On 2 September 2009, the Australian Industrial Relations
Commission (AIRC) handed down it's much
anticipated decision about transitional provisions to be included
in modern awards in stages 1 and 2 of the award modernisation
Whilst the majority of modern awards have been finalised
by the AIRC, there has remained much uncertainty about how
changes to terms and conditions of employment arising from the
introduction of modern awards would be introduced into
workplaces. That uncertainty has now been resolved, although
not without a high degree of complexity.
The AIRC has decided:
monetary obligations imposed on employers under modern awards
can be absorbed into over-award payments
an employee's take home pay should not be reduced as a
consequence of the application of a modern award. An employee
who suffers a reduction may apply to Fair Work Australia for an
order to remedy the reduction
in most modern awards, a five year phasing-in period will apply
to terms and conditions of employment relating to minimum wages,
casual and part time loadings, Saturday, Sunday, public holiday,
evening and other penalties and shift allowances
(Transitional Pay Rates). In most cases,
this phasing-in will apply to increases and decreases in terms and
conditions of employment and will occur in five installments of 20
per cent each commencing on 1 July 2010.
The effect of the decision is that in most cases, while the
terms and conditions of employment contained in a modern award will
apply from 1 January 2010, terms and conditions relating to
Transitional Pay Rates will not operate until 1 July
2010. At this time 20 per cent of the increase or
decrease will apply and the remaining increases or decreases
will follow over the next 4 years, on 1 July of each year.
For example, let's say the rate of pay under the applicable
transitional instrument for a full time employee is $18 per hour
and the modern award sets the rate of pay at $20 per
hour. Until 1 July 2010, the employer can continue to
pay the employee $18 per hour, however, on 1 July 2010 the employer
would need to pay 20 per cent of the difference between the modern
award rate and the transitional instrument rate, which would be
$18.40 per hour. The remaining increases will be implemented
in equal instalments until 1 July 2014. The employer will
also be required to pay any increase in minimum wages in the modern
award resulting from any annual wage review conducted by Fair
Work Australia. The first increase is also expected on 1 July
Implications For Employers
Employers should carefully review how the transitional
provisions will apply to modern awards that will cover them and
determine the appropriate transitional arrangements for their
workplace. While it is a complex task, it is important to
ensure compliance with an employer's legal obligations.
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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