Understanding Casual Conversion Rights Under the Closing Loopholes Act

The rules around casual employment in Australia changed fundamentally on 26 August 2024, when the casual conversion provisions of the Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024 took effect. The old system — where employers had to offer conversion — was replaced with a new system where employees can choose to convert.

This is not a minor tweak. The new framework introduces a completely different definition of what makes someone a "casual employee," creates a new employee-driven conversion pathway, and imposes notification obligations on employers that did not exist before.

If you employ casual staff — and most Australian businesses do — you need to understand what has changed and what you are now required to do.

The Old System vs the New System

Before 26 August 2024

Under the old casual conversion provisions (introduced in March 2021):

• Casual employment was defined by the contract of employment — if the contract offered no firm advance commitment to ongoing work, the person was casual
• Employers with 15+ employees had to offer conversion to permanent employment after 12 months of regular and systematic casual engagement
• The offer had to be made in writing within 21 days of the 12-month anniversary
• Employers could decline to offer conversion on reasonable business grounds
• Employees could also request conversion, and employers could refuse on reasonable grounds

After 26 August 2024

The new system flips the mechanism:

• Casual employment is now defined by the real substance, practical reality, and true nature of the employment relationship — not just what the contract says
• Employees can now choose to notify their employer that they wish to convert — the employer no longer makes the offer
• The notification can be given after a minimum qualifying period (6 months for non-small business employees, 12 months for small business employees)
• Employers can only refuse the conversion in limited circumstances
• A new dispute resolution pathway through the Fair Work Commission exists if the parties cannot agree

The New Definition of Casual Employment

This is the most significant change. Section 15A of the Fair Work Act now defines a casual employee based on the real substance, practical reality, and true nature of the employment relationship, assessed against specific criteria.

An employee is casual only if:

1. The employment relationship is characterised by an absence of a firm advance commitment to continuing and indefinite work according to an agreed pattern of work
2. The employee is entitled to receive a casual loading or a specific rate of pay for casual employees under the applicable award or agreement

The "absence of a firm advance commitment" is assessed by looking at:

• Whether the employer can choose to offer (or not offer) work, and whether the employee can choose to accept or reject it
• Whether the employee will work as required according to the needs of the employer
• Whether the employment is described as casual
• Whether the employee would be entitled to a casual loading or specific casual rate

Crucially, the assessment is based on the totality of the relationship — not just what the contract says. A contract that says "this is a casual engagement" does not make the employee casual if the practical reality is that they work regular, predictable shifts with an expectation of ongoing engagement.

This means an employee who has been engaged as a "casual" but works the same shifts every week for two years, with those shifts rostered well in advance and rarely changing, may not be a genuine casual under the new definition.

The Employee Choice Notification

Who Can Notify?

An employee can give a Casual Conversion Notification to their employer if:

• They have been employed for at least 6 months (or 12 months if employed by a small business with fewer than 15 employees)
• They believe they no longer meet the definition of a casual employee (i.e., the real substance of their employment is more like permanent employment)
• They have not given a previous notification that was accepted or validly refused within the last 6 months

What Must the Notification Contain?

The notification must be in writing and state that the employee considers they no longer meet the definition of a casual employee and wishes to convert to full-time or part-time employment.

The Employer's Response

After receiving a notification, the employer must respond in writing within 21 days. The employer can:

Accept the notification: The employee converts to full-time or part-time employment from a date agreed between the parties (or, if no date is agreed, the start of the first full pay period after the employer accepts).

Refuse the notification: The employer can only refuse if:

1. The employer has consulted with the employee
2. There are fair and reasonable operational grounds for the refusal
3. The grounds are known or reasonably foreseeable at the time of the refusal

The Act lists examples of fair and reasonable operational grounds:

• The employee's position will cease to exist within 12 months
• The employee's hours will be significantly reduced within 12 months
• There will be a significant change in the days or times the employee works that cannot be accommodated as a full-time or part-time arrangement
• Accepting the notification would not comply with a recruitment or selection process required by law

What Happens on Conversion

When a casual employee converts:

• They become a full-time employee if they work the equivalent of full-time hours, or a part-time employee otherwise
• Their hours of work are based on their regular pattern of hours at the time of conversion
• They become entitled to paid leave (annual leave, personal/carer's leave, etc.) from the conversion date
• Their period of service for leave accrual purposes includes the period of casual employment
• They lose the 25% casual loading because they are no longer casual
• Their base rate of pay must be at least the award minimum for their classification and employment type

Impact on Pay

This is an important point. A casual employee earning $29.04/hr (base $23.23 + 25% loading) who converts to permanent will earn $23.23/hr base. That looks like a pay cut, but they gain paid leave and other benefits that the casual loading was compensating for.

Some employers choose to maintain a higher-than-award rate for converted employees to smooth the transition. This is not required by law but can help with employee relations.

Employer Notification Obligations

Employers have a proactive obligation to notify employees about their casual conversion rights.

The Casual Employment Information Statement (CEIS)

Employers must give every new casual employee the Casual Employment Information Statement (prepared by the Fair Work Ombudsman) as soon as practicable after the employment commences.

Residual Notification Obligation

For non-small business employers (15+ employees), there is also a requirement to provide the CEIS to existing casual employees at specified intervals — generally after 6 months and 12 months of employment.

Small business employers (fewer than 15 employees) must provide the CEIS when employment commences and again after 12 months.

What Employers Should Do Now

1. Audit Your Casual Workforce

Review every casual employee and assess whether the practical reality of their engagement matches the casual definition:

• Do they work regular, predictable hours?
• Are their shifts rostered well in advance?
• Have they been working the same pattern for more than 6 months?
• Do they have a genuine choice to accept or reject work?

Employees whose practical reality looks more like permanent employment are at high risk of seeking conversion — or of being found to be permanent employees retrospectively (which creates back-pay liability for leave entitlements).

2. Review Employment Contracts

Ensure your casual employment contracts accurately reflect the nature of the engagement. A contract that says "casual" but describes fixed hours and ongoing engagement is problematic under the new definition.

3. Prepare for Conversion Notifications

Have a process in place for handling Casual Conversion Notifications:

• Who receives them?
• Who assesses them?
• What is the decision-making framework?
• How is the response documented?

You have 21 days to respond, so you need a process that works within that timeframe.

4. Update Payroll Systems

If a casual employee converts, your payroll system needs to:

• Remove the casual loading from their hourly rate
• Set up leave accrual (annual leave, personal/carer's leave)
• Credit their service period for leave calculation purposes
• Update STP reporting to reflect the change in employment type

5. Provide the CEIS

Make sure you are giving the Casual Employment Information Statement to all new casual employees and to existing casuals at the required intervals.

The Dispute Resolution Pathway

If an employer refuses a Casual Conversion Notification and the employee disagrees with the refusal, the employee can apply to the Fair Work Commission for a determination.

The FWC will:

1. Attempt to resolve the dispute through conciliation or mediation
2. If conciliation fails, make a determination on whether the employee meets the criteria for conversion
3. Order conversion if appropriate, including specifying the employment type and hours

This is a relatively new jurisdiction for the FWC, and case law is still developing. However, the FWC has indicated it will take a practical approach, focusing on the real substance of the employment relationship.

The "Casual Employee" Tax and Super Trap

A related issue: if an employee who has been treated as casual is found to be a permanent employee (either through conversion or retrospective reclassification), the employer faces liability for:

• Unpaid annual leave: 4 weeks per year, accrued over the entire period of employment (potentially years)
• Unpaid personal/carer's leave: 10 days per year, accumulated
• Superannuation on leave amounts: Super is payable on annual leave and personal leave payments
• Potential offset for casual loading: The Fair Work Act includes a provision (section 545A) allowing courts to offset the casual loading already paid against leave entitlements owed, but only if the loading was clearly identified as casual loading

Without the offset provision, the cost of retrospective reclassification can be enormous. With the offset, it is more manageable — but the employer must demonstrate that the loading was paid as a clearly identified casual loading, not just rolled into a flat hourly rate.

How AirComply Helps

Understanding which award applies to your casual employees and what rates they should be receiving is the foundation of compliance. AirComply's calculator covers all employment types — casual, part-time, and full-time — across all 155 Modern Awards.

Check casual rates and entitlements — free for all awards.

Frequently Asked Questions

Can a casual employee be forced to convert to permanent?

No. Conversion is always at the employee's choice. The employee must initiate the process by giving a written notification. An employer cannot force a casual employee to convert.

What happens to my casual loading when I convert?

The 25% casual loading stops when you convert to permanent employment. Your base hourly rate remains at the award minimum for your classification, but you gain paid annual leave, personal/carer's leave, and other entitlements that the loading was compensating for.

Can I refuse all casual conversion requests?

Only on fair and reasonable operational grounds. The grounds must relate to the position or the business, not to a general desire to maintain a casual workforce. Blanket refusal policies are not lawful.

Does the new definition mean all regular casuals are actually permanent?

Not necessarily. The assessment considers the totality of the relationship, including whether the employer and employee genuinely have the option to offer/accept or not offer/decline work. Regular hours alone do not automatically make someone permanent — but they are a strong indicator.

How far back can a casual employee claim unpaid leave?

If a casual employee is found to have been a permanent employee all along, they can claim unpaid leave entitlements going back 6 years. However, the employer may be able to offset the casual loading already paid against the leave entitlements owed under section 545A of the Fair Work Act.

Do small businesses have the same obligations?

Small businesses (fewer than 15 employees) have the same casual conversion framework, but the qualifying period before an employee can give a Casual Conversion Notification is 12 months rather than 6 months. Small businesses must also provide the CEIS to new casuals and at the 12-month mark.