The challenge in business to keep up with changes and awards can
be particularly problematic.
Many business owners don't have a full understanding of what
awards apply to their staff and even less of an idea of what
obligations those awards contain. This occurs because in
reality business owners are busy trying to run their business
and do not have the time to become experts in industrial
One of the common questions we are asked is:
"can I pay my staff member a lump sum amount that will
cover off my obligations under the Award?"
The simple answer is 'yes' and there are three principal
methods for doing this under the Fair Work Act
Enterprise Agreement (EA): An
EA is the easiest way to simplify your employment arrangements and
make sure that they comply with the obligations under awards and
the Act. EAs allow employers and employees to negotiate
directly to come up with an agreement which will entirely
replace the award in its effect. For a medium to
large enterprise, it is an excellent way of ensuring that you are
not leaving any contingent liabilities (in the form of underpayment
of wages claims) on your balance sheet.
Individual Flexibility Arrangement
(IFA): IFA's are individual arrangements that
vary the award. Currently, the variations may only be limited
to a certain number of items although this is likely to
change. Further, it is not scrutinised by a third party,
which can lead to errors, but also makes the process easier.
Finally, employees or the employer can terminate the agreements
within the required notice period (which the new Federal Government
is looking to extend out to 90 days).
Common Law Contracts: Since the early 70's,
following a line of cases, employers have been entitled to offset
their additional obligations under an award for over award payments
made to the employee. Generally, it requires the insertion of
a particular term within your contract that sets out clearly what
clauses the award is intended to cover by making lump sum
There are a range of options employers can chose from to pay
their staff above the award and do so in a way that successfully
excludes or reduces the effect of the award from that point.
However, the key is making sure that you are providing sufficient
remuneration to them such that it would outweigh their entitlements
under the award.
Long experience representing many of Australia's leading employers has taught us that in employment litigation the identity of an employee's representative is a major factor in how employee litigation runs.
Australian employees receive certain entitlements (such as annual leave and superannuation) where contractors do not.
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