Should I employ a casual or permanent? Six key considerations
March 10, 2011
A common strategy among employers is to increase labour flexibility through expanding the use of casual employment. This can achieve greater organisational resilience by enabling an employer to alter the quantity of labour used to match peaks and troughs in the demand for their products and services.
It may seem an obvious point that leaders and managers need to consider carefully which roles are performed by casuals – but all too often the reason why a role is filled on a casual or permanent basis is “because we have always employed those types of positions that way”. The decision has significant implications for the wages bill of a business as well as its productivity.
Here are 6 key HR and IR considerations to think through the next time you are restructuring or recruiting:
- Is the casual loading a worthwhile expense? Based on an objective mathematical calculation, a loading of 25% (the new standard across modern awards) far exceeds the cost of the paid leave entitlements foregone. There are various methods of determining this. Here is an example of a more straightforward calculation. Assuming an employee uses their entire annual and personal/carer’s leave accrued each year plus a further 2 days compassionate leave, the total leave would amount to 6.4 weeks (or 7.4 weeks for some shifworkers). This equates to 12.3%. If it is a role in which the employee would not be required to work public holidays, the entitlement to take those, say, 10 days off each year could be added to the leave that would be taken. The total period of the paid absence would then amount to 8.4 weeks each year. This equates to 16.2%. Remember too that even short-term casual employees are entitled to some forms of leave including paid long service leave and unpaid carer’s and compassionate leave. Whether the added expense of the loading is worthwhile will depend on other factors (so read on!).
- What kind of candidate are you looking for? Generally, whether a role is advertised as permanent or casual will attract a very different kind of applicant, including different skills, experience and aspirations. So a related question is do you need stability in the role or is high turnover acceptable/desirable?
- To what extent will the hours fluctuate from week to week? If casual employees can prove that they have regular and systematic employment for an extended period and a reasonable expectation of continuing employment, they can access a range of permanent employee entitlements at the same time as receiving the loading. For example, after 12 months they could access unpaid parental leave. The right to access unfair dismissal protection is dealt with the next point.
- Are you in need of disposability? It may sound harsh but casual employment is frequently used because of a desire to be able to dismiss particular staff easily. It is true that casual employees are excluded from notice of termination or redundancy pay. The trap to look out for is how soon a casual employee will access the unfair dismissal protections under the Fair Work Act 2009 if their hours are regular and predictable. Unless the business employs fewer than 15 employees, a casual employee engaged on a regular and systematic basis with an expectation of ongoing work can claim unfair dismissal after just 6 months. Ironically, this is the same minimum period a permanent employee must serve before gaining the right to make such a claim. Note, though, that in a small business with fewer than 15 employees, the 6 month period is extended to 12 months.
- Could you use a flexible permanent part-time arrangement instead? Just because an employee is part-time does not necessarily mean that you cannot vary their hours of work without incurring overtime. Well drafted contracts and agreements and effective labour management practices can result in additional hours being worked at ordinary rates (but don’t try to pay them a loading in lieu of their leave entitlements or you will be in breach of the National Employment Standards).
- What other wage-related costs will apply? Another factor that’s worth considering is how the penalties, overtime and loadings differ between casual and permanent employees. Many modern awards provide different entitlements between these employment types which can have a significant impact on your bottom line. The same can be true of Enterprise Agreements and transitional instruments. It is important to compare the total amounts that would be paid over a particular shift roster for a casual and a permanent employee based on their particular industrial instrument. You might even want to re-design the roster to fit the conditions better.
We hope this gives you some helpful advice the next time you are contemplating a restructure of all or part of your business, recruiting for an existing or new role or undertaking a process of workforce planning. As mentioned, casual employment can be a key factor in gaining greater labour flexibility and ultimately achieving organisational resilience.
If you would like advice on your particular employment options and implications, please do not hesitate to contact Joshua Shingles.
