Everything you need to know about maximum term contracts

As an employer, choosing a suitable employment contract may be a difficult task. There are several types of contracts and an employment contract must always accurately reflect the agreement between you and your employee. In this Business Kitz blog post we will examine the distinctions between two types of short-term employment contracts, known as maximum-term and fixed-term contracts, as well as how and when to use them.

To start with, we believe that it is critical to comprehend the differences between a fixed-term and a maximum-term contract how to terminate them and which is more convenient for your needs.

What is a maximum term contract?

The maximum term contract has a sunset date rather than a defined termination date. This type of contract specifies an expiration date and also allows the parties to terminate the contract early, usually with notice.

So, when are maximum term contracts used? These contracts are frequently used when a special project requires additional staff, such as to cover parental leave or during peak trading seasons such as Christmas.

A positive aspect of maximum-term contracts is the termination flexibility they offer. Both the employer and the employee have the option to end the agreement before the sunset date. When terminating a maximum-term contract before its entire length you must give a notice of termination.

What is a fixed-term contract?

A fixed-term contract is a contract between an employee and an employer that lasts for a certain duration or job and does not allow the parties to terminate the agreement early. A fixed-term contract may include an employer’s authority to cancel the employment contract for specific reasons. The employer and employee accepting the fixed contract can terminate if there is proper cause to do so, for example, an unacceptable performance in the workplace.

Now, when is this form of contract used? This type of contract is generally used when you need a specific individual for a certain position and at a specific period. 

If you’re wondering how to terminate a fixed-term contract, the process is more complicated since the parties have agreed that the contract would end on the given date. If the contract is terminated before the termination date, the party who terminated it may be required to pay the outstanding sum to the other party.

What are the key differences between maximum and fixed contracts?

 If you are still unclear about the distinction between fixed-term contracts and maximum-term contracts, here are the key differences:

  • Length of term: in fixed-term contracts, the employment contract specifies start and end dates, however, in maximum-term contracts, the contract expires on a “sunset” date.
  • Fixed-term contracts do not permit early termination, but maximum-term contracts allow you to stop the contract with a notice of termination.

What are the terms for contract renewal?

Fixed-term and maximum-term contracts are frequently renewed for subsequent six to twelve-month periods. If you require assistance with contract renewal on fixed-term or maximum-term contracts, our sister company, Legal Kitz, or the Fair Work Ombudsman can assist.

Legal advice

Both fixed-term and maximum-term contract arrangements have advantages and pitfalls. When hiring employees, employers should carefully analyse their conditions and utilise the contract that is most suited to the employee and the desired outcome.
Business Kitz understands that employment contracts can be complicated, and that’s the reason why we offer different contract templates to assist you. Otherwise, if you need legal assistance in reviewing or drafting your employment contracts, you can contact our sister company, Legal Kitz, here to help. They offer FREE 30-minute consultations to assist you with any queries or concerns. Book here now for your free consultation.

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