Fixed Term Contracts in Not-for-Profits and Charities - Funding Reality Does Not Remove Employment Risk
Australian Not-for-Profit’s (NFP) and charities have always had to manage workforce planning in imperfect conditions. In this environment, fixed term contracts can feel like a practical and necessary tool.
They often are.
But fixed term employment is now a higher risk area for boards, CEOs and HR leaders. Fair Work changes have made it clear that fixed term contracts cannot be used as a default workforce model simply because funding is uncertain. The law places limits on how long fixed term contracts can run, how often they can be renewed, and when consecutive contracts can be used. Employers must also provide the Fixed Term Contract Information Statement when entering a new fixed term contract. Fair Work states that the fixed term limitations generally apply from 6 December 2023.
For NFPs, the challenge is practical. Many roles are genuinely linked to funding. Some programs are designed for a limited period. Some roles exist only because a grant, contract or philanthropic contribution exists. Yet the presence of fixed term funding does not automatically make every fixed term contract lawful or low risk.
Why this matters for NFP employers
Fixed term contracts sit at the intersection of strategy, HR and governance. They influence workforce stability, staff retention, organisational knowledge, culture and service continuity.
When used well, they help organisations align employment commitments with genuine project or funding limits. When used poorly, they create uncertainty, turnover, compliance risk and loss of trust.
The risk is greatest where fixed term contracts become the ordinary way an organisation employs people. This is common in the sector. Employees may move from one fixed term contract to another for similar work, across similar programs, with little break in service. The work may feel ongoing, but the contract continues to be described as temporary.
That is where the governance risk increases.
The general fixed term limits
The Fair Work rules generally restrict fixed term contracts that:
+run for more than two years, including extensions
+include an option to extend or renew more than once
+form part of certain consecutive contract arrangements for the same or substantially similar work
If a contract breaches the rules and no exception applies, the end date may not operate as intended. The employee may still have enforceable rights, and the organisation may not be able to rely on the contract ending automatically.
This matters because many NFPs have historically relied on contract end dates as a workforce management tool. That approach now requires more discipline.
Who may be exempt
There are exemptions. These include certain contracts linked to specialised skills, training arrangements, essential work during peak demand, emergency circumstances, high income employees, governance positions, government funded roles and where an applicable modern award permits the arrangement.
There is also a temporary additional exception for some charity and NFP sector employees. At the time of penning this article Fair Work states that the additional charity and NFP exception applies to contracts entered into on or after 1 November 2024 and before 1 November 2026, where the required conditions are met.
This is helpful for some NFPs, but it is not a blanket exemption.
The organisation still needs to test whether the funding, role, program duration, contract period and total employment period meet the requirements. A general statement that the role is grant funded will not be enough.
The governance issue
Boards do not need to approve every employment contract. They do need assurance that the organisation is using lawful and sustainable workforce models.
A useful board question is not, "Do we have fixed term contracts?"
A better question is, "Do we know why each fixed term contract is fixed term, and can we evidence the basis for that decision?"
The board should be particularly alert to:
+long serving employees on repeated fixed term contracts
+staff performing continuing operational work under temporary contracts
+roles where funding is uncertain but the work is ongoing
+contracts renewed late or without review
+project roles that have become embedded business-as-usual roles i.e., no are core funded postions
+employees who do not understand their employment status or contract end arrangements
+managers using fixed term contracts to avoid performance management or workforce planning decisions
A better approach
Fixed term contracts should be used deliberately, not automatically.
For each fixed term role, management should document:
+why the role is time limited
+whether the work is linked to a specific project, program, funding source or temporary need
+whether a legal exception applies
+whether the contract length aligns with the funding or project period
+whether the employee has received the required Fair Work statements
+whether the arrangement could become continuing employment
+what will happen if funding is extended
This does not need to be complicated. A short internal decision record can significantly improve governance, HR practice and risk management.
Designing for funding reality and workforce dignity
Many NFPs have a genuine funding problem. Employment law does not remove that problem. But it does require organisations to respond to funding uncertainty with better workforce design.
A fixed-term contract can be appropriate where the role is genuinely temporary, properly documented and legally supported. It becomes problematic where it is used as a substitute for workforce planning, performance management or strategic clarity.
For NFP leaders, the shift is simple but important. Fixed term employment should not be treated as a funding reflex. It should be treated as a considered workforce decision.
That decision sits squarely within good governance.
If your organisation relies on fixed-term contracts, now is the time to review your arrangements. A focused audit can identify high risk contracts, confirm available exemptions, improve documentation and support more sustainable workforce planning.
This article provides general information only. NFPs and charities should check the Fair Work Ombudsman website for current guidance on fixed term contracts, contractor arrangements, exemptions and employer obligations before making workforce decisions.
