Transitional provisions — award phasing adjustments from July 2011

Analysis

Transitional provisions — award phasing adjustments from July 2011

From the first pay period that commenced on or after 1 July 2010, various monetary entitlements under modern awards were adjusted (up or down) by a percentage if there was a difference in the (then) current rate and the rate prescribed by the applicable modern award. The transitional amount or transitional percentage is adjusted on the first pay period to commence on or after 1 July each year during the phasing process.

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From the first pay period that commenced on or after 1 July 2010, various monetary entitlements under modern awards were adjusted (up or down) by a percentage if there was a difference in the (then) current rate and the rate prescribed by the applicable modern award. The transitional amount or transitional percentage is adjusted on the first pay period to commence on or after 1 July each year during the phasing process.
 
The phasing process occurs over a four-year period, which will then cease on 1 July 2014.

This means the second adjustment in the phasing process occurs from the first pay period to commence on or after 1 July 2011.

Modern awards contain transitional arrangements that specify when particular parts of the modern award come into effect.

Transitional provisions generally appear as a schedule to the modern award.

It should be noted that some modern awards may provide different transitional provisions to the ‘standard’ phasing process, therefore reference should be made to the transitional provisions of the applicable modern award to determine the appropriate phasing process.

The phasing percentage has changed to 60% (from 80%) from the first pay period on or after (fppooa) 1 July 2011. 

This article explains the method by which the relevant minimum award wage, casual loading and penalties are calculated consequent to the change in the phasing percentage under the transitional provisions of modern awards, and the decision by Fair Work Australia (FWA) in the Annual Wage Review 2011.
 
What entitlements are included?
 
The transitional provisions of a modern award cover the following employee entitlements:
  • minimum wage rates (including piecework rates and industry allowance)
  • casual or part-time loadings
  • Saturday, Sunday, public holiday, evening or other penalty rates
  • shift allowance/penalties.
Overtime penalty rates are not considered to be included under the term ‘or other penalties’ because the (then) Australian Industrial Relations Commission excluded certain matters dealing with spread of ordinary hours, starting and finishing times, and the number of hours of overtime required to be worked at certain rates, from the transitional provisions of modern awards in its decision on Award Modernisation in December 2008.

Transitional amount
 
The difference between an employee’s minimum wage rate under the Australian Pay & Classification Scales (APCS) as at 31 December 2009 and the appropriate wage rate under the modern award (either higher or lower) as at 1 January 2010 is referred to as the ‘transitional amount’.

Likewise, the difference in the percentage between the casual loading and shift, weekend and public holiday penalties under the APCS and the modern award, is referred to as the ‘transitional percentage’.

All other allowances prescribed by a modern award are excluded from the amount and were payable from 1 January 2010 (when modern awards became operative).

The phasing process
 
The following phasing-in percentages are applicable from the first pay period to commence on or after the relevant date:
  • 1 July 2010 — 80%
  • 1 July 2011 — 60%
  • 1 July 2012 — 40%
  • 1 July 2013 — 20%
  • 1 July 2014 — nil
On the fppooa 1 July 2011, the percentage of the transitional amount or transitional percentage to be deducted, or added, as the case may be, from the minimum wage rate, casual or part-time loading, or relevant penalty rate, is 60%. The phasing process occurs over a four-year period, which will then cease on 1 July 2014.

Annual wage Review and phasing in
 
Since the introduction of transitional provisions, there have been two Annual Wage Reviews — in 2010 ($26.00 per week) and 2011 (3.4%). The latest decision is operative from the first pay period commencing on or after 1 July 2011. The transitional amount is added, or deducted, as the case may be, to the new modern award rate (ie the award rate that includes both the $26.00 per week and 3.4% increases).
Example
 
An employee whose modern award rate is higher than the relevant minimum wage rate as at 31 December 2009 has a transitional amount of $8.98 (80% of $11.22). The relevant minimum award rate for an employee prior to the 2010 Annual Wage Review was (say) $630.00 a week. This means that from the fppooa 1 July 2010 the minimum award rate for this employee was the new modern award rate of $630.00 plus the $26.00 Annual Wage Review increase minus the transitional amount of $8.98.
 
Therefore:
$630.00 + $26.00 – $8.98 = $647.20
 
Consequent to the Annual Wage Review 2011, the current modern award rate increased to $678.30 (+3.4%) from $656.00 a week. The transitional amount is now $6.73 (60% of $11.22). Both the modern award wage rate and the new transitional amount apply from the fppooa 1 July 2011. The new minimum rate in this example is $671.57 a week ($678.30 – $6.73).
 
Examples — casual loading
 
WorkplaceInfo has received a number of enquiries relating to the transitional provisions and casual loading. Casual loading is subject to the phasing process, the relevant phasing percentage from the fppooa 1 July 2011 being 60%.
 
Casual loading — where APCS is higher than the modern award
 
In this circumstance, 60% of the total transitional percentage should be deducted from the casual loading in the modern award. Casual loading under the APCS was 20%. The casual loading under the applicable modern award is 25%. The total transitional percentage in this case is 5%. The percentage of the casual loading to be deducted from the casual loading in the modern award is (60% of 5%) = 3%. From the fppooa 1 July 2011, the casual loading is (25% – 3%) = 22%.
 
Casual loading — where the APCS is higher than the modern award
 
In this circumstance, 60% of the total transitional percentage in the modern award should be deducted from the total transitional percentage. Casual loading under the APCS is 33 1/3%. Casual loading under the modern award is 25%. The total transitional percentage is (33 1/3% – 25%) = 8 1/3%. The percentage of the transitional percentage to be added to the modern award casual loading is (60% of 8 1/3%) = 5%. From the fppooa 1 July 2011 the casual loading is (25% + 5%) = 30%. The appropriate casual loading from the fppooa 1 July 2010 was 31.67% (80% of 8.33% = 6.67% + 25%).
Exceptions
 
The transitional provisions of a modern award may exempt certain states or territories, or certain classifications, from the transitional provisions.

For example, the Children’s Services Award 2010 exempts the minimum wages of all classifications under the relevant NSW NAPSA (the Miscellaneous Workers Kindergarten & Child Care Centres NAPSA) from the transitional provisions, as well as certain classifications in Western Australia and Tasmania.

Source:  Paul Munro, IR Consultant.
 
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