Casual Conversion: What Does it Mean for Your Company?
Around one in four employees work as ‘casuals’ in Australia. As you would very likely be aware by now, the 2021 amendments to the Fair Work Act brought about various changes regarding casual employment in Australia, including a new definition of casual, a protection for employers who misclassify workers and new obligations on employers including the requirement to provide a Casual Employment Information Statement and to consider casual conversion. This article will focus on the latter, and what it means for you and your company.
Casual Conversion is the conversion of casual employees to full-time or part-time employment. Prior to these amendments, there was no statutory right to conversion and casuals could only rely on conversion clauses in applicable workplace instruments e.g. modern awards or enterprise agreements. Now, casual conversion is a National Employment Standard (NES) entitlement.
Under these new Amendments, certain casuals have the right to request casual conversion and certain employers are obliged to offer it. Given there are penalties for non-compliance, it is vital that you, as an employer, have a clear understanding of exactly what your obligations are, and that you have a procedure in place to ensure compliance.
Assuming you have met the deadline and have made conversion offers by the 27th of September 2021, or let casuals know you will not be offering them, we will talk about your ongoing obligations.
How big is your business?
If you have less than 15 regular employees, then you are classified as a ‘small business’, meaning you are not obliged to make an offer, but must still consider requests.
If you are not a small business, you have to do this automatically, in the absence of requests by employees. This small business distinction is something to keep in mind if your business is growing, as your obligations could increase, just as your success does!
Manage obligations to make an offer
If you are not a small business, it is vital that you are proactive in ensuring that you have a procedure in place to assess eligibility of your casual employees.
Eligible casual employees are those who have been employed for over 12 months, with at least the final 6 months involving a regular pattern of hours, on an ongoing basis, which, without significant adjustment, they could continue to work as either a full-time or part-time employee.
At this point in time, employers (if they are not a small business employer) have to make an assessment of the worker’s employment and then either offer them casual conversion, or formally tell them that they are not being offered permanent employment. Also, after this 12-month-mark, employees have the right to request conversion to permanent employment. If a casual employee works ‘regular pattern of hours’ and wishes to have their employment converted, they must submit a written request to their employer. This right for employees to request, exists regardless of whether you are, or are not, a small business employer.
It is important to note that you may face some difficulty assessing whether casuals have been working a ‘regular pattern of hours’. If an employee has worked 8-hour shifts on every Monday and Tuesday for the most recent nine months, it is clearly a regular pattern of hours for the requisite six months. However, it won’t always be this clear and you will need to carefully consider this with respect to each employee.
You are under no obligation to offer additional hours, i.e. if they usually perform two shifts a week, then the offer to convert only needs to be for continuing employment for two shifts.
Offers made must be in writing within 21 days of the 12-Month Period and outline whether the employee is being offered full-time or part-time employment. Employers can however, decline to make an offer or agree to request, if they have reasonable grounds. In all cases, written notifications are required.
What are ‘reasonable grounds’ for not making an offer or refusing a request?
There is a non-exhaustive list in the Fair Work Act of what may be considered ‘reasonable grounds’, which includes:
“the employee’s position will cease to exist within the period of 12 months after the time of deciding not to make the offer;
the hours of work the employee is required to perform will be significantly reduced in that 12-month period;
there will be a significant change in the days and/or times the employee will be required to perform work in that period, which cannot be accommodated with the days or times the employee is available to work; or
making the offer would not comply with a recruitment or selection process required under a federal, state or territory law.”
Although, as we said, this is not exhaustive and all of the circumstances will be taken into account, including your business’ needs and the nature of the employees’ role. These reasonable grounds need to be communicated to the employee within 21 days from the casual employee’s first employment anniversary.
What does this mean in practical terms?
We recommend that you ensure a robust process is in place to manage this obligation. For example, establishing a notification system within payroll to ensure employees that may become ‘eligible’ are not overlooked.
We also suggest a review of company policies and procedures that are relevant and ensure they do not contradict the casual conversion process.
Whilst there is now an added obligation on larger businesses to assess their casual employees on an ongoing basis and inform them of this right, most long-term casuals do not want conversion because it comes with a large pay cut. As the right to conversion only kicks in after 12 months, most casuals, at this point in time, will be used to this pay rate and will not be wanting pay cuts.
Also, if an employee rejects or fails to responds to the offer of casual conversion, as an employer, you will not have to make subsequent offers. The employee still can request however, provided they meet the eligibility criteria as above, as well as: they mustn’t have refused an offer in the last six months, they have not been given reasonable grounds for the decision not to make the offer, their employer has not already refused a request, and the request is not made during the period of 21 days after their first anniversary date (if not a small business employer). All of these conditions must be met, with written notice being given to employer, with the request being for full-time or part-time employment. These requests can be rejected on the same grounds as above.
Need any more help or information?
We have made a Guide to this process which includes an explanation of your obligations, as well as templates of letters that you can use for communications with employees (e.g. template of letter offering a casual employee Conversion). It is our gift to you! You can find this Guide here.
If there is anything else we can assist with in this respect, or in any other respect, please don’t
hesitate to contact us.