New employment laws could stretch not-for-profit budgets

New workplace laws introduced last month largely ban fixed-term contracts longer than two years.

But the Community Council for Australia (CCA) says most of the organisations it represents are reliant on funding agreements that last for two years or less.

There are limited exceptions to the new rule, including for organisations with a reasonable expectation that government or philanthropic funding for more than two years would dry up after that point. Other exemptions apply for some organisations involved in organised and high performance sport, live performance, or higher education.

CCA chief executive David Crosbie said the changes had sparked uncertainty in the sector.

“There has been some analysis suggesting that the average length of funding contracts currently in place in charities and NFPs is less than two years, which is why many use repeated fixed-term employment contracts,” he said.

“For some charities, the new requirements may mean they have to have more employees on full-time permanent contracts, and for some that requires additional costs (to cover redundancy and other entitlements) and greater risk of not being able to balance their budgets, depending on their income streams and how certain they are.”

He said there was “a level of uncertainty about the way charities and community organisations might apply the new requirements, particularly in relation to repeat fixed-term contracts”.

He said a key concern was how to interpret the issue of a “reasonable expectation” that funds would dry up for those organisations claiming an exception.

“The CCA had previously argued that charities and community organisations often faced ongoing uncertainty about their income streams – even if the funding they receive has been provided previously and there is a good chance the funding will be rolled over for another period of time.

“Of course, knowing you have a good chance of future funding does not mean you have certainty, and the risk of a charity trading insolvent is clearly reduced if staff can be employed on fixed-term contracts that match the terms of their funding streams.”

He said that “charities have no issue with permanently employing people to undertake the valuable work they do in our communities” where they are able to rely on ongoing funding.

Asked how the government would protect smaller organisations relying on funding cycles of less than two years, a spokesperson for the Department of Employment and Workplace Relations said: “The intention is not to disrupt the use of fixed term contracts where genuinely necessary and appropriate.”

They said the legislation and regulations had “a range of exceptions to the limitations; for example, where a contract is funded in whole or in part by either government, or philanthropic funding in certain circumstances”.

The spokesperson defended the reforms to fixed term contracts.

“The Australian Government believes that while fixed term contracts continue to have a legitimate purpose in helping employers to source workers to perform discrete tasks for a fixed period, they can exacerbate job insecurity for employees when they are used for the same role over an extended period, or where employees are subject to rolling contract renewals for jobs that would otherwise be permanent.”

But Mr Crosbie said that “charities are continually asked to do more with less”, and that more funding was needed to meet the expectation that they would be able to respond to the threats of cyber security, climate change, impact reporting and much more.

“Without significant investment in building the capacity of charities and NFPs, we undervalue their work, role and contribution – and fail our communities,” he said.

Asked what the government and other funders could do to strengthen the sector, Mr Crosbie responded with a shopping list of ideas.

“If we want resilient and flourishing communities, governments and philanthropy need to invest in resilient charities and NFPs.

“This means working more as partners for outcomes, providing more certainty in funding, and valuing charity expertise. We would like to see longer-term contracts, more trust, more authentic engagement and more flexibility, with less prescription and less micromanagement. We would also like to see funders paying the full cost of service delivery, allowing charities to invest in building the capability that supports and develops a high- performing workforce, keeps data safe and measures outcomes.”

The CCA’s People and Culture Network will meet with the Fair Work Commission’s head of enforcement in late February to discuss the impact of the changes.

Mr Crosbie hoped the meeting would help the Fair Work Commission to better understand how charities and NFPs operated. The CCA would also seek reassurances about how the Fair Work Ombudsman would interpret and enforce the new laws, he said.

The workplace law changes are among a raft of industrial relations and workplace changes introduced by the Albanese government.

For more guidance on the top trends affecting not-for-profits in 2024, be sure to read our special report in February's Community Directors Intelligence.

More information

New rules for fixed-term contracts (Fair Work Commission)