Many businesses believe that paying an employee above-award rates will satisfy the requirements of any Modern Award that applies.
A key misconception that, provided a business pays over-award rates, it will have met its obligations under Modern Awards. This may not be true. Paying over-award rates does not necessarily ensure compliance.
Most Modern Awards contain detailed rostering and overtime arrangements and provide for a range of allowances. These award conditions will apply unless the appropriate steps have been taken to exclude or vary them.
A breach of award conditions can attract substantial civil penalties for a corporate employer and individuals involved can also be penalised for each breach.
Given the confusion and complexity, it is important you are alert to the compliance issues associated with the introduction of modern awards and are able to ensure your business is are meeting its obligations.
Modern Awards set the minimum terms and conditions of employment for employers and employees in the national workplace relations system. There are more than 120 modern awards and it can be confusing to manage your employees in accordance with the terms and conditions regulated by Modern Awards – e.g. minimum wages, overtime, penalty rates, hours of work, allowances, consultation and dispute settlement procedures.
There are a range of mechanisms available in relation to Modern Awards that allows employers to vary the terms and conditions. These may include annualised salary arrangements, a high-income guarantee of annual earnings, individual flexibility agreements or negotiating a collective agreement.
However, unless you have undertaken the effort to review the Modern Award(s) that may apply to your workplace, it is impossible to assess where existing conditions fall short of compliance and whether a mechanism to vary or exclude the modern award is available or appropriate.
What do modern awards deal with?
The Fair Work Act 2009 (Cth) (FWA) specifies the minimum standards applicable to all employees in the private sector – e.g.
- Minimum wages for that award’s industry/occupations;
- Skill-based classifications and career structures;
- Incentive-based payments, piece rates and bonuses;
- Types of employment;
- Flexible work arrangements;
- Arrangements for when work is performed;
- Overtime and penalty rates;
- Annualised wage rates or salaries;
- Allowances, including for particular expenses, responsibilities or working conditions;
- Leave, leave loadings and arrangements for taking leave;
- Procedures for consultation, representation and dispute settlement.
Award conditions and entitlements are over and above the minimum requirements set out in the FWA and based on the minimum requirements of the National Employment Standards (NES).
Who is covered by a modern award?
A national system employee or employer (i.e. in the private sector) is covered by a modern award if the award is expressed to cover their industry and role.
Whilst the Fair Work Commission can vary the coverage of a modern award (e.g. to include or exclude additional parties), it cannot vary an award in a way that would result in an employee or employer no longer being covered; except where they will be covered by a different modern award.
Who is not covered by a Modern Award?
Whilst the majority of employers and employees in the private sector are covered by awards, there are some who won’t be. Generally, modern awards will not apply where:
- An enterprise agreement applies to an employment relationship; however, if the base rates of pay in an agreement are lower than those in the relevant modern award, the base rates of pay in the modern award will apply.
- A person is in a managerial role at the ‘top of an organisation’ and is a ‘high income employee’. A ‘high income employee’ means an employee whose annual earnings exceed the ‘high income threshold’ and who have accepted a formal guarantee of those earnings which remains in force. The ‘high income threshold’ figure is updated annually.
Employees who are not covered by an award or an agreement are commonly referred to as ‘award and agreement free’. ‘Award and agreement free’ employees may have an employment agreement / contract and are entitled to the national minimum wage and the NES.
Do modern awards override the NES?
No. Modern awards may contain terms that are ancillary, incidental or supplementary to the NES as long as the effect of those terms is in no way detrimental to any employee, when compared to the NES.
What if there is a modern award and an employment agreement/contract?
The existence of an employment agreement/contract does not void an employee’s entitlement to the minimum conditions provided in a relevant modern award and NES. The modern award standards will override any employment agreement/contract which provides lesser entitlements than the applicable modern award or NES.
Can modern awards be varied?
Yes. The FWC can vary a modern award itself or it can be varied with an application by an employee, employer or union representative. There are limited grounds upon which a modern award can be varied.
Generally modern awards can be varied where there is a need to correct an error, remove ambiguity and/or remove uncertainty. The FWC can also vary minimum wages on work value grounds or on other grounds where it is ‘necessary to achieve the modern award’s objective.
Akyra’s key takeaways
- A modern award compliant workplace will not happen by accident or mistake. You run a serious risk if your business does not invest in reviewing your employment strategies on a regular basis.
- It is recommended you take steps to review the Modern Awards which may apply to your employees to ensure your terms and conditions of employment (including wage rate) complies with the relevant Award.
- As an employer, you have a duty under the FWA to ensure compliance to avoid a breach or potential and unnecessary fines where a breach is identified.
NEED MORE INFORMATION?
Akyra can help your business to assist and support all your questions and concerns related to Modern Awards and pay obligations. Please contact Akyra on 07 3204 8830 or book a free 30-minute consultation for an obligation-free conversation.
Disclaimer – Reliance on Content
The material distributed is general information only. The information supplied is not intended to be legal or other professional advice, nor should it be relied upon as such. You should seek legal or professional advice in relation to your specific situation.