- On 4 December 2009, the AIRC will publish the final batch of modern awards.
- All new modern awards will commence on 1 January 2010.
- Many employers will be surprised by the scope of award coverage, especially in relation to clerical and managerial roles. It’s possible that awards will cover employees who were previously regarded as ‘award free’, even though this was not the stated intention of the modern award process.
- A late variation to the modern awards covering clerical staff and employees in the banking, finance and insurance industry has removed the exemption for employees earning 15 per cent more than the Level 5 wage rate in the award.
- Instead, the AIRC has inserted ‘annualised wage’ provisions. Unlike the ‘15 per cent exemption’, these provisions do not operate automatically. Employers need to give written notice to employees that their salaries are being paid in satisfaction of specific award entitlements.
- Employers with staff who are covered by either of these awards need to revisit their pay rates and employment contracts to ensure that they can take advantage of the ‘annualised wage’ provisions.
- There is also scope in all modern awards for employers to make ‘individual flexibility agreements’ with any award covered employees.
- For high income employees (ie earning more than $108,300pa), there is the opportunity to escape award regulation by reaching agreements with employees via a guarantee of annual earnings.
- Freehills can assist clients to put the necessary written notices in place so that they can take advantage of the annualised salary provisions and avoid falling foul of the awards.
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The enormous task of condensing thousands of industrial awards into around just 150 modern awards will culminate on 1 January 2010 when modern awards come into operation under the Fair Work Act 2009 (Cth).
This Friday, 4 December 2009, the AIRC is due to publish the final modern awards completing the 4th and final stage of the modern award process.
The conclusion of Stage 4 next week will reveal the final form of the contentious Miscellaneous Award which is intended to cover employees traditionally covered by awards who do not fall within the coverage of any other modern award. However, over recent weeks the Australian Industrial relations Commission (AIRC) has been busy varying the ‘final’ versions of modern awards published in the earlier stages.
Are awards really relevant?
Emphatically, yes. Together with the National Employment Standards (NES) which also commence on 1 January, 2010, modern awards are intended to provide the safety net conditions of employment for the majority of Australian workers. The modernisation process has re-invigorated awards by updating their content, but also broadening their scope in some cases. And whereas employers in the past may have ignored awards (especially old state awards) which may have ‘notionally’ applied to employees, it is important to bear in mind that all modern awards will be enforced by a single federal agency—the Fair Work Ombudsman (FWO). It’s most unlikely that the FWO will go soft on breaches within its clear charter.
Awards are also relevant because they continue to be the benchmark against which any enterprise agreements are assessed to determine whether they satisfy the new ‘Better off overall’ test (BOOT). Because modern awards have been updated and generally offer more consistent benefits across the board, some employers may face greater difficulty in ensuring new EBA’s pass the BOOT.
It just will not be possible for employers to ignore modern awards or hope they will not apply. In some instances, modern awards will prescribe quite detailed rostering and overtime arrangements. And in some cases, there will be restrictions on employers seeking to annualise salaries to offset certain award benefits. For example, under the modern Clerks Award, there are new standard provisions which must be complied with to effectively achieve this (see below).
What steps do I need to take?
Many employers are already aware of the modern awards and their contents which are likely to commence on 1 January 2010. However, here’s a short list of things to follow up before then:
- Make sure you review the modern awards that may apply to your work force—especially for your staff and non-EBA workforce. Look for the scope and classifications of employees covered by modern awards and don’t assume that people are not covered just because they may be on high incomes.
- Check for any gaps between the award/s and your existing conditions of employment. Especially be prepared to update contracts of employment and policies to ensure that certain award conditions are not being breached. (At the same time, check your contracts and policies for compliance with NES).
- Some award conditions just can’t be escaped. For example, it’s a standard obligation to make the award accessible at the workplace. Failure to do so could result in a penalty for breach. The standard clause is in the following terms: The employer must ensure that copies of this award and the NES are available to all employees to whom they apply either on a noticeboard which is conveniently located at or near the workplace or through electronic means, whichever makes them more accessible.
- If you have high income employees (more than $108,300 pa) then awards can be avoided for those employees by reaching an agreement for a guarantee of annual earnings. There are some technical rules about ensuring the guarantee is effective, so take care if taking this step. Contracts for new (high income) employees should contemplate providing the guarantee as a matter of course.
- Even for employees below the high income threshold, there is the scope in every modern award to make an individual flexibility agreement (IFA) and thereby override certain award matters (such as overtime, penalty rates, hours of work, allowances and leave loading). Again, there are strict conditions which apply to such arrangements.
- Some modern awards also provide for scope to offset certain award entitlements under an annualised salary arrangement. Again, it would be wise to prepare draft contracts for employees which are complaint with the fairly rigorous award prescriptions to achieve this.(See our comments below in relation to the modern Clerks Award).
Banking, Finance & Insurance and Clerks Awards: Last-minute removal of ‘15 per cent exemption’
In the lead-up to publication of the final modern awards, the AIRC has made some significant changes to two of the modern awards that are relevant to many of our clients: the ‘Banking, Finance and Insurance Award 2010’ and the ‘Clerks – Private Sector Award 2010’.
On 16 November 2009, the AIRC varied these awards to remove the exemption from certain provisions of the award for employees paid more than 15 per cent above the Level 5 wage rates in those awards. (The relevant Level 5 pay rate under both the ‘Banking, Finance and Insurance Award 2010’ and the ‘Clerks – Private Sector Award 2010’ is $740/week or $38,480/year.) The variation was a result of applications by the FSU and ASU made in line with a variation issued in May 2009 by Julia Gillard, Minister for Employment and Workplace Relations to the award modernisation request to the AIRC.
The varied request stated that the creation of modern awards was not intended to exempt employees who are not high income employees from award coverage where there was no history of such exemption in the relevant industry or occupation.
Annualised salaries allowed…
In place of the ‘15 per cent exemption’, the AIRC has inserted ‘annualised salary’ provisions. These provisions allow employers to pay their employees an annual salary in satisfaction of specific award entitlements, such as allowances, overtime and penalty rates and annual leave loading.
…provided you confirm in writing
Unlike the 15 per cent exemption, the annualised salary provisions do not apply automatically. Where an employer wants to utilise the annual salary provision, it must advise the employee in writing of:
- the annual salary payable, and
- which of the specific award provisions the annual salary is intended to satisfy.
Miscellaneous Award
On 4 December 2009, the AIRC is expected to publish the final version of the Miscellaneous Award. This modern award is intended to cover employees traditionally covered by awards who do not fall within the coverage of any other modern award.
In its decision of 25 September 2009, the AIRC kept everyone guessing as to the ultimate coverage of the Miscellaneous Award, commenting that it was unclear which employees would be covered by the award. The AIRC’s decision confirmed what many have feared, that the Miscellaneous Award could apply in some parts of the workforce that were previously award-free. One industry greatly concerned by these comments is the accountancy industry. Professional accountancy firms have voiced particular concern over the potential for traditionally award-free accountancy staff to be caught by the Miscellaneous Award. While setting pay rates above the award minima may not be a problem, ensuring that other provisions of the award such as overtime payments could be problematic.
This article was written by Kerryn Tredwell, Senior Associate, Sydney and Tony Wood, Partner, Melbourne.
More information
Modern awards have a lot of employers confused. For information regarding the possible implications for your business, contact one of the Employee Relations partners.