Employing casuals is cost effective but there are traps

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May 18, 2017 | Posted in Business Advice, Human Resources Services
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Small businesses are frequently employing casuals to meet fluctuating workloads. It makes sense. Despite having to pay casual employees 25 per cent loading to compensate for no paid leave entitlements, casuals provide flexibility and are cost effective as you only pay for the hours that they work.

There are a few traps though.

Often a casual will start off with a few shifts when new in the job. They settle in and soon start to prove their worth. Before long, the casual is working regular days or hours each week or fortnight. A regular work pattern emerges. And once a regular work pattern emerges, the employee no longer falls under the definition of "casual.”

So what should a business do when a regular work pattern becomes evident for a casual employee? There are two options:

  • Mix up the casual’s hours/days or
  • Consider offering the employee a more permanent arrangement – full-time, part-time or a fixed term employment period

Option number two is not considered often enough, yet it’s a good, safe option for businesses of 15 employees or less as a small business can legally terminate new hires within the first 12 months of their employment without being at risk of an unfair dismissal claim.

In a recent Federal Court decision (Skene v Workpac Pty Ltd), the Court determined that Skene, who was defined as a "casual” under an enterprise agreement, was nevertheless a permanent employee for the purposes of the Fair Work Act. Although Mr Skene received casual loading under the enterprise agreement, the Court ruled that he was entitled to take paid annual leave under Fair Work’s National Employment Standards (NES). Why? Because Skene’s employment was regular and systematic, and did not meet the common law characteristics of a "casual” employee. In the eyes of the Court, Skene was a "permanent employee” and entitled to annual leave under the NES.

This decision makes regular and systematic engagement of casual employees risky business, rather than a cost effective solution.

Avoid this costly trap

1. When hiring new staff, keep front of mind the definition of a "casual” employee:

  • an employer can offer employment to the employee on any day
  • the employee can elect to accept the offer of work
  • there is no certainty about the period over which employment will be offered
  • there is informality, uncertainty and irregularity, and
  • there is no commitment as to the duration of the employee’s employment or the days or hours the employee will work.

2. Consider a fixed term contract or permanent full-time/part-time employment to meet your needs. You then have the option for your new hire to work regular days/hours with the comfort if things don’t work out, you can terminate their employment within 12 months.

3. For your existing "casuals,” as soon as a regular work pattern emerges consider an alternative employment option (full-time, part-time, fixed term contract) and act sooner rather than later.

This article first appeared in Inside Small Business.


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