Changes to how casual employees can transition to permanent employment are coming this year. The new process adds an employee-driven element, where, depending on certain circumstances, a casual employee can notify their employer of their intention to move from casual to permanent employment.
This is a marked departure from the previous rules, which were entirely up to the employers. So, what does this new process look like, and what does it mean for small businesses?
Let’s go through it.
Key changes to casual employment rights
The “Closing Loopholes” amendment has directly changed how casual employees remain casual or transition to permanent employment.
Under the old rules in the National Employment Standard, a casual employee’s employment status was entirely employer-driven. This meant that any conversation or initiation of a casual employee was through the employer’s agreement or arrangement.
Now, employees can let their employer know their desire to change their working status, called the employee choice pathway.
Under the employee choice pathway, casual employees can pursue permanent employment by notifying their employers of their intent to change from casual to permanent. The following criteria have to be met before notice can be given:
- The employee has been employed for 6 months or more (or for small business, 12 months or more)
- The employee believes that they no longer meet the requirements of a casual employee defined under the Fairwork Act 2009
Who is affected by the employee choice pathway?
The changes have been in effect for medium-large businesses since 26 February 2025. Under the legislation, businesses with 15 or more employees must follow the employee choice pathway procedure.
The changes will come into effect on 26 August 2025 for small businesses (15 employees or fewer). Under the rules of casual employment, an employee may only notify their intent for permanent employment if they have been employed for more than 12 months.
The process involved
The employee choice pathway is twofold: a notice of intent to transition from casual to permanent, and the response to that notice. While this may seem simple, a number of factors determine the outcome. First, before a notice can be made to move from casual to permanent, we must look at what defines casual employment status.
Defining casual employment
The legal definition of what constitutes casual employment can be found in the Fairwork Act 2009 (15A). This is a rather large document, so for all intents and purposes, casual employment can be simply defined like this:
- The employment relationship is not a firm commitment to further ongoing work.
- The employee is entitled to casual loading under the rate determined under their agreement, rate, or contract.
If you are unsure about the definition of casual employment, the Fairwork Ombudsman has materials and resources.
Giving notice of employment change
The notice a casual employee gives to their employer about moving to permanent employment requires two factors to be satisfied:
- The employee must have been employed for 6 months or more (12 months or more for small businesses), and;
- The employee believes that they no longer meet the requirements of casual employment.
Here is an example of a notice to demonstrate what this would look like in the workplace.
Imagine a bartender working casually for over 10 months at a large pub with more than 15 workers. This casual employee has been given more responsibilities in the last few months, including rostering other casuals. The employee has also noticed they work fixed, regular, rostered shifts. With this information and a desire for more security in their employment, they approach their employer with notice to transition from casual to permanent employment.
In this example, the employee meets the requirements to give notice and pursue the casual choice pathway. After notice occurs, the employer is required to respond. Let’s take a look.
Responding to a notice
Once an employer receives a notice from their employee, they have 21 days to respond. Before a response is made, the employer should consult with the employee about what changes the transition would make to their employment. This discussion should include:
- Whether the employee would move to full-time or part-time permanent employment.
- The change of hours the employee will work.
- When the change of employment will take effect.
After a consultation, the employer can accept or reject the notice of employment change.
Accepting or rejecting an employment change notice from an employee
When accepting a change, the employer needs to include what has been consulted previously and provide a new written employment agreement with their employee. The changes must immediately be implemented after the acceptance of employment status unless the employer and employee have agreed on a different commencement date.
When it comes to rejecting a notice, employers need a good reason. An employer can justify a rejection of the notice when either of the following circumstances apply:
- The employee still meets the requirements of casual employment.
- Causes significant changes to the business organisational structure.
- It will have a considerable impact on day-to-day business operations.
- The change will break existing rules in an award or enterprise agreement.
- The change violates recruitment or selection procedures that are protected by law.
Accepting or rejecting an employee’s notice must be thoughtfully considered, whatever the circumstances, and communication should be clear and concise. If there is a disagreement, it may come down to both sides not effectively communicating. However, dispute resolution procedures are in place if the relationship is beyond solving in the workplace. It also should be noted that protections are in place against any adverse actions taken in reaction to an employee submitting a notice.
What happens if there is an employment dispute?
Any dispute must be resolved first in the workplace. However, if a dispute occurs due to a disagreement about an employee’s employment status, there are a number of avenues that can be explored:
Unfortunately, if either of these doesn’t remedy the situation, the matter may have to be resolved in court, arbitrated by the Federal Circuit Court.
The bottom line
As the changes on the pathway from casual to permanent employment are new, there will be a degree of awkwardness in implementation. What is essential is good communication and honesty when discussing an employee’s future in your business. As the date for small businesses to follow the new rules is set for 26 August 2025, there is plenty of time to review your procedures for managing your staff.
You may find that the new process has new opportunities for dedicated employees to commit fully to your business. Whatever the employee choice pathway brings, ensure you are prepared with proper payroll systems to navigate the changing landscape.
