Modern awards: what you need to be wary of

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Modern awards: what you need to be wary of

Having all modern awards finalised by the end of this year is a mammoth undertaking, and the later review process will be needed to sort out some 'bugs'. In the meantime, employers need to be wary about several issues.

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Having all modern awards finalised by the end of this year is a mammoth undertaking, and the later review process will be needed to sort out some 'bugs'. In the meantime, employers need to be wary about several issues.
 
A presenter at the 2009 Informa Australia Limited Workplace Relations Summit, held in Sydney on 30–31 March 2009 drew attention to a number of issues and provided guidance on what employers should do now to prepare for modern awards..
 
Alice De Boos, partner of HWL Ebsworth Lawyers, noted the award modernisation process includes a guarantee that employees’ take-home pay cannot be reduced, but there can be no corresponding guarantee that employers’ costs will not increase, despite not increasing costs being a specific objective of the process.
 
Contingencies in transition Bill
 
De Boos commented that the Fair Work transition Bill, which is still before Parliament, appears to concede that the modernisation process will not be completed on time, so it contains provisions to extend NAPSAs if this becomes necessary. Also, some major enterprise awards such as those that cover large banks are not due to expire until 31 December 2013, and the modernisation process is not intended to affect them. They will continue in 2010 and beyond unless the parties apply to have them modernised.
 
Scope of the project
 
The Australian Industrial Relations Commission (AIRC) had a priority list of 17 awards to modernise first. In their new form, they amount to a total of about 600 pages, the longest being the Modern Manufacturing Award at 89 pages. But the AIRC’s starting point was over 500 awards with a total page count exceeding 30,000.
 
The AIRC Award Modernisation webpage has a modernisation progress report on every award.
 
'Award-free' threshold
 
The $100,000 earnings threshold that applies to award coverage will be indexed on 1 July 2009 and each subsequent 1 July. De Boos predicted that it will increase to around $103,000 this year.
 
Although the amounts are similar, this limit is calculated differently from the limit for claims of unfair dismissal. It excludes compulsory superannuation contributions and any payments that cannot be determined in advance (such as overtime, commissions and bonuses), unless the latter amount is a guaranteed payment. This means that awards such as the Real Estate Industry Award will continue to cover most employees because, although their earnings often exceed the threshold, their base rate of pay is very low. Mining and Construction are other industries where this scenario is common.
 
De Boos advised employers to consider salary packaging in cases where regular high overtime results in earnings above the proposed threshold.
 
More union demarcation disputes?
 
This is a possibility, according to De Boos, who said that union coverage and respondency will become more 'fluid' because modern awards will not have designated union or employer association respondents. This potentially means that several unions could sign up members in the same industry covered by the same modern award.
 
Review process
 
The award modernisation process provides for conduct of an 'anomalies' review after two years, then general reviews every four years. The anomalies review will presumably be used to eradicate errors and oversights that surface in the meantime.
 
What employers should do now
 
De Boos provided the following checklist:
  • Carefully assess current award and NAPSA provisions against the proposed modern award equivalents, and amend as required to comply. Where NAPSAs apply, state-based entitlements that are not reflected in modern awards will be phased out over a five-year transition period, so note the relevant changeover/expiry date.
  • Review all current enterprise agreements and employment contracts to determine any impact of the new system.
  • Note that the impact of the changes will vary from state to state. New South Wales will be less affected because it has a strong state award system and relatively high pay rates, but states such as Victoria and Tasmania will be affected more.
  • If you are paying award rates or close to them, you need to stay up to date with the modernisation process, eg via the AIRC webpage.
  • The tight time frame means that some things will fall through the cracks. De Boos quoted the example of the Private Sector Clerks Award, which may mean that it becomes possible to force employees to work on Saturday mornings, which previously only applied to one state.
  • Evaluate opportunities provided by the individual flexibility clauses that each award must contain. For example, 12-hour working days with fewer work days per week could go there.
  • Note that standard loadings may apply to casual employees, which will increase payments made to those that had lower or no loadings. The Retail and Restaurant/Catering industries have both claimed that this will increase their employment costs — possibly by up to 15% in states such as South Australia.
  • Evaluate salary packaging options for high-paid employees as an alternative to award coverage; for example, where employees have low base earnings but total remuneration is much higher. Note that some employees earning just under the threshold may become subject to award coverage for the first time when their current arrangements expire, so you need to know which award will cover them.
 
Further information
 
Further information about the Workplace Relations Summit is available from Informa.
 
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