Casual employee conversion Australia

Casual Employee Conversion 2026: What Small Businesses Must Know

What Changed on 26 August 2025?

Casuals now have a legal path to permanent employment.

The “employee choice pathway” lets casuals request conversion after 12 months. Your business must respond within 21 days.

You can refuse. But only for specific reasons.

This applies to all small businesses (fewer than 15 employees).

Who Can Request Conversion?

A casual can request permanent employment if they:

Have worked 12 months (for small businesses)
Work regular and systematic hours
Expect ongoing employment continues
Believe they no longer meet the casual definition

The new definition focuses on actual work pattern, not the contract label.

If someone works Monday-Friday every week, they’re not truly casual anymore. Even if the contract says “casual.”

The New Casual Definition

Old rule: Contract said “casual” = casual.

New rule: Look at what actually happens.

Three tests:

Do they work regular, predictable hours?
Is there an expectation of ongoing work?
Do they lack the flexibility of true casual work?

If yes to all three, they’re casual in name only. They can request conversion.

Example: Sarah works Tuesday-Friday every week for 18 months. Hours are the same. She expects to keep working. She’s not truly casual anymore. She can request permanent employment.

What Happens When They Request Conversion?

Day 1: Employee submits written request (or gives notice).

Day 21: You must respond.

Your options:

Accept conversion to permanent (full-time or part-time)
Refuse conversion (but only for specific reasons)
Consult and negotiate

You cannot ignore the request. Silence = non-compliance.

Grounds to Refuse Conversion

You can refuse if:

Insufficient regular work hours to justify permanent role
Seasonal workload (work naturally stops/starts)
Business circumstances changed
Work genuinely is temporary or project-based

Important: “I don’t want to pay for leave entitlements” is NOT a legal reason to refuse.

The Cost Impact (Why This Matters)

Casual → permanent means significant payroll costs.

A typical scenario:

Casual employee:

$25/hour (includes 25% loading)
No paid leave
No superannuation match (just 12%)
No long service leave

Same person, permanent part-time (20 hours/week):

$20/hour (base rate, no loading)
4 weeks annual leave paid ($1,600/year)
Long service leave accrual ($308/year)
Superannuation 12% ($4,992/year)
Sick leave paid (5 days, ~$800/year)

Annual cost difference: ~$7,500 MORE for permanent role.

Multiply across 5-10 casuals, and conversion costs $37,500–$75,000 per year.

Common Mistakes Small Businesses Make

Mistake 1: Ignoring the request

If a casual requests conversion and you don’t respond, you’re in breach. The Fair Work Commission can order conversion anyway.

Mistake 2: Refusing without valid grounds

“I prefer casuals” or “Can’t afford permanent benefits” won’t hold up. You need documented operational reasons.

Mistake 3: Changing their hours to avoid conversion

Cutting hours to under 12 months after they’ve requested conversion = adverse action. Penalties up to $93,900.

Mistake 4: Not calculating the cost

Many businesses don’t realize permanent costs (leave accrual, super, long service leave). Budget it now.

Mistake 5: Assuming your contract prevents conversion

Contract language doesn’t matter anymore. The real work pattern matters. Courts look at substance, not labels.

What Small Businesses Should Do Now

Step 1: Audit your casual workforce

List all casuals:

How long have they worked?
Are hours regular?
Do they expect ongoing work?
Could they request conversion?

Step 2: Assess financial impact

Calculate the cost if 50% of casuals convert to permanent.

Step 3: Make strategic decisions

For casuals you want to keep: Plan for permanent costs. Budget it.

For casuals who are truly temporary: Document why (seasonal, project-based, etc.).

Step 4: Update your contracts and processes

New casuals should have clear terms about temporary nature of work.

Existing casuals: Prepare for conversion requests starting now.

Need Help Planning?

Casual conversions affect payroll, entitlements, and budgets.

In Campbelltown and Greater Sydney, we help small businesses plan for conversion requests.

📞 Call: 04 044 71 816

We’ll audit your casual workforce, calculate conversion costs, and help you prepare before 26 August 2025.