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Pulse Check: contracts of employment

By CCIWA Editor 

CCIWA’s experienced and innovative legal practice Business Law WA specialises in workplace relations and employment law matters for businesses of all sizes.

Our team of specialised lawyers can assist your business with the industrial relations law changes, ensuring your workplace is legally compliant, safe and productive.

Here are some of this month’s frequently asked questions asked by our Members about contracts of employment, answered by our Business Law WA team.

Q: Can a contract stipulate 40 hours per week?

A: The National Employment Standards (NES) includes a “maximum weekly hours”, which for a full-time employee is 38 hours and additional hours which are reasonable. An employer cannot require or request an employee to work more than those hours.

A contract in some circumstances could include more than 38 hours where they are reasonable additional hours being requested or required, however it will depend on the employee, their role, their pay and the business they are working for.

If you would like to include more than 38 ordinary hours of work a week in a contract, CCIWA recommends you get legal advice on the risks associated with it and the best way to include those additional hours.

Q: Can we add an annualised salary and pay a flat rate?

A: It is generally possible to pay employees an annualised salary. However, before you do so, first check any relevant awards or enterprise agreements to see if they contain specific provisions about annualised wages or salaries.

From there, it is important to calculate the appropriate flat rate for that specific employee, based on the employee’s classification level, the rosters that they work and will be working going forward, and what entitlements the annualised salary is going to cover.

Incorrectly calculating a flat rate can lead to an underpayment of employees, which can lead to significant penalties and proceedings.

Care should therefore be taken when calculating the flat rate, and when regularly reviewing the flat rate, which CCIWA can assist with.

Q: Can we change an employee’s contract to 40 ordinary hours per week?

A: It may be possible for employees to work 40 hours per week in their contracts. However, it is important to note that generally only 38 hours per week can be ordinary hours, and the rest will be additional hours which might attract different pay rates.

Employers can issue a new contract to existing employees – however an employee does not have to accept the new contract! If employees do not accept this new contract, the terms of the new contract are unlikely to be conditions of their employment.

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Q: Employees are asking to transfer from employment to being sole traders – what are the risks associated with this?

A: In some cases, employees might leave their place of employment and then work for that business as a sole trader, or a contractor. However, it is important to consider if that person is in fact a sole trader/independent contractor in reality – or continues to be an employee.

Sham contracting is illegal and occurs where a person is actually an employee, not a sole trader/independent contractor. Where it’s found there has been a sham contracting arrangement, courts can impose penalties against individuals or businesses.

Furthermore, the new Closing Loopholes Bill includes a new definition of employee which means that when deciding if a person is an employee of a business, multiple factors need to be considered, not just what the contract states.

This means the person could be underpaid as they are not receiving their employee benefits. It is very important that the business considers if this person is truly a sole trader/independent contractor or if they are actually an employee, and CCIWA would recommend you seek advice on this assessment.


If you have any questions about employment contracts, contact our Employee Relations Advice Centre on 9365 7660 or email [email protected], or if you would like to speak to one of our employment lawyers, email [email protected].  

What are the rules around contracts of employment? Our experts answer your FAQs.

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