Your guide to understanding employment contracts

Estimated reading time
 3 min

In this article

• Why contracts are so important
• 4 common types of contracts
• What to look for when reviewing contracts

Contracts are the backbone for many Aussie employees.

They can outline your rights, responsibilities, benefits and more, while giving you something to help you manage your workplace expectations.

While the specifics will vary based on your industry and the workplace, there are some elements that are the same across the board. That’s why we’re explaining all things contracts today. Ready to start?

Why are contracts important?

Having your agreement clearly laid out can help you manage your expectations, protect you (and your workplace) legally and outline any codes of conduct and working conditions you’ll need to meet.

And knowing what you’re getting into can impact your finances. For example, if you don’t read the entitlements section and suddenly fall ill, you might not be covered by your workplace and can lose some income. This will have a ripple effect on your financial commitments and other aspects of life. Even though it can be a painstaking task to read the fine print, it does pay to understand your contract front to back.

 Tip: You don’t have to stick to the status quo when it comes to your contract

If you’ve been working for the same employer for years now, you might not have updated your contract because there’s been no reason to – it’s got all the essentials in there. But even though you learn competitors are offering a better salary, compensation or work benefits that you (rightly) deserve, you feel comfortable with the contract you have now and stick with it despite the opportunity to make things better for you.

This is what we call the status quo bias, which is our preference for keeping things the way they are even when the alternative is better. When it comes to your current contract, think about your personal and financial goals and how adjusting your contract could help you work towards them. For example, if you’re working towards a specific financial goal and you’ve been at the business for a while now, see if you can update your contract with a new salary. Regularly review your contract to make sure it aligns with your current job and goals.

Common types of employment contracts

There are many ways you can be employed, and having the correct arrangement can help your work, life and finances. If you’re ever uncertain about your contract, it’s always a good idea to chat to your employer about it.

Here are the common types of work contracts you might encounter:

Full time contract: When people talk about that 9–5 grind, they’re referring to working full time.

• You’ll work around 40 hours each week, but this can vary based on your industry or workplace.
• You’re entitled to annual leave, sick or carer’s leave and family violence leave.
• You can have a permanent or temporary contract. The former is ongoing while the latter has a fixed period.

Part time contract: As a part timer, you’ll work less than a full-time worker but have access to some of the same benefits.

• The number of hours you work will depend on the employer and industry standards – it can be three full days, five half days or a combination of full and half days. The main thing is that it’s under 38 hours.
• You’re entitled to annual leave, sick or carer’s leave and family violence leave.
• Like full time, you can have a permanent or temporary contract.

Casual contract: When you’re a casual worker, your job comes without the guarantee of consistent or ongoing work. While the unreliability might seem daunting, it does come with its benefits.

• There’s more flexibility in choosing when you can work and how available you are in a given week.
• You might receive higher pay because you don’t have access to the benefits of a full or part time worker, like annual or sick leave.
• While you won’t receive things like paid leave, you can still take unpaid carer’s or compassionate leave if you need to.

Independent contractor: An independent contractor – also known as a freelancer or sole trader – is not the same as an employee. You work for yourself, and businesses might engage you to work for them for a specific reason. For example, a business might hire a freelance graphic designer to help create their branding and will outsource future design work to them.

• You can set your own hours and charge based on your specific services. You might set your rates per project, hour, or for each day you’re on the project.
• While you’re not entitled to sick or annual leave, you can still talk to your clients about when you’re taking a break or fall ill.
• You’ll need an Australian Business Number (ABN) and you’ll have to stay on top of your invoicing, paying your super and sorting out tax.

Read more about balancing career and life