While most Australian workers fall under a modern award, with its associated minimum terms and conditions of employment, the specifics of the award system can sometimes be a bit tricky for employers to navigate and understand.
In addition to navigating this complex system, there are also many misconceptions and myths floating around regarding what is and isn’t acceptable when it comes to Modern Award compliance.
In this week’s Akyra blog, we provide an explainer on Modern Awards – and clear up some common misconceptions amongst employers.
What are modern awards?
Modern awards are a common term when discussing employment law in Australia, but what exactly are they?
As explained by the Fair Work Ombudsman, “a modern award is a document which sets out the minimum terms and conditions of employment on top of the National Employment Standards (NES)” for more than 100 industry or occupation types.
A modern award will outline all the terms and conditions of employment for employers and employees covered by that Modern Award and include employee entitlements such as:
- hours of work
- penalty rates
Most Australian workers will fall under a modern award, though there are some exceptions. For example, “managers or higher income employees may not be covered by a modern award even if one applies to the industry in which they work.” It is, however, important to remember that this is not the case for all managers.
With the large number of modern awards out there, and understandable uncertainty among some employers on certain issues, we’ve compiled a list of some common questions – and answers – on this topic.
Question: I can’t seem to find an appropriate modern award for an employee. Does that mean they aren’t covered?
Answer: No, just because an employer cannot identify an obvious modern award which applies to an employee, it does not mean that they are not covered. For example, some workers may fall under the Miscellaneous Award. If you are uncertain about which modern award applies to an employee, check with the Fair Work Commission or your HR Consultant.
Question: If both an employee and employer wish to opt out of a modern award, can they?
Answer: No, even if both an employee and employer wish to opt out of an award in favour of a separate employment agreement. Employers must remember that “awards apply as a matter of law and not choice.” If an employee falls under a specific modern award, the requirements outlined in that award must be adhered to.
Question: Is it true that all managers and high-income employees are NOT covered under a modern award?
Answer: While many senior managers and professionals will not fall under a modern award, this is not always the case. Many managers and senior employees, others eg. bank managers and store managers, do fall under a modern award. It is critical that employers confirm whether or not senior managers are covered under a specific award – do not just assume that they are not. Modern awards will also NOT apply to high-income employees, currently classified as those earning over $162,000 p.a. as of July 2022.
Question: If I’m paying above award rates, do I still need to pay overtime and penalty rates to employees?
Answer: Well, that depends on several factors. If an employee is paid at the same overall rate of the relevant award (or above) AND their employment contract includes a offset clause, then an employer may not need to pay overtime or penalty rates. The term ‘overall’ encompasses any penalties that might apply.
Question: My employees are not part of a union – do modern award conditions still apply to them?
Answer: Yes. Regardless of whether or not employees are part of a union, they are still covered under any applicable modern award.
Akyra’s key takeaways
- Modern awards set out the minimum terms and conditions of employment for Australian workers, including pay rates, working hours and penalty rates
- An employee is covered by the relevant Modern Award; even when the employee’s wages are more than the minimum stipulated by that Modern Award
- Modern awards apply to all Australian workers, with some exceptions – including many senior managers and high-income earners
- If you are unsure of which modern awards apply to an employee, or if you are uncertain about your obligations, contact the team at Akyra Strategy & Development
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.