Every Australian employer must have a written employment agreement in place before an employee starts work. Without one, you are exposed to disputes over pay, hours, duties, and termination. A properly drafted agreement protects your business, sets clear expectations, and ensures you meet your obligations under the Fair Work Act 2009.
This guide covers exactly what must be in an employment agreement in 2026, what common mistakes to avoid, and how to make sure your contracts hold up if challenged at the Fair Work Commission.
Fair Work Centre is an independent private organisation providing advisory services to employers only. It is not associated with or authorised by the Fair Work Ombudsman, the Fair Work Commission, or any government authority.
Quick Summary
- Employment agreements must not undercut the National Employment Standards (NES) or the relevant Modern Award
- Every agreement needs core clauses: position, pay, hours, leave entitlements, and termination
- Casual, part-time, and full-time employees each require different agreement types
- Fixed-term contracts carry strict rules — breaching them can cost up to $93,900 per violation
- Agreements cannot remove NES entitlements — they are the legal floor, not a ceiling
What Is an Employment Agreement Under the Fair Work Act 2009?
An employment agreement is a legally binding document between an employer and employee that sets out the terms and conditions of employment. Under the Fair Work Act 2009, every employee is entitled to a minimum set of conditions regardless of what their contract says. These are the National Employment Standards (NES) — 11 minimum entitlements that apply to all employees in the national workplace relations system.
Any term in your employment agreement that attempts to exclude or reduce an NES entitlement is void. The NES applies automatically — you cannot contract out of them.
What Must Be in Every Employment Agreement in 2026?
A compliant employment agreement should cover the following core clauses:
1. Position and Duties
Clearly define the employee job title, primary duties, and reporting structure. Vague role descriptions create disputes — especially around performance management and redundancy.
2. Remuneration
State the base salary or hourly rate and confirm it meets or exceeds the minimum rate under the relevant Modern Award or the National Minimum Wage (currently $24.10/hour from 1 July 2026). Include whether superannuation is included in or on top of the stated rate — this distinction has caused significant underpayment claims.
3. Hours of Work
Specify the ordinary hours (maximum 38 ordinary hours per week for full-time employees under the NES) and any expectation of reasonable additional hours. For part-time employees, state the guaranteed minimum hours — failure to do so may inadvertently create a full-time entitlement.
4. Leave Entitlements
Reference the NES leave entitlements: annual leave (4 weeks per year for full-time employees), personal and carer leave (10 days per year), compassionate leave (2 days per bereavement), parental leave (up to 12 months unpaid), and community service leave including jury duty.
5. Notice of Termination
Under the NES, minimum notice periods range from 1 week to 5 weeks depending on length of service. Your agreement can specify longer notice — but never shorter. Employees over 45 with more than 2 years of service are entitled to an additional week of notice.
6. Confidentiality and Intellectual Property
Include clear clauses protecting confidential business information and specifying that intellectual property created in the course of employment belongs to the employer. Without this, you may have limited recourse if an employee takes client lists or proprietary processes when they leave.
7. Restraint of Trade
Post-employment restraint clauses must be reasonable in scope, duration, and geography to be enforceable. Courts regularly strike down overbroad restraints. Seek legal advice before including them — a poorly drafted restraint offers no real protection.
8. Dispute Resolution
Include an internal dispute resolution process. Employers who demonstrate a genuine internal process are viewed more favourably by the Fair Work Commission — and often resolve matters before they escalate to formal proceedings.
Employment Agreement Types: Getting the Classification Right
The type of agreement depends on the employment classification. Getting this wrong is one of the most expensive mistakes Australian employers make.
Full-Time Employment Agreement
38 ordinary hours per week. Entitled to all NES conditions in full. This is the default assumption — if you have not documented the classification otherwise, the Fair Work Commission may treat an employee as full-time.
Part-Time Employment Agreement
Less than 38 hours per week, with guaranteed regular hours stated in the agreement. Part-time employees receive pro-rata entitlements. If you do not specify minimum guaranteed hours, you risk the employee claiming full-time equivalents.
Casual Employment Agreement
No guaranteed hours. Casual employees receive a 25% casual loading in lieu of most leave entitlements. Since 2021, employers with 15 or more employees must offer eligible casual employees conversion to permanent employment after 12 months. From 26 August 2024, significant reforms introduced a new casual employment definition — review all casual agreements against the updated test.
Fixed-Term Employment Agreement
Since December 2023, fixed-term contracts cannot exceed 2 years in total including renewals, unless an exemption applies. Breaching the fixed-term rules now carries civil penalties of up to $93,900 per contravention. If you rely on fixed-term contracts for project roles or seasonal work, audit your current arrangements immediately.
Need help structuring the right agreement for your employees? Fair Work Centre members get access to 50+ customisable employment agreement templates — drafted by employment lawyers and updated when the law changes.
What Your Employment Agreement Cannot Do
- Exclude unfair dismissal rights: You cannot contract out of the unfair dismissal regime. Any clause purporting to do so is void.
- Reduce NES entitlements: Stating an employee gets 3 weeks annual leave does not make it legal — the 4-week NES entitlement applies regardless.
- Require excessive hours: Contracts requiring 55 to 60 hours as a standard condition are unenforceable.
- Make retrospective changes: You cannot unilaterally change the terms of an employment agreement without the employee consent. Doing so may amount to constructive dismissal.
The 5 Most Costly Employment Agreement Mistakes Australian Employers Make
- Using a generic template without award coverage review. A template drafted for retail may not be compliant for a hospitality employer covered by a different Modern Award. Always check the applicable award before finalising any agreement.
- Not updating agreements when the law changes. Agreements from 2019 may not reflect casual conversion rules, fixed-term limits, or the updated NES. Review annually.
- Failing to get a signed copy. Always obtain a signed copy before the first day of work. Unsigned agreements invite disputes.
- Bundling salary with entitlements without a valid annualised salary clause. Attempting to use a flat rate to cover overtime, allowances, and loadings is only legally valid if correctly structured under the applicable award.
- Omitting a probationary period clause. Without a clearly documented probationary period, dismissal during early employment carries the same procedural requirements as at any other time. Always state the probation length (3 to 6 months) and the performance review process.
Key Takeaways
- Every employment agreement must meet or exceed the NES — no exceptions
- Classify employees correctly from day one — casual, part-time, full-time, or fixed-term
- Fixed-term contracts are capped at 2 years — audit yours immediately
- Signed agreements prevent disputes — always get one before the start date
- Review agreements annually against award updates and legislative changes
Frequently Asked Questions
There is no specific law that mandates a written employment agreement — but operating without one is extremely risky. Without written terms, disputes about pay, hours, duties, and termination are decided against whatever the employee can prove. The Fair Work Commission and courts will imply terms and apply the relevant Modern Award, often in the employee’s favour. Every employer should have a signed written agreement in place before an employee starts.
No. A Modern Award sets the minimum conditions for employees in a particular industry or occupation. An employment agreement can only provide conditions that are equal to or better than the award — it cannot reduce award entitlements. If your agreement conflicts with an applicable Modern Award, the award prevails. Always check which Modern Award applies before drafting any agreement.
Unilaterally changing a fundamental term of employment — such as pay, hours, or duties — without the employee’s agreement may constitute a breach of contract. If the change is significant enough, the employee may resign and claim constructive dismissal, which is treated as an unfair dismissal. Always obtain written consent to any material variation and document the change properly.
There is no legal minimum or maximum, but 3–6 months is standard. The minimum employment period for unfair dismissal eligibility is 6 months (or 12 months for businesses with fewer than 15 employees). Setting a probationary period shorter than this threshold does not automatically protect you from unfair dismissal claims — procedural fairness is still required throughout probation.
No. Casual, part-time, full-time, and fixed-term employees all need agreements that reflect their specific classification and entitlements. Using a one-size-fits-all template without tailoring it to the employee’s classification and the applicable Modern Award is a common source of compliance failures. At minimum, each employment type should have a distinct template.
An annualised salary arrangement allows an employer to pay a single flat salary that covers award entitlements including overtime, penalty rates, and allowances — provided the arrangement is formally documented, the employee is no worse off overall, and reconciliations are conducted at least annually. Errors in these arrangements have led to significant underpayment claims and Fair Work Commission proceedings.
