It’s important to note that CCA, our members, most charities and NFPs have no problem with the policy intent of this legislation, but CCA does have a problem with the impact it has had on many charities and community organisations already struggling to meet employment costs that are increasing faster than their income.

CCA note that as a peak body we raised concerns about the impact of this legislation before it was finalised and have advocated for changes once it came into operation.

As a consequence of our advocacy for an exception in relation to fixed term contracting of staff employed on short term contracts, an amended exception was accepted as a transitionary measure over the next 12 months. 

This amendment – the Fair Work Act 2009, Fair Work Amendment (Fixed Term Contracts – Exceptions Measures) Regulations 2024 – came into force on 1/11/24.

The amendment allows registered charities to contract staff on fixed term employment agreements for the delivery of programs and projects funded by government or philanthropy and align the length of the fixed term employment contract to the length of the fixed term funding provided. 

There are a number of conditions to this exception including that the contract is not five years or longer, and the contracted employee has not been employed continuously in any role by the charity for seven years or more. If either of these conditions are met the charity needs to offer permanent employment to the staff member.  CCA believes these conditions on the exception are appropriate.

CCA believe this amendment relating to charity fixed term contracting needs to be permanently incorporated into the Fair Work Act 2009.

What follows in this submission is an outline of why this amendment is so critical to Australian charities.    

1. Charities employ 11% of Australia’s workforce – in excess of 1.4 million Australians

While charities are not seen as major employers compared to small and big business, the reality is that the charities sector is bigger than most industry groups including mining, tourism, agriculture, construction, etc. in relation to the number of people the sector employs.

2. Charities that employ staff operate largely on short-term contracts

Most charities are volunteer run micro-organisations that employ no staff, but those that do tend to operate on relatively short-term funding contracts from governments or philanthropic grants.  The overwhelming majority of these contracts are for less than three years, some are annual or shorter, some are two-year contracts.  A three-year contract in the charities sector is seen as longer-term funding.  In fact, some government departments and agencies see short-term contracts as a positive risk management strategy.

The other major contribution to the $200+ billion annual turnover of charities is income earned through fundraising events and services provided. 

3. Many charity employees are employed on fixed term contracts in line with the funding cycles of the programs they are employed in

The main reason the Secure Jobs Better Pay legislation negatively impacted so many charities is that it limits the way charities can contract their staff.  A key provision of the substantive (pre-amendment) legislation is that, assuming no eligibility for any of the exceptions, staff who have had two successive contracts of employment cannot have a third contract and must either be given a permanent staff position or no longer remain contracted to the organisation.

In CCA’s consultations with members, CCA was given many examples of how the legislation would negatively impact charities.  Here are just two examples:

One example involved a medium sized charity that received 12 months funding for an innovative new project.  The project was working well, and a second 12-month funding grant was obtained.  Then the charity was offered the possibility of gaining further substantial and possibly longer-term funding for the program provided they continued to run the program for a further four months to allow for an independent evaluation of its effectiveness. 

Under the new workplace legislation this would require the charity to put the existing project staff on permanent employment contracts because they had already been contracted twice in the same roles, even though only four months of funding was guaranteed. The skills of these staff were part of what made the program effective.  Should the charity take the risk?

In another example, a charity with approximately 100 employees received most of its staffing budget through annual government funding.  This funding was usually not confirmed more than a month in advance of the end of the contract period.  To meet the obvious risk in this kind of funding, all employees in their 12 month funded programs were on 12 month contracts – aligned to the funding cycle.  This had been the practice for more than three years.

The charity always endeavoured to treat and pay staff as though they were permanent employees including paying redundancies when positions were lost.  However, if the charity had to put all staff on permanent employment contracts – as it would under the Secure Jobs Better Pay legislation – it would need to set aside approximately half a million dollars to meet all redundancies.  Otherwise they might be deemed to be technically insolvent.  To achieve that kind of cash flow saving, the charity would have to significantly reduce both staff and programs. 

4. Good governance demands appropriate risk management in relation to employment contracts – and that often means fixed term contracts

Charities need to meet their governance obligations under the Australian Charities and Not-for-profit Commission governance standards.  Many charity Boards and Audit and Risk Committees see one of their key roles as minimizing the risk of a charity trading insolvent.

Charities do not generally have access to debt financing.  Few charities hold a line of credit or significant reserves of capital.  In fact, it’s not good practice to accumulate significant reserves.  Charities have a responsibility to use their resources to achieve their purpose and provide a public benefit.

Using fixed term employment contracts in alignment with fixed term funding contracts is often the most effective and efficient way for charities to manage the risks associated with uncertain funding, without compromising staffing numbers or services to their communities.

5. The reality of charity funding is not changing anytime soon

In an ideal world, all charities would be funded to a level that would enable them to employ staff in permanent roles with secure funding, or with recruitment and redundancy costs built into all funding contracts.  Unfortunately, that is not the world we live in.  Nor is it the world we are likely to live in when many government Departments and agencies still see short term funding contracts as a way to manage risk and ensure competition.