If you use fixed term contracts, the rules shifted again on 1 November 2026. Most of the change lands on charities, not-for-profits and medical research employers. But there’s also a new Fixed Term Contract Information Statement (FTCIS), and that one applies to everyone.
This is the third November in a row the fixed term exceptions have been rewritten. If you’re struggling to keep up, you’re not alone. Here’s what’s changed, what hasn’t, and what to do about it.
What Are the Fixed Term Contract Rules?
Since 6 December 2023, the Fair Work Act has limited how you can use contracts that end at a set time. Unless an exception applies, a fixed term contract can’t:
- run for more than two years, including any extensions
- be extended or renewed more than once
- be followed by another fixed term contract for the same or substantially similar work if that would push past these limits.
The rules also catch maximum term contracts, the ones with an end date that can also be ended early with notice. Calling it something different won’t get you out of it.
What Happens If You Get It Wrong?
The end date simply doesn’t work. Your employee is treated as ongoing. If you later want to end their employment, you’re back to needing a valid reason, a fair process and the unfair dismissal risk that comes with it.
You can also be hit with penalties for breaching the Act. That’s a lot of risk for a contract you thought was straightforward.
Which Exceptions Apply to All Employers?
Before you panic, the limits don’t apply in a range of situations. The main ones for SMEs are:
- Small business employers: you have fewer than 15 employees when the contract is made.
- High income earners: the employee earns above the high income threshold.
- Specialised skills: the role is a distinct, identifiable task that needs specialised skills.
- Training arrangements: such as apprenticeships and traineeships.
- Peak periods and emergencies: essential work during a peak demand period, or work during an emergency.
- Replacing an absent employee: for example, covering parental leave or a workers compensation absence.
- Government funded roles: funding is payable for more than two years and there’s no reasonable prospect of it being renewed.
- Award permits it: the modern award covering the employee allows a longer fixed term.
- Governance roles: governance positions of up to four years.
Small business owners, read this bit twice. Even if you’re exempt from the limits, you still need to give the FTCIS to every fixed term employee.
What Changed on 1 November 2026?
Two things changed. Both only affect charities, not-for-profits and medical or health research employers.
1. The Exceptions Are Now Ongoing
The charity and medical research exceptions were temporary. They were due to stop applying to contracts made from 1 November 2026. They’ve now been made ongoing, so eligible employers can keep using longer fixed term contracts for funded programs and projects without wondering if the rules will vanish next year.
2. The Funding Test Is Tougher
Before, it was enough for a role to be funded “in whole or in part” by an eligible source. Even a small contribution could get you there.
For contracts entered into on or after 1 November 2026, more than 50% of the funding for the position must come from eligible sources. You can combine eligible sources to get over the line.
For charities, eligible sources include government grants or procurement, funding from a different registered charity, and gifts left in a will. Payments made to individuals under an entitlement (think NDIS-style payments) and Commonwealth Home Support Programme payments don’t count.
For medical and health research employers, eligible sources include government funding, funding from a different philanthropic entity and, where the employer is itself a philanthropic entity, funding given for its charitable purposes, including gifts left in a will.
Quick example: a charity runs a four year program. A government grant covers 35% of a coordinator’s wage and a philanthropic foundation covers another 25%. That’s 60% from eligible sources, so the exception can apply. If most of the wage came from the charity’s own general fundraising, it can’t.
What Hasn’t Changed
The other conditions still apply. For charities, in short:
- you’re a charity registered with the ACNC
- your annual revenue (or your ACNC reporting group’s) is under $10 million
- the work is for a specific funded program or project that runs for no more than five years
- the contract length substantially matches the length of the program or project
- the contract won’t take the employee past seven years of continuous employment with you
- the funding started on or after 1 November 2024
- the employee isn’t covered by either of the higher education awards.
Medical and health research employers have similar conditions, with two key differences. The revenue threshold is under $100 million, and the work must primarily involve basic, pre-clinical, clinical or translational research.
Do Existing Contracts Need to Change?
Contracts entered into before 1 November 2026 stay under the old funding test. You don’t need to redo them.
Any new contract, renewal or extension from 1 November 2026 needs to pass the new 50% test. Be careful with renewals. A renewal for an existing employee is likely to be treated as a new contract made on the date it’s signed.
Which Fixed Term Contract Information Statement Do I Give?
You must give every fixed term employee the FTCIS when they enter the contract, or as soon as possible after. That includes small business employers and employers relying on an exception.
Give the version in place when you enter into the contract. For contracts starting after 1 November 2026, that’s the new version. Download the new FTCIS from the Fair Work Ombudsman.
If your onboarding pack has an old FTCIS saved in it, swap it out today. It’s a five minute job that saves a headache later.
Our Take: It’s Getting Harder to Keep Up
We get why these rules exist. Rolling people over on contract after contract for years isn’t fair on them. But each round of changes adds another test, another date and another document to track.
For a small charity with no HR team, a 50% funding test means someone needs to know exactly where every dollar of a role’s wage comes from, and keep the paperwork to prove it. Not hard in theory. In practice, it’s another job on a list that’s already too long.
The upside is certainty. The exceptions aren’t disappearing every 12 months anymore. So the smart move is to set up a simple process once, and stop relying on last year’s template.
What Should You Do Now?
Do This Now
- Replace the old FTCIS with the new version in your contract and onboarding packs.
- Check any fixed term contract, renewal or extension you’re about to sign.
- Charities and research employers: work out the funding mix for each fixed term role before you issue the contract.
Do This in the Next Few Months
- Keep grant agreements, funding letters and budgets that show how each role is funded.
- Track total service for anyone on repeat contracts.
- Review your contract templates. If they came from a free download or an AI tool, now’s the time.
- Write a simple internal guide on when fixed term contracts can be offered, so managers aren’t guessing.
Need a Hand?
Fixed term contracts look simple until one goes wrong. If you’re not sure a contract stacks up, or your templates need a refresh, talk to HR Gurus. We’ll cut through the BS and give you a clear, risk-managed path forward.
Not sure where your gaps are? Take our free HR Compliance Scorecard and find out in a few minutes.
Frequently Asked Questions
Can a fixed term contract be longer than two years?
Only if an exception applies. Without one, a fixed term contract can’t run for more than two years, including extensions, and can’t be renewed more than once.
Do small businesses have to follow the fixed term contract rules?
Employers with fewer than 15 employees when the contract is made are exempt from the two year and renewal limits. They still must give every fixed term employee the Fixed Term Contract Information Statement.
What is the Fixed Term Contract Information Statement?
It’s a Fair Work Ombudsman document that explains fixed term employment to employees, including when fixed term contracts are allowed. Employers must give it to every new fixed term employee.
Which version of the FTCIS do I need to give?
The version in place when you enter into the contract. For contracts starting after 1 November 2026, use the new version published by the Fair Work Ombudsman.
What is the 50% funding rule for charities and medical research employers?
For contracts entered into on or after 1 November 2026, more than 50% of the funding for the position must come from eligible sources, such as government grants or funding from another charity or philanthropic entity. Before that date, partial funding was enough.
Do I need to change fixed term contracts signed before 1 November 2026?
No. Contracts entered into before 1 November 2026 stay under the old rules. New contracts, renewals and extensions from that date need to meet the new funding test.
What happens if a fixed term contract breaks the rules?
The end date has no effect, so the employee is treated as ongoing. The employer can also face penalties for breaching the Fair Work Act.
This article is general information only and isn’t legal advice. For advice on your situation, get in touch with HR Gurus.