6 common types of employment contracts in Australia

Not all jobs are the same. Neither are the employment contracts.

Some people work full-time, others just a few days a week. Some stick around for years, others jump in for a short project. And each setup needs a different type of employment agreement. Getting it wrong can be problematic. It can mean an employee missing out on entitlements and your business breaching employment laws, sometimes without even realising.

In this article, we go through the main types of employment contracts and when to use each one. We also cover some of the common employment contract pitfalls employers often run into.

The information in this article is current as of April 2025. As employment laws are subject to frequent change, make sure you check the Fair Work Act for the most up-to-date information.

What is an employment contract?

An employment contract is an agreement between a business and a worker. It sets out the rules of the employment relationship. For example, things like pay, hours, leave, notice, and what the job involves.

An employment contract can be in writing or verbal. But a written employment contract is always safer. If there’s ever a dispute, it's super helpful to have everything in writing.

Employment contracts must follow Australian employment law. That means meeting the National Employment Standards (NES) as set by The Fair Work Commission and sticking to any relevant modern award or enterprise agreement. If your contract falls short, it won’t hold up legally. The NES and award will override it.

Some people mix up employment agreements with contractor agreements. But they’re not the same thing. Employees and contractors are treated differently under the law. An employment contract is for a worker who’s part of your team, like someone on payroll, who gets leave and super. A contractor agreement is for someone who runs their own business. Get it wrong and you risk misclassifying the worker, which can lead to fines and backpay claims.

6 different types of employment contracts

Here’s a breakdown of the most common types of employment contracts in use in Australia (and when to use them):

1. Full-time employment contract

A full-time employment contract is for permanent employees. They work around 38 hours each week, on a regular and ongoing basis.

When to use it

This is the standard contract for full-time employees. It can be best to use this type of permanent employee contract when you need someone working consistent hours across the week, long term. Think store managers, full-time admin staff, or anyone working the full week in a stable role.

Key inclusions and entitlements

• A 38-hour week, or more if the award allows
• Paid annual leave (at least four weeks per year)
• Paid personal/carer’s leave (10 days a year)
• Long service leave (varies by state)
• Paid public holidays (if they fall on a working day)
• Superannuation
• Minimum notice if the job ends
• Any additional award entitlements (e.g. penalty rates, allowances)

Legal considerations

A permanent employee contract must meet the NES. It must also follow any award rules that apply to the role. If your business falls under an enterprise agreement, you’ll need to meet that too. You must also outline termination terms, pay rates, and regular working hours in the contract.

If you're hiring full-time employees, you need to make sure they receive a copy of the Fair Work Information Statement when they start.

2. Part-time employment contract

A part-time employment contract is for part-time employees who work regular hours each week, but less than full-time.

When to use it

You could use a part-time employment contract if the job is ongoing but doesn’t need a full 38-hour week. For example, a receptionist who works Mondays to Wednesdays, or a retail worker on weekend shifts.

Many recruitment software tools let you set expected working hours and shift patterns during the hiring stage.

Key inclusions and entitlements

• Regular, set hours written into the contract
• Access to the same minimum employment entitlements as full-timers, but on a pro-rata basis
• Paid annual and sick leave
• Public holiday pay (if they usually work that day)
• Superannuation
• Written agreement on extra hours worked (can’t assume flexibility)
• Minimum notice periods

Legal considerations

You need to record the exact agreed working hours. If you need to change the employee's working hours, you’ll need their consent in writing. If they regularly work extra hours outside of what’s agreed? They may have a right to overtime or even an employment contract change.

All part-time employees must also get a copy of the Fair Work Information Statement when they start.

3. Casual employment contract

A casual employment contract is for casual employees who work irregular or ad hoc hours. With this kind of employment relationship, there's no ongoing commitment from either side.

When to use it

A good time to use a casual employment contract may be when shifts change from week to week, and there’s no guarantee of regular work. It can be a good employment contract type for short-term needs, seasonal work, or filling last-minute gaps. Think bar staff, delivery drivers, or hospitality workers brought in on demand.

Key inclusions and entitlements

• Hourly rate that includes casual loading (usually 25%)
• No paid annual leave or sick leave
• Still get unpaid carer’s leave and access to a safe workplace
• Superannuation still applies if they earn over the threshold
• Rostered shifts need confirmation ahead of time

Legal considerations

Casual employment attracts different rules than ongoing work. If a casual employee has worked regular hours for 12 months, they might have the right to request permanent work. This is called casual conversion. You must give notice in writing about this option. And you need to do it within 21 days after their 12-month anniversary.

You must give casual employees a copy of the Fair Work Information Statement and the Casual Employment Information Statement when they begin working for you.

4. Fixed-term contract

Fixed term employment contracts are for roles that run for a set period. This means that they have an agreed start and end date.

When to use it

A fixed-term employment contract may work well when someone’s covering a staff member on leave, for instance. It can also be suitable for an employee you recruit to do project work that will wrap up at a certain point. Think 12-month parental leave covers, or a 6-month contract for a website redesign.

A good HR platform can flag when contracts are ending. This can mean you’re not scrambling to renew or offboard at the last minute.

Key inclusions and entitlements

• Start and end date clearly stated
• The person may work full-time or part-time during the employment period
• Paid leave and other entitlements apply as normal, depending on hours
• Requires the inclusion of superannuation, public holiday pay, and notice terms

Legal considerations

In December 2023, the Fair Work Ombudsman tightened the limits on fixed term employment contracts. Most can’t go on for longer than two years. And you can’t keep rolling them over. There are a few exceptions, like high-income roles or where funding is uncertain. But you’ll need a solid reason to go past the two-year mark.

If you ignore these rules, the worker could be treated as a permanent employee. This can mean more entitlements and potential backpay.

If you're hiring fixed-term employees, you need to give them a copy of the Fair Work Information Statement when they start. You also need to make sure they receive the Fixed Term Contract Information Statement.

5. Maximum-term contract

A maximum-term contract is similar to a fixed-term contract. It still has a precise end date. The difference is that it also includes a clause that enables either party to end the contract earlier if needed.

When to use it

This type of employment contract can work well when you’re not really sure how long the work will last. For instance, if you’re covering a parental leave role, but the employee might return earlier than planned. Or you’ve got a two-year project but want the option to scale back if things change. A maximum-term contract can give you that flexibility.

Managing multiple contracts across departments? A central HR or workforce management system can make it easier to track who’s on what terms, and when they’re due for review.

Key inclusions and entitlements

• Start and finish date in writing in the contract
• A clear clause explaining how the employer or employee can end the contract early
• Can be full-time or part-time depending on the role
• Paid leave, public holidays, and personal leave still apply based on hours worked
• Inclusion of superannuation and notice terms
• Inclusion of any award-based entitlements that apply to the role

Legal considerations

You need a proper early termination clause in writing in the contract. Try to end the agreement early without that? You could be on the hook for the rest of the contract. Just like with other types of employment contracts, you have to meet the NES and award conditions.

Anyone on a maximum-term contract must also get the Fair Work Information Statement when they start.

6. Independent contractor agreement

An independent contractor agreement is for self-employed workers. These are workers who run their own business. They invoice you for the work they do and set their own hours. They usually supply their own tools or equipment, too. An independent contractor agreement is not an employment contract. But we added it to the list to define and differentiate it, as people often confuse the two.

When to use it

An independent contractor agreement can be a good idea when you're hiring outside contractors, freelancers, or tradies. It could also be a suitable option for ABN holders doing short-term, specialised work. This could include a web developer hired for a new website build, or a plumber brought in to handle a single job. The key thing to remember here is that they aren't employees. They’re running their own business and selling their services to you.

Some HR tools also support contractors. This enables you to keep agreements and contact details in the same place as your employee records.

Key inclusions and entitlements

• Scope of the work to be done
• Agreed timeline and deadlines
• Payment terms (amount, invoicing, payment method)
• Who’s responsible for tools, materials, and insurance
• Any termination clauses you want to include

Contractors don’t get superannuation (unless agreed), paid leave, or access to the NES. They pay their own tax and GST. They also don't fall under any awards or enterprise agreements.

Legal considerations

Treating an independent contractor like an employee is where things can go wrong. Treating them like an employee can include you telling them when to work, controlling how they do the job, and supplying all the tools. It may also apply if they only work for you. Tick some or all of these boxes and you might have accidentally created an employment relationship.

That’s called misclassification. And it can lead to serious legal issues. This could result in you having to pay unpaid leave, super, and backpay. Even if you call them a 'contractor,' the Fair Work Commission will look at how the working arrangement actually operates day to day.

You don't need to give contractors a Fair Work Information Statement. But it’s still a good idea to have a solid written contractor agreement to avoid issues down the track.

How to choose the right type of employment contract

Choosing the right contract type shapes everything. For example, the worker’s entitlements, how you manage them, and what happens if the relationship ends. So, it's important to get it right. Getting it wrong could mean facing underpayments, disputes, or even penalties for misclassification.

Here are some things to think about before you pick a contract type:

Job stability and hours

Start by considering how steady the work is. Will the person work regular hours every week? Is the role part of the team in the long term? If the answer is yes, then a permanent contract, either full-time or part-time, is probably best. These types of employment contracts are for stable, ongoing roles where the hours don’t shift much.

Here are some instances in which you may use a permanent contracts:

• You’re hiring a receptionist for 20 hours every week, ongoing
• You’ve brought on a store manager working 38 hours a week long term
• The job doesn’t have an end date, and you expect the person to stay on

If the hours change week to week, or there’s no guarantee of ongoing work, a casual contract may be better.

Duration and scope of work

Next, figure out if the job has a definite finish line. If the role is for a set period, say six months or a year, or it’s tied to a project with an end date, that’s where fixed-term or maximum-term contracts can make sense.

Here are some instances in which you may use fixed-term or maximum-term contracts:

• You’re covering for a team member on parental leave
• You’re hiring someone for a one-year research project
• The role has funding for a limited time (like a grant or seasonal program)

If the job is open-ended with no set end date, it’s probably ongoing employment. In this case, a permanent employment contract is probably the best option.

Level of control over work

Ask yourself who’s calling the shots. Are you managing their hours and how they do the work? Or are they running their own show? If you’re setting the schedule, providing tools, and supervising the work, they’re an employee. In this case, you'll need an employment contract.

But if they’re quoting the job, using their own equipment, and deciding how and when the work gets done? Then they're typically self-employed workers. In this instance, you’ll need an independent contractor agreement instead.

Here are some scenarios in which you may choose an employment contract:

• You’re telling the person what time to start, when to take breaks, and how to do the job
• They’re using your equipment or working from your site
• You expect them to follow your internal policies, procedures, and processes

And here are some scenarios in which you may go with a contractor agreement:

• You're hiring a graphic designer to create branding for your business, and they invoice you for the work
• A plumber is doing work across multiple sites and brings their own gear
• The person runs their own ABN and offers services to other clients too

If you’re blurring the lines here, double-check. Getting this wrong can be expensive, in more ways than one.

Flexibility and business needs

Finally, think about how much flexibility the role really needs. Do you want someone available only when needed? Or do you need them locked in week to week?

You might use a casual contract when:

• You run a cafe and need someone to fill shifts on short notice
• You’re covering busy periods (like Christmas) with extra staff
• You can’t commit to regular hours or ongoing work

Alternatively, you might go with a permanent contract when:

• You need someone consistently available each week
• You’re planning team rosters based on regular availability
• The job is part of your core business operations

Need some structure, but also flexibility to end the arrangement early? A maximum-term contract could be the right fit. This is especially true if the role has a rough end date, but things might change.

Common employment contract mistakes 

Even with the best of intentions, it’s easy to get employment contracts wrong. Most issues pop up when employers rush the process or copy what’s worked for someone else without thinking about the role at hand.

Here are four mistakes that come up again and again (and how to avoid them):

Using the wrong contract type

This one’s more common than you’d think. Choosing the wrong contract can mess with a worker’s employment arrangement, entitlements, and employment status.

For example, hiring someone as a casual when they’re actually working regular, ongoing hours could mean you owe them annual leave, notice, or backpay. Or classifying a contractor when the person is clearly acting like an employee? That can lead to fines and legal trouble.

Before you offer the job, slow down and match the contract type to the true nature of the work.

Leaving out key clauses

It’s not enough to just name the job and pay rate. A solid written contract needs to cover all the basics. These can include the start date, hours, leave, notice, duties, and anything else that might come up down the line.

Leave those details out, and you’re setting yourself up for confusion or disputes. If something’s not in writing, you’ll probably have a hard time enforcing it later, too. Go through your written contract line by line before sending it out. It should clearly outline expectations on both sides.

Using HR software that includes contract templates can help make sure you don’t miss anything.

Not updating contracts as roles evolve

A common trap: you hire someone part-time, then over time they start working close to full-time hours. Or you take on a casual, but they end up on a regular schedule. If their day-to-day work changes, the contract should, too.

Why? Because under Australian law, employees have a right to the same entitlements as the type of work they’re actually doing... not just what their contract says. If someone’s role shifts, update the agreement. Otherwise, you risk underpaying them or missing legal obligations without even knowing it.

Relying on templates without legal review

Employment contract templates are everywhere. But just because something looks professional doesn’t mean it is. Every business is different. So is every role. A generic contract pulled off the internet might leave out key legal protections or clauses that are necessary to protect employee rights. Worse, you might miss key award obligations or create confusion about entitlements.

If you’re using a written contract template, at the very least, have someone who understands employment law in your state review it. Ideally, work with a lawyer or HR expert to create one that fits your business.

Simplify employment contract management with Rippling

Managing employment contracts shouldn’t be a drama. But it often is. Between drafting different contract types, chasing signatures, and trying to keep on top of compliance, things can become rather chaotic.

Rippling is an all-in-one workforce management platform that takes care of employment contracts from start to finish. The best part? It links them to the rest of your HR systems.

Here’s how it works:

• Generate and send contracts in minutes: No more digging through old Word docs! You can create contract templates for full-time, part-time, casual, and contractors. And you can send them directly through Rippling.
• E-signatures are built in: Employees can sign contracts online, straight from their phone or computer. This means no printing, no scanning, and no delays.
• Everything is tracked: You’ll always know who’s signed, who hasn’t, and what’s outstanding. If a contract’s about to expire or a fixed term is ending, Rippling will flag it for you.
• It links with payroll and onboarding: Once the contract’s signed, you don't need to copy details from one system to another. Rippling pulls everything through, like pay rate, job title, and start date, and sets the employee up across your systems automatically.
• It stores everything in one place: Contracts, amendments, and contractor agreements all save securely in the cloud. They're easy to search for and access when you need them.
• It helps you stay compliant: Rippling can prompt you to send out the right info at the right time. For example, the Fair Work Information Statement or the Casual Employment Information Statement. It also helps keep records up to date if the employee’s role or status changes.

Whether you’re onboarding a new hire, managing fixed-term contractors, or reviewing your casual workforce, Rippling makes it easier to stay on top of it all. And with fewer manual steps and way less room for error.

From onboarding to offboarding, Rippling helps you manage every stage of the employee lifecycle. And because it’s part of a single, unified system, updates flow through everything from HR, to Payroll, IT, and Spend.

Employment contract FAQs

What is the most common employment contract?

The most common type of contract in Australia is a full-time employment contract. This is for full-time employees in permanent roles where someone works around 38 hours a week, with set hours and ongoing employment. Full-time staff get access to paid leave, super, public holidays, and other entitlements under the NES and relevant awards.

What are the three elements of an employment contract?

The three main elements of an employment contract are:

1. Offer: the employer offers a job under certain terms.
2. Acceptance: the employee agrees to those terms.
3. Consideration: there’s an exchange of value, usually wages for work.

A contract can be written, verbal, or even implied. But to avoid confusion, every worker should have their own employment contract in writing. It clears up expectations and gives both sides something to refer back to. This can be especially important if the employment contract ends and there’s a dispute.

Is an employment contract legally binding?

Yes. As long as it meets the basic legal requirements. Even implied contracts can be binding if there’s clear evidence that a working relationship existed. But to protect yourself (and your team), it’s always better to have your own employment contract in writing. Just make sure it follows the Fair Work Act, the NES, and any applicable award or enterprise agreement.

What’s the two-year contract rule?

As of December 2023, fixed-term employment contracts have a limit of two years. That includes any extensions or renewals. So, you can’t just keep rolling someone over on back-to-back contracts. If you go over the limit, the worker might be treated as a permanent employee by law. 

As mentioned, there are some exceptions. For instance, for high-income earners or funding-based roles. But most businesses need a valid reason to go past the two-year mark.

What's a temporary employment contract?

A temporary employment contract is another term people use for fixed-term or casual arrangements. It’s for jobs that don’t have ongoing work attached. This could mean short-term cover, seasonal roles, or project-based work with a set end date.

Just keep in mind that 'temporary' isn’t a contract type under the Fair Work Act. You’ll still need to choose the right legal structure (casual, fixed-term, or maximum-term), depending on the hours, entitlements, and commitment involved.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.