Australia: Fair Work Act - Modern Awards: Are you prepared?

Last Updated: 7 December 2009
Article by Mark Howard

On 1 January 2010 the modern award system provided for in the Fair Work Act 2009 will come into effect.

Employers must ensure that where a modern award applies to their employees, the terms and conditions provided to those employees are at least as favourable as those set out in the modern award. Failure to comply with requirements set out in an applicable modern award could expose employers to penalties of up to A$33,000 per breach.

Key issues for employers include:

Will your business be covered by a modern award?

Modern awards have been drafted to apply in a variety of industries and occupations. If your business is currently covered by an award it is likely that it will be covered by a modern award from 1 January 2010. Even if your business is not currently covered by an award, it is still possible that a new modern award or the new Miscellaneous Award 2010 could apply to your business.

Will entitlements change under modern awards?

Most modern awards consolidate and standardise entitlements from a number of current state and federal awards. For this reason it is highly likely that there will be conditions provided for in modern awards which did not previously apply. It is therefore vital that employers carefully review the entitlements contained in any applicable modern award and compare these with existing entitlements. Employers cannot assume that it is business as usual.

Will high income earners be excluded?

High income employees are not automatically excluded from modern award coverage. However, it is possible for employers to exclude high income employees from the coverage of a modern award by entering into a "guarantee of annual earnings" with the employee. A guarantee of annual earnings is an undertaking from an employer that it will guarantee annual earnings to the employee above the high income threshold of A$108,300.

What flexibility is available to employers?

Although the flexibility of individual statutory agreements is no longer available to employers, there are a number of mechanisms which can assist employers to achieve flexibility in the terms and conditions of employment offered to award employees. For example, under the Clerks – Private Sector Award 2010 and the Banking, Finance and Insurance Award 2010, employers may elect to pay employees an annual salary in satisfaction of the minimum wages rates, allowances, penalty rates and annual leave loading contained in the Award. In addition all modern awards provide a mechanism for individual agreement whereby provided the employee is better off overall, employers and employees may agree to vary certain terms of an award to meet the individual needs of the employer or employee by entering into an Individual Flexibility Agreement.

Do employers need to comply from 1 January 2010?

The modern award system commences operation from 1 January 2010. However, in order to alleviate the impact of award modernisation of employers and employees, a number of awards will include transitional provisions which will phase in award increases and decreases relating to monetary obligations over a five year period. Employers will need to check the provisions of the modern award applicable to their business to ascertain if transitional provisions will apply.

What should employers do?

  • Ascertain whether any modern awards apply to employees.
  • Compare modern award entitlements with those currently offered.
  • Consider the merits of entering into individual flexibility agreements, annualised salary arrangements or guarantees of annual earnings?
  • Ensure that employees covered by a modern award receive the entitlements contained in that award.

If you require assistance in relation to the introduction of modern awards or other workplace relations matters please contact one of the Middletons Workplace Relations & Safety team.

Welcome to our new members

The Middletons Workplace Relations & Safety Group has experienced significant growth in the past month with the arrival of Kathy Dalton, Partner, Michaela Moloney, Special Counsel and Martin Alden, Senior Associate.

Middletons has one of the leading Workplace Relations & Safety teams in Australia and is currently advising employers, government bodies, small business and insurers on the impact of the Fair Work Act.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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