Modern awards

With the introduction of modern awards and the National Employment Standards (NES) from 1 January 2010, Australia’s industrial relations system for private industry underwent a major transformation. All employees of national system employers come within the scope of the NES and modern awards. These have been progressively replacing numerous other industrial instruments that applied to Australia’s workforce. The change to modern awards was not immediate in certain respects because transitional provisions applied — particularly relating to wage rates. In addition, unincorporated employers had a grace period until 1 January 2011 to move to the new awards. This section provides an overview of how modern awards apply.

 
 
Modern awards and NES  
 
With the introduction of modern awards and the National Employment Standards (NES) from 1 January 2010, Australia’s industrial relations system for private industry underwent a major transformation.
 
All employees of national system employers come within the scope of the NES and modern awards. These have been progressively replacing numerous other industrial instruments that applied to Australia’s workforce. The change to modern awards was not immediate in certain respects because transitional provisions applied — particularly relating to wage rates. In addition, unincorporated employers had a grace period until 1 January 2011 to move to the new awards.
 
WorkplaceInfo has a large amount of information relating to awards. A good place to start any research is with the Employment Topics A-Z. For example, there you will many entries relevant to awards including Awards (modern).
 
Modern awards replace awards and NAPSAs
 
From 1 January 2010, the applicable modern award replaced the pre-reform federal award or preserved state award (NAPSA), where relevant. A NAPSA is a Notional Agreement Preserving a State Award. NAPSAs were created under the previous WorkChoices system when what were previously State Awards were brought into the Federal system using the device of a ‘notional agreement’. In practice the employer and employee had to do little other than to recognise that the industrial instrument was now a federal one; changes which would have had more impact down the track were circumvented by the change in federal government in 2007 and the introduction of the Fair Work Act in 2009.
 
As soon as a modern award came into operation in relation to an employee, the prior award (with the exception of an enterprise award) ceased to apply to that employee.
 
If an employee is covered by a NAPSA but there was no modern award for that employee in place on 1 January 2010, the preserved state award continues to apply to that employee until a modern award comes into operation, or until the sunset date of 1 January 2014, whichever occurs first.
Interaction with NES
 
The minimum entitlements of the NES override any provision in a modern award that is less favourable than the NES, although the likelihood of this occurring is negligible. 
 
‘Take home pay orders’
 
Where a modern award sets a lower rate of pay for an employee than set by an award-based transitional instrument (ie a pre-reform federal award or NAPSA), the Fair Work Act allows the Fair Work Commission to make an order to require the employer to pay an amount of money to the employee to rectify this. These orders are to be known as ‘take home pay orders’.
Award/agreement-free employees 
 
The NES is the minimum entitlement that applies to all employees, including employees who were previously, and are currently, award/agreement-free. 
 
There is now also a Miscellaneous Award which applies to employees who are appropiately award-governed, but do not come under another modern award. The award does not cover classes of employees who, because of the nature or seniority of their role, are traditionally award-free — this includes managerial employees and professional employees such as accountants and finance, marketing, legal, human resources, public relations and information technology specialists.
Modern awards available
 
To assist employers in determining the relevant modern award that covers their employees, the Fair Work Commission publishes a list on its website
 
 
Effect on enterprise awards
 
Enterprise awards continue to operate after 1 January 2010. Modern awards do not apply to employees who are covered by an enterprise award, or employers in relation to those employees.
 
The Fair Work Act establishes an award modernisation process for enterprise awards. From 1 January 2010 until 31 December 2013, Fair Work Australia will have the power to make a modern enterprise award to replace a current enterprise award. These powers can be exercised on application. An application may be made by any person covered by the enterprise award. If no application is made, the enterprise award will continue but only until 31 December 2013.
Effect on enterprise agreements
 
It should be noted that a condition in a modern award that is more favourable than the NES does not override the relevant provision of an existing workplace agreement. 
 
For example, if a modern award prescribes 12 days per annum personal/carer’s leave, this does not prevail over an agreement that prescribes 10 days leave, because the agreement complies with the minimum entitlement provided by the NES. 
 
However, an agreement made from 1 January 2010 is required to pass the BOOT, which means the more favourable award entitlement must be considered when presenting the agreement for ratification before the FWC.
 
The minimum wage rates of an existing workplace agreement will be overridden by the wage rate of the relevant classification of an applicable modern award where the award wage rate is more favourable than the agreement.
 
Allowances and modern awards
 
With the exception of wage rates, penalties and loadings, and industry allowances (which all commenced on 1 July 2010), the majority of modern award provisions, including other allowances, commenced on 1 January 2010.
 
Allowances (other than industry allowances) are not covered by the ‘transitional provisions’ of a modern award. Transitional provisions refer to the phasing-in (over a five-year period) of wage rates, penalties and loadings, when there is difference between the relevant rate under the previous pre-reform federal award or NAPSA and the applicable modern award.
 
Most modern awards prescribe monetary allowances to compensate for a number of different conditions and qualifications. These allowances are usually amounts paid to an employee in specified circumstances, for doing particular work or carrying certain responsibilities.
 
Nature of allowances
 
Generally speaking, monetary allowances prescribed by modern awards fall into two distinct categories: work-related and reimbursement (or expense-related).
 
Work-related allowances
 
These allowances are amounts that compensate for the performance of duties that recognise disabilities, additional qualifications or responsibilities, or the locality of the work.
 
Work-related allowances that relate to responsibilities or qualifications, usually form part of the employee’s ordinary rate of pay for the purposes of the modern award and may be expressed as an ‘all-purpose allowance’.
 
Allowances expressed as a percentage
 
Under modern awards, an allowance that could be classified as a ‘work-related’ allowance is usually expressed as a percentage of the prescribed ‘standard rate’ under the wages clause of the applicable award. This is a reference to a specific classification rate, rather than the particular classification that covers the employee’s duties.
 
The amount of any allowance expressed as a percentage of a standard rate will increase when the standard rate is increased, usually consequent to the annual wage review which operates from 1 July each year.
 
Reimbursement allowances — monetary figure
 
Most awards provide a category of allowance generally referred to as a reimbursement allowance. These allowances are usually expressed as a prescribed monetary amount rather than a percentage of the relevant standard rate in the award. However, at the time of any adjustment to the ‘standard rate’, each expense-related allowance must be increased by the relevant adjustment factor. The relevant adjustment factor for this purpose is the percentage movement in the applicable index figure most recently published by the Australian Bureau of Statistics since the allowance was last adjusted. The applicable index figure is the relevant Eight Capitals Consumer Price Index.
 
Sample documentation
 
For an extensive library of policies, agreements, forms, correspondence and checklists, designed to make human resources (HR) management easy for your business see our HR Advance website.
 
 
 

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