Fixed-term Contracts vs Secondments

By Chloe Boike, Workplace Relations Advisor

Often, the terms ‘fixed-term contract’ and ‘secondment’ are used interchangeably, as they have some similar traits. However, fixed-term contracts and secondments are very different in the way they are applied and their effect on employment. The following article explores the differences and where the types of employment should be used.

Fixed-term Contract v Secondment

A fixed-term contract is an employment contract that runs for a specific period and ends on a specific day. Commonly, fixed-term contracts last for 6-12 months and are sometimes used to cover the absence of an employee (i.e., an employee on parental leave or worker’s compensation), or to assist with a short-term project where there is limited or no capacity to manage the absence internally.

An employee on a fixed-term contract may work on a part-time or full-time basis. Casuals cannot work under a fixed-term contract as casuals do not have a guarantee of ongoing work.

The Fair Work Legislation Amendment (Secure Jobs, Better Pay) Act 2022 (Cth) introduced some significant limitations to fixed-term contracts. From 6 December 2023, fixed-term contract limitations relate to:

• Length of fixed-term contracts: contracts cannot be longer than two years.
• Extension or renewal: contracts cannot be extended beyond two years and cannot be renewed more than once.
• Offering new contracts substantially similar to previous ones: more than two consecutive contracts of similar work cannot be offered.

For further information on the fixed-term contract limitations, check out Business Chamber Queensland’s article: “Are You Compliant with the Recent Changes to Fixed-term Contracts?” which can be found here.

A secondment is a temporary assignment either within the organisation they are already employed by, or to another organisation through an agreement with the employee's current employer. The implication of the term ‘temporary’ means the employee (secondee) will automatically return to their original ‘substantive’ position once the secondment comes to an end.

Secondments can provide the opportunity for employees to gain specific skills or a different viewpoint. Other times secondments may be required to fill a temporary absence whilst an employee may be on leave. Secondments within an organisation may also referred to as ‘job rotations’.

External secondments can range from an employee being seconded to another organisation in order to gain experience and insight from that organisation, to a technical employee being seconded to a supplier or customer to gain experience and a greater understanding of that business’ operations.

Choosing between a fixed term contract and secondment

The operational needs of a business change from time to time – new projects or business contracts, long-term absences (e.g. maternity leave), IT upgrades, seasonal work and holiday trading. Where those needs are temporary in nature, businesses have the chance to review their current resources and determine whether it is possible that those operational needs can be met by

• Sharing the extra workload between people,
• Moving on or more people into new jobs internally (secondment), or
• Both of the above.

A mixture of both works best where the work of a less senior employee can be shared amongst other employees so that they can take on the work temporarily for a more senior employee.

Secondment may not be right where:

• there are insufficient internal resources
• the internal resources are not right (e.g. all employees are too inexperienced to complete the work needed)
• There are time constraints cannot be overcome (e.g. someone has been injured and unable to work for several months)
• There is a high coordination burden (e.g. too many movements and too much training would be required to meet the operational need

In this case, it would likely be reasonable to engage someone on a fixed-term contract for the purpose of the temporary need.

Importantly, secondments can also be used for development, where those needs are driven by an immediate operational need of the business. Secondments are an excellent tool for development, both personal and professional. For example, a seconded manager can learn to expand their skills and recognise diverse perspectives within organisational boundaries, build interactions with colleagues and increase communication.

There are some challenges that may arise from secondments, including employees who are dissatisfied that they were not selected for the secondment. The employee placed on secondment may have trouble handling the change in responsibilities or settling into new organisational culture. Sometimes, employees may also expect that after completing a secondment, they will receive a promotion and may be unhappy when they realised that this is not the case. Should a business choose to offer a secondment, it is recommended that they are clear about the expectation that the employee is to return to their substantive position at the end of the secondment.

Secondment Legal Factors

There are some legal considerations employers will need to understand when placing employees on secondment, whether internally or within another business:

• Employee’s Consent: An employee must give genuine consent to being placed on secondment and consent to the terms of the secondment agreement.
• Employment Contract: The secondment agreement must not vary the employee’s original employment contract.
• Employee’s Rights and Entitlements: The employee will retain all their rights and entitlements under their initial employment contract whilst they are on secondment including wages, leave and superannuation.
• Work Health and Safety: The host employer (if externally seconded) must provide the employee with a safe working environment and take reasonable action to minimise any risks to the employee’s health and safety.
• Discrimination: An employee cannot be discriminated against based on their secondment.
• Intellectual Property: It will need to be determined between the host employer and the original employer the ownership of any intellectual property created by the employee.

How can Business Chamber Queensland help?

Business Chamber Queensland members with HR services as part of their membership can contact the Workplace Advisory Services Team:

P: 1300 731 988

E: [email protected]

A consultancy fee will apply for businesses who do not have a HR membership.

For membership queries, contact our membership team on 1300 731 988.