A modern award is a set of minimum terms and conditions for employment in Australia.
If you have or are planning to open a business in Australia, you must already know about “modern awards”. Modern awards are one of the most important documents in employment in Australia. Modern awards apply to both employers and employees and failure to follow them could have you as the employer, facing serious monetary penalties. It should be stressed that the onus is on the employer to be up to date and compliant with your relevant modern award.
Modern Award: Explained
A modern award is a relatively new concept in Australia. Coming into effect on 1 January, 2010, over 100 modern awards replaced thousands of Federal Awards. Modern awards are in addition to National Employment Standards (NES). All employees covered by the national workplace relations system are covered by modern awards.
The national workplace relations system is made up of:
– National Employment Standards
– Registered agreements
Modern awards are broken up into occupations or industries. In saying that, for most companies, several modern awards may apply for their employees. In majority of cases, it’s occupation-based, which means it is directly linked to the nature of the job (responsibilities, scope, skills required). Therefore, it’s essential to evaluate each employees’ job description and identify their modern award, accordingly.
One of the biggest misconceptions regarding modern awards is that it only concerns payroll. It’s so much more than that. Modern awards should be viewed as where Human Resources and Payroll meet. In a modern award it outlines the minimum entitlements for:
– Penalty rates
– Hours of work
– Dispute resolutions
– Types of leave
– Flexible work arrangement
– Consultation about major workplace changes
– Annual leave loading or cashing out
– Redundancy requirements
– Termination extra guidance to follow
Awards are updated every financial year (which starts from July 1st). However, some awards are updated at different times of the year; this year a few were changed in October. Therefore, you should make sure to check them regularly and update your employees’ wages accordingly.
Modern Award: Why You Cannot Avoid It
Modern awards are essential to remaining compliant. While you may pay a wage that is well above the minimum stated in the award, you, as an employer, must check them regularly. Additionally, you need to be aware of what modern awards apply to your employees.
As employees move up the ranks and change positions within your business, their award may change, and as such, their minimum entitlements. Again, the onus is on the company to be aware of the modern award that your employees fall under. You face the penalty. Not the employee.
Keeping up to date on modern awards is a proactive measure to ensure that you don’t get stung by huge financial penalties in the future.
Modern Award: Monetary Consequences
Failing to comply with modern awards can result in a monetary penalty. The penalty could be in the form of a fine or an ordered payment for the victim (employee) of the breach.
Penalties can be as high as $63,000 for each breach. The amount chosen is determined by factors such as whether it was wilful (intentional) negligence, whether the employer is a repeat offender, and the circumstances surrounding the breach, among others.
Modern Awards: Exceptions
Modern awards do not apply to employees who work for a business that is covered by a registered agreement. There are two types of agreements under the national workplace relations system. They are:
These are negotiated in good faith between employers and employees and must be better overall than the modern award that would have applied otherwise.
Examples of enterprise agreements include:
– Single-enterprise agreement
– Multi-enterprise agreement
– Greenfields agreement
Agreement-based transitional instruments
These are agreements that were made prior to Fair Work 2009. As such, these agreements have passed their nominal expiry date. However, they will continue to operate until one of the following things happen:
- Someone applies to end the agreement
- The agreement is replaced by a new one with the same coverage
Examples of agreement-based transitional instruments include:
– Collective agreements
– Certified agreements
– Australian workplace agreements
– Individual transitional employment agreements
While modern awards don’t apply in a strict sense, their minimum standards are still applicable. Therefore, if you have a registered agreement in place, you cannot pay less than the modern award. The aim of the registered agreement for a business is to suit their employees better than a general modern award. Employees must have better working conditions than under the current award.
A registered agreement must be approved by and registered with the Fair Work Commission. Currently, most agreements are finalised (provided the application meets all of the requirements) within 20 days for simple applications and 45 days for complex applications. Following its approval, it will be published on the Fair Work Website.
High-income threshold exemption
If your employee is earning above the annual salary threshold of AU$162,000 a year, a modern award may not apply. This is a tricky exemption that is dependent on a number of factors being met. Additionally, the threshold does increase yearly, so you must check it regularly to ensure compliance.
For the employee to be exempt from the modern award, the employer must give them a guarantee of annual earnings. This arrangement must last for a minimum of 12 months. It should be noted that the guarantee can only be terminated if both the employee and employer agree to it.
The importance of modern awards cannot be understated. Following them is essential to remaining compliant. As they update yearly, it’s the responsibility of the employer to regularly check and keep up-to-date on any changes that are made to their relevant awards. Failing to do so will be costly.