The pain of transition to modern awards — any solutions?

Analysis

The pain of transition to modern awards — any solutions?

Employers are grappling with the complexities of moving to modern award wages rates that include the prescribed classification rates plus casual loadings and penalty rates.

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Employers are grappling with the complexities of moving to modern award wages rates that include the prescribed classification rates plus casual loadings and penalty rates.
 
The complexities are explored in Phasing-in wage rates, loadings and penalties.
 
Where ‘transitional provisions’ are included in a modern award, the pre-modern award conditions relating to minimum wages, casual and part-time loadings, Saturday, Sunday, public holiday, evening, and other penalties and shift allowances continued to apply until 1 July 2010, when the modern award obligations commenced. Then the modern award rates apply by instalments — a further four instalments on 1 July each year concluding on 1 July 2014. The changes in wages and conditions covered by the phasing-in arrangements will operate from the first pay period or of after 1 July each year.
 
The actual calculations involved can extend to four separate exercises:
  1. The classifications under the pre-modern award instrument have to be aligned with the modern award classifications because many of the awards contain different classifications from those that applied previously.
  2. The actual rates for the particular classifications are subject to transition/phasing-in, with the transitional amounts and the $26 Minimum Wage increase granted from 1 July 2010 to be taken into account.
  3. The changes in casual loadings are subject to a separate phasing-in exercise.
  4. The changes in penalty, etc, rates are subject to a separate phasing-in exercise.
Any solution?
 
The amount of administration involved is causing concern for employers, and some steps to ameliorate the problem have been floated — including:
  • Employers who have to phase up to the modern award rates could simply pay the modern award rates, but this could be an unwelcome financial impost on some employers. There has been suggestions that some tax incentives could be provided to encourage employers to pay the modern award rates and this would soften the blow and give employers a reason to do so — to ease the administrative burden.
  • Employers who could phase down to the modern award rates because the pre-modern award instrument is higher than the modern award could simply continue to maintain the difference above the modern award rate and not phase down and keep a close watch on modern award rates (otherwise adjusted). This approach would not appeal to employers aiming to one day pay the actual modern award rate rather than continuing to remain above it. Again a tax incentive to continue to pay the higher rate without phasing down would be an incentive for employers to continue to pay the higher rates.
  • There is little joy for transitioning casual loadings and penalty rates, etc, except for those employers who are currently paying less than the modern award percentages and are willing to simply adopt the higher modern award figures, or those employers who are paying higher than the modern award percentages and are willing to continue to do so.
 
Classifications issue
 
Because there are arguments as to which employees are classified as what under many awards, the intervention of Fair Work Australia may be required to require the parties to each modern award to provide a table of ‘equivalent classifications’ — addressing the pre-modern award instruments and the classifications in those instruments and how they fit under each modern award.
 
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