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It is imperative that employers correctly classify their employees as either permanent or casual. The primary differences between permanent and casual employees are outlined below, as well as a case study of a typical workplace scenario that highlights difficulties in managing an employee who has been incorrectly classified as casual or part time.
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Casual employees
The primary difference between a permanent and casual employee is the ‘reasonable expectation of ongoing work’ that the employee has. A casual employee should not have an expectation of ongoing work. Their work is typically more intermittent and generally on an ad-hoc and as-needed basis. In comparison, a permanent part-time employee should have agreed days and hours of work and have a clear expectation that their employment is an ongoing relationship.
Many employers have the misconception that you can engage a ‘permanent casual’. Under the National Employment Standards (NES) and the modern award system, which applies to all national system employers, there is no provision to engage a casual on a permanent basis. Most modern awards only provide three types of employment: full time, part time and casual. A casual is engaged under a minimum hourly engagement, usually three hours. They do not accrue leave entitlements, and they can work up to 38 hours before overtime is payable.
In short, generally if an employee is working a permanent arrangement with regular rostered hours and days, then they should be classified and paid as a permanent employee and receive the applicable entitlements such as annual leave and personal/carer’s leave.
Casual conversion
As per the NES, employers (other than small business employers) are obligated to offer permanent employment to casual employees who have been employed for 12 months. Further criteria apply, including the need for the casual employee to have worked on a regular and systematic basis for a period of at least 6 months, and the ability of the casual employee to continue working their usual pattern of work as a permanent employee without significant adjustment. This offer must be made in writing within 21 days of the casual employee’s 12 month anniversary. If a casual employee does not meet this criteria, or the circumstances of their position will substantially change in the next 12 months, an employer must still inform them in writing that they are declining to offer them conversion to permanent employment.
Note: While a small business is not obligated to offer casual conversion to any casual employees engaged on a regular and systematic basis, these employees can still request casual conversion to permanent employment, which must not be unreasonably refused.
Leave entitlements
While casual employees are not entitled to paid annual leave and paid personal/carers leave, they do receive a 25% casual loading on their hourly rate of pay. This casual loading is designed to compensate for the fact casual employees do not receive these two paid leave entitlements.
In addition, employers are obligated to pay a casual employee long service leave, at their ordinary rate of pay (that is, the loaded base rate) when it falls due. As such, it may be prudent for an employer to consider the costs associated with employing a casual employee compared to a permanent.
Proposing permanency
Engaging a casual employee on a permanent arrangement over a long period of time may lead the casual to seek a change in their employment by requesting to become a permanent employee, hence the importance of maintaining intermittent (ad-hoc) shifts for casual employees. If, however, a casual employee wants to remain employed as a casual despite your offer of permanency, it is recommended to document both your offer and the decline from the casual employee.
Parental leave
As per the NES, the unpaid parental leave provisions apply to employees who have 12 months or more of continuous service with an employer.
It’s important to be aware that unpaid parental leave does not just apply to permanent employees. A casual employee will also have this entitlement if they have worked for their employer for at least 12 months on a regular and systematic basis, and they have a reasonable expectation of continuing this work if not for the birth or adoption of a child.
The NES also provides a return-to-work guarantee to employees to return to their pre-leave position after completing their period of parental leave. This also applies for ‘regular’ casual employees who have taken a period of unpaid parental leave.
It’s important to keep track of the working arrangements of all employees to ensure you are meeting your obligations to them under the NES.
Consult HR Hub (see further resources) to understand working arrangements, including obligations and/or best outcomes when a casual employee returns to work after completing a period of unpaid parental leave.
Flexible working arrangements
The NES also provides the right for casual employees to request flexible working arrangements provided they have been regular and systematic for a period of 12 months and have a reasonable expectation of ongoing work. Further, they would need to satisfy the same eligibility criteria as permanent employees. This includes any of the following: having caring responsibilities, having a disability, being over the age of 55, suffering from family violence, or providing care or support to a member of their immediate family or household who is suffering from family violence.
Examples of flexible working arrangements include job sharing, reducing hours, or working from home. Flexible working arrangements should be made available to all employees, and should become embedded as its own policy rather than added on to existing policies. Policies should clearly outline expectations, obligations and responsibilities for all parties as well as focusing on outcomes and achievements rather than time spent in the office.
Refer to Acumen note Flexible working arrangements for more information. Refer also to Parlour guides 03 Part-time work and 04 Flexibility.
Termination traps
Another area of difficulty is the termination of casuals when they have been employed on a regular and systematic basis for a period of at least 6 months (or 12 months in a small business). While a true casual employee – one who works on an ad-hoc basis – terminates their employment at the end of each shift and has no guarantee of ongoing employment, a long-term casual will in fact have access to unfair dismissal. Therefore, there should be a fair process implemented before terminating the employment of a long-term casual (eg, providing warnings etc, if the employee is underperforming).
In summary, it is recommended that employers correctly classify and understand the engagement arrangement of all employees from the outset of their employment. In addition, employers should be mindful to regularly review any long-term casuals and consider if it is better to engage them under a permanent arrangement.
Further resources
Disclaimer
The material contained in this note is general comment and is not intended as advice on any particular matter. No reader should act or fail to act on the basis of any material contained herein. The material contained in this note should not be relied on as a substitute for legal or professional advice on any particular matter. Wentworth Advantage Pty Ltd, expressly disclaim all and any liability to any persons whatsoever in respect of anything done or omitted to be done by any such person in reliance whether in whole or in part upon any of the contents of this note. Without limiting the generality of this disclaimer, no author or editor shall have any responsibility for any other author or editor. For further information please contact Wentworth Advantage Pty Ltd.
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