Resistance is futile: Modern award basics for employers
One of the biggest challenges for Australian employers is navigating the often complex and confusing landscape of the modern awards.
In this blog, we provide some basic information about modern awards to help employers find their way.
What is a modern award?
A modern award is a document made by the Fair Work Commission (FWC) that sets the minimum terms and conditions of employment for employers and employees in a particular industry or occupation.
Modern awards are given legal effect by the Fair Work Act 2009 (Cth) (FW Act), under which it is an offence to contravene the terms of a modern award.
There are 122 modern awards of general application that have replaced the previous State and Federal Awards.
What is in a modern award?
Most significantly, modern awards set the minimum rates of pay for employees, which can vary significantly between modern awards depending on the industry and the classification of the employee in question.
Modern awards also set a range of other employment terms and conditions such as:
- Penalty rates – for work performed on weekends or outside of usual hours of operation;
- Overtime rates – for work in excess of an employee’s ordinary hours;
- Allowances – paid to employees for performing certain duties (e.g. first aid allowance or travel allowance); and
- Break arrangements – when employees should receive breaks and how long they should be.
The terms and conditions of employment vary from modern award to modern award so employers should never assume that the terms and conditions of one modern award will apply consistently throughout all modern awards.
Do employers have to comply with the terms of a modern award?
Yes. If a modern award covers an employer and its employees then the employer must comply with the terms of the modern award.
Serious penalties apply for failure to comply with the terms of a modern award.
Modern awards are non-negotiable and cannot be displaced by an employment contract.
What if an employer pays above the modern award rate of pay?
Even if an employer pays an employee more than the applicable minimum rate of pay in a modern award, all the terms of the modern award will still continue to apply.
Take for example the recent decision of Muscat v Chase Commercial Pty Limited T/A Chase Commercials  FWC 1398 (29 March 2018) where the FWC held that the Director of Asset Management of a real estate agency was covered by the Real Estate Industry Award 2010 despite her title and $180,000 salary. The FWC found that the employee performed functions that were covered by the Real Estate Industry Award and was not elevated beyond coverage under the Award simply by virtue of a title and above-Award remuneration.
Employers should also be mindful that modern awards terms are not only concerned with minimum wages. This can trip employers up when it comes to managing other entitlements like annual leave or entitlements that are not as easily understood, such as the notice period required before an annual shut down.
Can I just set and forget?
No. The modern awards change regularly. In fact, the FWC is compelled by the FW Act to review minimum wages annually and to conduct a comprehensive review of the modern awards every four years.
The four-yearly review process has proven to be very complex and drawn out and has resulted in changes to the modern awards occurring regularly in response to a range of matters.
For example, a decision was handed down in 2017 to make changes to the penalty rates in several modern awards covering the retail, hospitality and restaurant industries. Several of these changes are being introduced in a transitional manner meaning that the changes to penalty rates will not be final, in some cases, until 2019. The modern awards affected by the FWC decision will continue to regularly transition until the final penalty rate is reached.
Therefore, it is essential for employers to regularly review their employment practices to ensure they are compliant with the modern awards and to always view the most recent version of the modern awards through the FWC’s website – https://www.fwc.gov.au/awards-and-agreements/awards/modern-awards/modern-awards-list
KeyPay has 44 of the 122 modern awards built into the platform, automating all the rules for users so manual calculations aren’t necessary. What’s more, KeyPay keeps the awards up to date in real time in the cloud, so you don’t have to worry about payroll compliance.