Govt sets out rules for transition to modern awards


Govt sets out rules for transition to modern awards

The Federal Government has advised the AIRC to vary the operation of transition periods for modern awards to suit the industry concerned, apply the BOOT test only three times during the period, and has set out the rules for ensuring workers’ take-home pay is not reduced.


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The Federal Government has advised the AIRC to vary the operation of transition periods for modern awards to suit the industry concerned, apply the BOOT test only three times during the period, and has set out the rules for ensuring workers’ take-home pay is not reduced.
In a submission to the AIRC, the Government urged it to ensure that transitional arrangements in individual awards best meet the requirements of the particular industry.
It also said that to the greatest extent possible, parties should be encouraged to participate in the award modernisation process and reach agreement on transitional provisions in respect to their particular modern award.
AIRC told ‘be flexible’
It also urged the AIRC to be ‘flexible’ in dealing with transition provisions of modern awards.
‘For instance, in some modern awards it may be appropriate for the Commission to utilise a shorter phasing in period, while in others, it would be more appropriate to defer the transition of certain conditions or wage increases for employers in the first year and then transition them in over the remaining four years of the transitional period,’ the submission said.
‘Alternatively, the Commission may decide to weight the phasing in, or out, of particular terms and conditions towards the earlier or later part of the five year transitional period, or otherwise, progressively across the whole five year transitional period.’
Disparate pay rates a ‘challenge’
On the key issue of disparities in pay rates and penalties in the same industry across the States, the Government said it was ‘aware that choosing a new national award benchmark presented many challenges’.
‘The Government submits that it is imperative that appropriate and workable transitional arrangements are made for these industries, to allow for a smooth transitional to modern awards and appropriate time for employers to adjust to their new requirements,’ the submission said.
‘Again, the Government encourages the Commission to work closely with industry parties to examine any cost impact. The parties are best placed to develop flexible transitional arrangements for these awards.’
Take into account global recession
However the Government said the current global recession should be taken into account when developing transitional arrangements.
On Friday, the IR Minister Julia Gillard directed the AIRC to make a new modern award covering the restaurant and catering industry, and to examine award coverage in this industry.
In its submission, the Government said the SIRC should defer the consideration of transitional arrangements in this industry until this examination is finalised.
In the aged care industry the Government said transitional provisions in modern awards are important to enable the industry to manage any change in labour costs.
‘The Government encourages the Commission to use the full five-year transition period available to allow the industry to absorb any changes in labour costs,’ the submission said.
BOOT test
Regarding the BOOT test, the Government said there was potential uncertainty where a modern award contains terms and conditions of employment which will be phased in over time through transitional provisions.
It said it would make a regulation to make it clear the AIRC is to take into account transitional provisions in modern awards when applying the BOOT.
‘For example, at the time an agreement is made, the relevant modern award may contain a 33% casual loading, stepping down to 29% after two years, and then stepping down to 25% at the end of the transitional period (ie. five years).
‘Conversely, another modern award could phase in a casual loading stepping up from 15% to 25% over 5 years.
Applied at three intervals
‘In this situation, the Government’s intention is that the BOOT be assessed at the time the agreement is approved in respect of three intervals: when the agreement is made, after two years, and again after five years.
‘This will ensure that, over the period of operation of the agreement, employees would be better off overall than they would be under the modern award over the same period.
‘After the transitional period, the assessment of the BOOT will be in respect of a single set of nationally consistent conditions.’
Strict rules for ‘take-home pay orders’
The submission also sets strict rules for the making of ‘take-home pay orders’, while pointing out that ‘award modernisation is not intended to result in a reduction in the take-home pay for employees (or outworkers) dependent on the award system’.
Take-home pay orders are available when a worker’s pay is reduced because of award modernisation, and FWA can order the worker’s pay be maintained.
The submission says these orders will not apply where lawful changes, such as re-organising rosters, have resulted in reduced pay.
‘Take-home pay orders can only be made where there is an actual reduction in take-home pay,’ the submission said.
Pay must decrease
‘For example, if an award rates decreases, but an employee’s pay does not decline because their pay level is maintained by their employer, an order cannot be made.
‘Furthermore, FWA will not be able to make a take-home order if the reduction in take-home pay is minor or insignificant, or FWA is satisfied that the employee has been adequately compensated in other ways for the reduction.
‘For a take-home pay order to be made by FWA, award modernisation must be the operative or immediate reason for the reduction in the employee’s take-home pay.’
The Government says take-home pay orders can only be made when:
  • a modern award applies to an existing employee when the award comes into operation, and
  • the employee is employed in the same (or comparable) position as he or she was employed in immediately before the modern award came into operation, and
  • the amount of the employee’s take-home pay for working particular hours or for a particular quantity of work after the modern award comes into operation, is less than the take-home pay for those hours or that quantity of work immediately before the award came into operation, and
  • the reduction in the employee’s take-home pay is attributable to the award modernisation process.
Minimum wage rises do not flow on
Minimum wage review increases will not flow on to take-home pay orders.
However, they will continue if the modern award is replaced by an enterprise agreement.
The submission said some employers have submitted that the Commission should not be overly concerned with any disadvantage caused to employees by modern awards, because this could later be remedied by FWA through take-home pay orders.
The Government encouraged the AIRC to reject this advice, saying the scope for such orders is ‘tightly constrained’.
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