Casual or serious? Employers must understand employment relationships

No matter the industry or size, businesses hire and rely on casual employees. While this employment type is often synonymous with temporary work such as summer jobs or students, employers must understand their legal obligations as continually employing someone as a casual can easily turn into a permanent employment relationship.

Typically, the casual employment type is used for workers who enter organisations intermittently and for short periods but without proper checks and balances, employers can find themselves in tricky situations.

In this article, our experts explain what constitutes a casual employment relationship, what a casual employee is, and the legal rights these workers have.

So, what creates a casual employment relationship?

A casual employee hasn’t been created in legislation, instead has been defined through case law. The tests for ‘what is a casual?’ is considered to be a situation whereby an employee works as and when required, the employer can offer work and the employee can decline work, there’s no pattern of work and no expectation of further engagement. Often casuals are used when there’s a very short temporary increase in work or whereby a business needs to call someone in to cover when another staff member is sick or has an unexpected absence.

Holidays? What about annual leave entitlements?

Businesses may feel stumped when it comes to leave entitlements for a casual employee. They have most of the same rights and responsibilities as other employees, but their leave entitlements are sometimes different. Casual employees’ annual holidays are often paid on a pay-as-you-go basis.

Usually, an employee will accrue their annual holidays and receive the entitlement to use four weeks of annual holidays after 12 months of continuous employment. The basis of annual holidays is for an employee to take a paid day off on what would be an otherwise working day. However, a casual employee is likely unable to determine an otherwise working day as the relationship is so irregular and intermittent that it makes providing a day off difficult, also as there’s no ongoing expectation of further engagement, they may never agree to work another day. Therefore, casuals are often paid their annual holidays out at each engagement which is the equivalent of 8 per cent of their gross earnings.

What should the employment agreement contain?

The nature of the relationship must be clearly stated in your employment agreement. It should be clear that there are no guaranteed hours, or work on a specific day and that the amount of work may fluctuate. The provision of pay-as-you-go annual holidays must also be stated in your employment agreement. It’s also important to ensure that the 8 per cent pay-as-you-go annual holidays are specified in the pay slip.

Have they always been and are they still a ‘true’ casual?

It’s imperative that employers not only choose the correct type of employment relationship but that if the type selected is that of casual the employee is forever managed as a casual employee. Just because a contract states ‘casual’ doesn’t always mean that’s the true nature of the employment relationship. If a casual is relied upon too much or if they’re always offered a particular day and then begin to be expected to work and/or they expect to work, they can then become a permanent employee as they’ll no longer meet the definition of a casual.

Once this occurs, whether the business recognises this or not, the employer faces the risk of perhaps simply no longer offering work, dismissing incorrectly, or being liable for wage arrears as they haven’t been accruing annual holidays despite there being 8 per cent annual holidays in the contract.

The easiest way a casual can be considered permanent is where a regular pattern of work is established. The Employment Relations Authority (ERA) has the legal power to review the terms of the contract as well as factors beyond the contract to determine whether they’re casual. Factors can include intention, the hours and days of work, and communication between the parties.

It’s strongly recommended that employers keep track of not just casual employees but all staff members to ensure accurate records of working patterns and regularly review the management of relationships as well as the employment agreements to ensure they’re reflective of actual arrangements, as these can often change organically.

Can you terminate a casual employee?

Each time an employer offers, and the casual employee accepts work, it’s considered a continuation of their employment. In some cases, there could be a large gap since the last time the employee accepted and performed work for the employer. If an employer hasn’t offered work for a while or if the employer simply stops offering work, it doesn’t mean that the contract has been terminated. The employer will still need to give the notice as required in the employment agreement.

What do employers need to consider?

The consequences of not correctly identifying or managing a casual employment relationship can result in considerably large consequences for any business. These can include the employee’s legal costs, ERA investigation hearing costs, compensation for unjustified disadvantage, or unjustified dismissal and wage arrears as well, should the employee raise a personal grievance.

If you believe you may have a risky ‘casual’ employee, you may want to consider managing them as a true casual to see how they respond, or possibly even raise the risk and ask if they wish to be a permanent employee and have a new contract drawn up.

How can Citation HR help?

Employment law can be tricky to navigate, especially regarding types of employment and ensuring they’re managed compliantly.

Employers with the best intentions can be caught up in the demands of managing the workplace, and they may not even realise they’ve stepped across the line. Business owners and managers must understand a casual contract well and use these contracts only for the purpose for which they were designed: to support a business at random times of peak demand or staffing shortfall.

Citation HR’s HR Software is full to the brim with various HR and employment templates and documents – they’re ready to use, compliant and always up to date.

If any of the information in this article has raised any questions or concerns about casual employment status, or any other worker status, or if you have another workplace matter you need assistance with, please contact our employment relations experts via our HR Advice Line.

Not a Citation HR client? To learn more about how Citation HR can support your business and streamline its people management processes, reach out to our friendly team for a confidential, no-obligation chat here.

About our author

Jessica Husband is an Employment Relations and Health & Safety Consultant at Citation HR. She assists clients with a range of employment relations and compliance matters via the 24/7 HR Advice Line. She has been helping businesses and employers with employment relations for over four years and counting.