Casual Employment Arrangements – What is your Strategy?

So, you employ a casual workforce at your business. You may have commenced this ‘strategy’ when you were first getting started, and it has continued to be the ‘way we do things around here’ because it may be easy, and the employees might seem to like it and it just ‘works’.

But does it?

With changes to Fair Work legislation, that recently became effective for small businesses (see our recent blog on Employee Choice Pathway ) now might be the time to take stock and ask some particular questions to assess if casual employment is the right workforce strategy for your constantly evolving business.

It must be said, that the continually evolving industrial relations landscape is certainly targeted and supportive of enabling employees to pursue a more stable employment relationship. With this Government direction, the time is now to make an assessment to see if you can jump on board and also potentially benefit from these changes.

If you employ casuals, they can request permanent employment through the Employee Choice Pathway process, in line with the Fair Work legislation, and you will need to provide a response. An employee can request this if they have been employed for at least 6 months (or 12 months for small business) and if they believe they are no longer meeting the definition of a casual employee.

The definition of a casual employee is (as defined by Fairwork):

A person is a casual employee if, when they start employment:

• the employment relationship has no firm advance commitment to ongoing work, taking into account a number of factors, and
• they’re entitled to a casual loading or specific casual pay rate under an award, registered agreement, or employment contract.

Further details regarding the definition are available at: Casual employees – Fair Work Ombudsman

The opportunity exists to provide a considered perspective, ahead of time of a request for permanent employment, so you are not forced to make an isolated decision that isn’t fully informed or considered and aligns with YOUR needs as a business.

As a business, you pay a premium on the hourly rate to have flexibility with casual employees. 25% on top of the hourly rate applicable to that role, is the norm in most cases. That comes with an upside – Flexibility – if the work slows down, so does the need to roster employees for shifts, No paid leave (we’ll put LSL to the side for moment), and in most instances, if you have concerns with the employees performance or conduct, it is often easy enough to finish up employment with them (although there are some caveats so we recommend you ensure you are aware of the obligations and risks before terminating).

Remember that casual employees are now defined by the terms ‘no firm advance commitment to ongoing work’. Typically, casual employees can accept or reject shifts, do not have a regular pattern of work and they may or may not be offered work regularly. It is worth keeping this front of mind as you unpack your workforce strategy.

What if you have an ‘ongoing’ arrangement with your casual employees, in a predictable rostering arrangement over a lengthy time period? It may be that you are paying a premium for flexibility, however you are not actually requiring or utilising the flexibility.

For longer term casuals, you have already assessed that they can do the role, so their suitability has been trialed and you have already established that you need the work to be done, so the need to constantly question the resources required for the volume of work needing to be done is becoming more predictable.

Casual employment may also come with further down sides for your business – a less predictable workforce – potentially higher staff turnover – due to lack of stability and employees can provide minimal notice to not attend shifts, creating a headache to resource properly. Further, in this candidate short market, with casual roles typically being less attractive, you may not be getting the best talent showing interest in your vacancies when they arise.

Permanent part time, or even full time employment may be something worth considering as part of your workforce strategy.

If your initial concerns are around suitability for the role or a reluctance to commit to a new employee without ‘trialing’, remember there are significant protections under standard probationary terms (3 to 6 months), and further extended protections from unfair dismissal for small businesses who employee fewer than 15 employees for the first 12 months of employment if termination of employment was to occur.

Dependent on the Award, Agreement or Employment Contract that you are employing your workforce under, there are still options to increase the hours of work in times of high, or seasonally high times of the year if that is a concern for you, especially for part time employees.

Further, permanent employees who have access to annual and personal leave will, in theory, have more regular rest breaks throughout the year, enabling a more effective and engaged employee, not an unrested, sick, casual employee with no option but to show up for work. Typically, these annual leave periods are planned, enabling you to prepare and put in appropriate arrangements for these times.

If things begin to not work out with your permanent employees, there are many pro-active and also re-active strategies that can be put in place. Performance management, discipline and termination options exist, however there are also great retention and positive, supportive strategies that can be put in place to turn the tricky employee around.

We get it, you need to weigh up the risks. Ultimately though, if you are paying a premium for a flexible, agile and dynamic workforce, when you don’t actually need it, is it a waste of resource? Especially when the alternative, a more permanent employment arrangement has significant upside for you, and for the employee.  It might be something worth considering.

Your circumstances may prevent you from committing to a more permanent workforce model, but it is still worth asking the question. By understanding your business needs and obligations, pursuing a deliberate employment strategy will have a positive impact on retention, attraction and employee engagement. It also enables you to plan and forecast more effectively, being more deliberate and purposeful in your operations.

An informed strategy is better than not having a strategy at all and will put you in the driver’s seat to make the best business decisions.

Example Scenario casual comparison from a costing perspective:

 *scenario based on a 38 hour week. Oncosts such Long Service Leave, payroll tax, workcover, insurances are not included.

Even if you had to employ a casual to cover your permanent employee for their 2 weeks personal leave and their 4 weeks annual leave (based on a base hourly rate of $25 per hour plus casual loading) at a cost of $7,980 including super, you’d still be $5,187 in front hiring a permanent employee.