Fixed-Term Contract Redundancy: Are You Entitled to a Payout? (2026)
Fixed-term contract workers may be entitled to redundancy pay if their contract is terminated early. Learn how the 2023 fixed-term contract reforms affect your redundancy rights in 2026.
Fixed-Term Contracts and Redundancy: The Basic Rules
Whether a fixed-term contract employee is entitled to redundancy pay depends on how and why the employment ends. Under section 123 of the Fair Work Act 2009, an employee is not entitled to NES redundancy pay if their employment is terminated at the end of a fixed-term contract — that is, when the contract simply expires as agreed. This exclusion exists because both parties entered the contract knowing it would end on a specified date, so the employee cannot claim they were taken by surprise. However, if the employer terminates the fixed-term contract early — before the agreed end date — the situation is different. If the early termination is due to the position being made redundant (the employer no longer needs the job done by anyone), the employee may be entitled to redundancy pay. The key question is whether the employee has accrued sufficient continuous service to qualify for NES redundancy pay, which generally requires at least 12 months of continuous service. If the employee has been on successive fixed-term contracts with the same employer, the total period of continuous service across all contracts is counted. This is a crucial point that many employers and employees miss: consecutive fixed-term contracts build up continuous service, and with it, entitlements to notice and redundancy.
New Fixed-Term Contract Restrictions from December 2023
Significant reforms to fixed-term contracts took effect on 6 December 2023 under the Fair Work Legislation Amendment (Closing Loopholes) Act 2023. Section 333E of the Fair Work Act now limits the use of fixed-term contracts. The key restrictions are: a fixed-term contract (including any renewals or extensions) cannot be for a period of more than 2 years in total, and a fixed-term contract cannot be renewed or re-made more than once. This means an employer can offer a maximum of two consecutive fixed-term contracts with the same employee, and the total duration cannot exceed 2 years. There are exceptions for certain categories of work: employees earning above the high income threshold ($174,200 for 2025-26), essential work during a peak demand period, work that is genuinely distinct and identifiable, employees engaged on a government-funded contract where funding is for a defined period, and certain training arrangements. If an employer breaches these restrictions — for example, by entering a third consecutive fixed-term contract or extending beyond 2 years — the fixed-term provisions are of no effect and the employee is treated as a permanent employee. This has significant implications for redundancy entitlements, as the employee would be entitled to NES redundancy pay based on their full period of service.
When Fixed-Term Employees ARE Entitled to Redundancy
Fixed-term employees are entitled to redundancy pay in several situations. First, if the employer terminates the contract early (before the agreed end date) due to a genuine redundancy, and the employee has at least 12 months of continuous service, NES redundancy pay applies. The amount is calculated the same way as for permanent employees, based on the years of continuous service. Second, if the employee has been on consecutive fixed-term contracts totalling more than 12 months, and the employer decides not to renew the final contract because the position is being made redundant, redundancy pay may be payable. The FWC has found in several cases that a reasonable expectation of renewal, combined with non-renewal due to redundancy, can trigger the obligation. Third, if the employer has breached the new section 333E restrictions (more than 2 years or more than one renewal), the employee is deemed permanent and is entitled to full redundancy pay. Fourth, if the employment contract itself or an applicable enterprise agreement provides for redundancy pay, those terms apply regardless of the NES exclusion. Some enterprise agreements explicitly include fixed-term employees in their redundancy provisions. Finally, if the fixed-term contract contains an early termination clause, the terms of that clause will govern what the employee receives on early termination, which may include a payment equivalent to redundancy.
When Fixed-Term Employees Are NOT Entitled to Redundancy
The NES clearly excludes redundancy pay when a fixed-term contract expires at the end of its agreed term. If your 12-month contract ends on the date it was always going to end, you are not entitled to redundancy pay under the NES, even if the employer decides not to renew it. This is the case even if you had a reasonable expectation of renewal — unless the applicable award or enterprise agreement provides otherwise. You are also not entitled to NES redundancy pay if you have less than 12 months of continuous service, regardless of whether the contract ends early or expires naturally. Employees of small businesses with fewer than 15 employees are excluded from NES redundancy pay entirely, whether they are on fixed-term or permanent contracts. If the contract is for a specified task or project, and the task or project is completed, no redundancy pay is owed. It is also worth noting that casual employees are not entitled to redundancy pay, even if they have been working regular and systematic hours for an extended period. However, a worker labelled as a fixed-term contractor who is actually an employee may be entitled to redundancy — the substance of the relationship, not the label, determines the outcome. If there is any ambiguity about your employment status, seek advice before assuming you are not entitled.
Early Termination Clauses and Contractual Entitlements
Many fixed-term contracts contain an early termination clause that allows either party to end the contract before the agreed end date by giving a specified period of notice. If the employer exercises this clause, the employee is entitled to the notice period specified in the clause (which cannot be less than the NES minimum notice period) and, if the early termination is due to redundancy and the employee has sufficient service, NES redundancy pay. Some contracts also contain a payout clause, requiring the employer to pay the employee for the remaining balance of the contract if it is terminated early. This can be more generous than NES redundancy pay, particularly for shorter contracts with a substantial remaining term. For example, if an employee is on a 2-year contract with 14 months remaining and the employer terminates early, a payout clause might entitle the employee to 14 months of salary — far more than the NES redundancy scale. If the contract does not contain an early termination clause, the employer may face a breach of contract claim for ending the contract early. In this situation, the employee may be entitled to damages equal to the remuneration they would have received for the remainder of the contract, less any amounts they earn or could reasonably earn in alternative employment (the duty to mitigate). This common law entitlement exists alongside any NES redundancy pay entitlement.
How s333E Affects Rolling Contracts and Continuous Service
Before the 2023 reforms, some employers used rolling fixed-term contracts to avoid providing permanent employment and the associated redundancy entitlements. An employee might work for the same employer for 5, 10, or even 15 years on successive fixed-term contracts, never accruing redundancy entitlements because each contract nominally expired and a new one began. Section 333E has substantially curtailed this practice. Under the new rules, after two years or one renewal (whichever comes first), the employer must either offer permanent employment or end the arrangement. If the employer continues the fixed-term arrangement in breach of s333E, the contract is treated as a permanent contract and the employee accrues all permanent entitlements, including redundancy pay, based on their full continuous service. For employees who were already on rolling fixed-term contracts when the reforms commenced on 6 December 2023, transitional provisions apply. The new restrictions do not apply to contracts entered into before that date, but they do apply to any new contract or renewal after that date. This means an employee whose fixed-term contract was renewed for the first time after 6 December 2023 is subject to the new restrictions from that point. The interaction between transitional provisions and continuous service calculations can be complex, and affected employees should seek specific advice.
Unfair Dismissal Rights for Fixed-Term Employees
Fixed-term contract employees can make unfair dismissal claims in some circumstances. Under section 386(2)(a) of the Fair Work Act, a person is not dismissed if their employment ended because of the expiry of a fixed-term contract without renewal. However, if the contract is terminated before its expiry date, this is a dismissal and the employee may claim unfair dismissal (subject to the usual eligibility requirements of minimum service and the high income threshold). The minimum employment period is 6 months for employers with 15 or more employees, or 12 months for small business employers with fewer than 15. If an employee has been on consecutive fixed-term contracts, the total period of continuous service counts towards the minimum employment period. This means an employee on their third consecutive 6-month contract has 18 months of continuous service and is eligible to claim unfair dismissal if their contract is not renewed. The question of whether non-renewal of a fixed-term contract can constitute a dismissal is nuanced. If the employer led the employee to have a reasonable expectation of renewal and then did not renew for reasons that were harsh, unjust, or unreasonable, the FWC may find a dismissal occurred. Each case turns on its facts, including any representations made about renewal, the history of past renewals, and the reasons for non-renewal.
Try these free tools
Official resources
General information and estimates only — not legal, financial, or tax advice. Always verify with the Fair Work Ombudsman (13 13 94) or a qualified professional.
Related articles
Made redundant? Calculate your exact payout in 10 seconds. NES scale: 4 to 16 weeks' pay by service. Small business exempt? Tax-free portion? Find out now.
How Much Notice Must Your Employer Give You? 1-5 Weeks by Law (2026)Australian employers must give 1-5 weeks' notice depending on your service length. Over 45? You get an extra week. Free calculator + pay-in-lieu rules + what happens if they don't give enough notice.
Unfair Dismissal in Australia: How to Know If You Have a CaseWas your dismissal unfair? Learn the eligibility rules, 21-day deadline, high income threshold ($175,000), remedies, and how to apply to the Fair Work Commission.