What are Modern Awards?

An award is a legally binding order made by the Australian Industrial Relations Commission (AIRC) which prescribes the minimum terms and conditions of employment for certain workers. Employers are legally bound by the awards that relate to their employees.

Whereas previously in Australia there were many thousands of awards operating both at the Federal and State levels, as from 1 January 2010 these awards have been consolidated into 122 Modern Awards.  A full list of Modern Awards is available on the AIRC website at http://bit.ly/6yD8j0.

Modern Awards are either created by industry type (e.g. Banking & Finance), or by work type (e.g. Clerical Workers). They establish detailed obligations relating to such matters as employment status (e.g. are your workers part time or casual?), employee classifications (e.g. is a particular worker grade 1 or grade 3?), minimum wages, overtime, leave loading, penalty rates, allowances, superannuation payments, and consultation and dispute resolution procedures.

Why Do Modern Awards Affect Me?

Every Australian private sector employer is likely to be subject to Modern Award coverage, because, at minimum, they will have at least some administrative / clerical staff.

Many employers believe that just because they pay over award wages that Modern Awards will not apply to them. This is not correct.

Ignorance of Modern Awards will prove costly for employers as those who do not meet their obligations under the Modern Awards may find themselves subject to claims for back- pay despite the fact that they have paid over award wages.

The following steps are designed to assist in complying with Modern Awards.

Step 1:  Identify Which Modern Awards Apply to Your Business

To do this properly you should conduct a workplace audit identifying each staff member, the type of work they do and the worker’s pay levels. It is then a process of reviewing the list of Modern Awards http://bit.ly/6yD8j0 and identifying those awards that are most likely to apply to your business.

For some employers this may be a very straightforward exercise based on their industry type. For others, if the tasks looks daunting, we recommend that you call the Fair Work Australia (FWA) helpline on 1300 799 675, tell them your industry, and the type of workers you employ.  The FWA will usually be able to point you in the right direction with respect to which Modern Awards apply to your business.

Step 2:  Identify Your Business’s Obligations

Once the relevant awards are identified they will need to be printed out and their terms carefully reviewed. Whilst every Modern Award is different, some common obligations include:

  • Making a copy of the Modern Awards and National Employment Standards (refer to separate blog) available to all employees to which the award applies.
  • Identifying a worker’s employment status. A worker may be full-time, permanent part-time, casual etc.  Definitions of employment status vary between awards so it is very important to review the particular award and to ensure that all employees are employed correctly. There is, for example, a big difference between pay rates and entitlements applying to part-time and casual employees.
  • Identifying a worker’s classification. Each award has a detailed schedule setting out employee classifications and wage levels.. The Clerks – Private Sector Award 2010 for example has detailed classifications from Level 1 (being the lowest skill) to Level 5 (being the highest skill). It is a fundamental obligation under the award to advise their employees in writing of their classification and of any changes to their classification.
  • Meeting minimum terms and conditions of employment based on a worker’s employment status and classification. These typically include such things are payment of minimum wages, overtime, leave loading, penalty rates and allowances.
  • Complying with complex transitional arrangements where award wages are being paid and there is a variation between the old award pay scales and those under the Modern Awards.

Step 3:  Document Variations to Award Terms & Conditions

 

It is at this stage that you will need to decide whether you will comply with the strict terms and conditions of the Modern Award, or whether it is more appropriate for you to seek to vary them.

Employers who wish to vary the terms and conditions of Modern Awards have a choice. They can either:

  • enter into a formal Enterprise Bargaining Agreement (EBA) with their employees (an EBA must be approved by a valid majority of staff and certified by the AIRC. Once certified an EBA will take precedence over an award); or
  • amend their standard employment contracts (often referred to as common law agreements) to accommodate the “flexibility” or “annualised salaries” clauses  contained in the relevant Modern Award.

In simple terms if, from 1 January 2010, employers wish to vary the Modern Award conditions through common law agreements, they need to document this variation, stating each term of the award that is being varied and detailing how the variation will result in the employee being “better off overall” in relation to their terms and conditions of employment.

Step 4:  Monitor Ongoing Compliance

 

Whether you decide to comply strictly with the terms and conditions of a Modern Award, or negotiate a variation to these terms and conditions, it is critical that you monitor your ongoing compliance with the terms of the agreement you have reached.

For example, you should regularly review the classification of individual employees as a change in classification will lead to a change in minimum terms and conditions of employment which in turn will require you to revisit the employees “better off overall” status. Similarly, if you use the annualisation clause contained in many awards you have a legal obligation to review an employee’s salary at least annually to ensure that their compensation is appropriate having regard to the award provisions.

 

What Can CompliSpace Do To Help?

 

CompliSpace can guide you through each step of the Modern Award process, from identification of your obligations through to the establishment of an Enterprise Bargaining Agreement or the drafting of appropriate common law employment agreements.

If you are looking for a holistic explanation of the changes brought about by the Fair Work Act and Modern Awards we invite you to download a copy of our whitepaper From Workchoices to the Fair Work Act & Beyond – What You Need to Know to Manage Your Business Risk http://bit.ly/8qjMgg.

CompliSpace has also recently completed an in-depth survey of over 350 Australian businesses to ascertain their levels of preparedness for the industrial relations changes.  A copy of The Road Ahead – Human Resources Risk Survey can be downloaded from http://bit.ly/4ycRWg.

Finally if you wish to undertake an assessment of your businesses human resources risk we invite you to undertake our on-line Human Resources Risk Assessment which will immediately provide you with feedback as to your businesses risk rating.  Follow the link http://bit.ly/I4xzY.

For more information with respect to Modern Awards, or any of our other services, visit www.complispace.com.au or contact David Griffiths or Phyllis Peterson on Sydney +61 (2) 9299 6105 or Perth +61 (8) 9288 1827.

This blog is a guide to keep readers updated with the latest information. It is not intended as legal advice or as advice that should be relied on by readers. The information contained in this blog may have been updated since its posting, or it may not apply in all circumstances. If you require specific or legal advice, please contact us on (02) 9299 6105 and we will be happy to assist.