How do employment contracts interact with awards?

Q&A

How do employment contracts interact with awards?

Some employers prefer to adopt the practice of having all employees on written contracts of employment — including those covered by awards — and the issue of award terms interacting with contractual terms arises.

WantToReadMore

Get unlimited access to all of our content.

Some employers prefer to adopt the practice of having all employees on written contracts of employment — including those covered by awards — and the issue of award terms interacting with contractual terms arises.

This question was recently sent to WorkplaceInfo.

Q  Our company is currently reviewing our employment documents and would like to draft a contract of employment for each of our staff, including our award-covered employees.

The award-covered employees are paid a substantial over-award payment, but our senior management is not sure whether this can be offset against other conditions provided under the applicable modern award.

For example, can the over-award payment compensate for the removal of the annual leave loading as a condition of the employee’s employment, despite being a provision of the applicable modern award?

Also, we wish to review staff wages near the end of each financial year but don’t want to necessarily adhere to the Annual Wage Review decision.

Can we pass on a wage review that differs from the decision of Fair Work?

A  The contracts of employment should specifically identify the entitlements compensated for by the over-award payment.

Detail the payments
 
Previously, the parties may have agreed verbally to certain payments being covered by the over-award payment, however, it is advisable that the company draft contracts of employment detailing the arrangement, because the employer may have difficulty refuting any claim by an employee that a particular payment has been absorbed into the over award payment.

Meet award entitlements
 
Provided the minimum conditions of the applicable modern award are observed in each relevant pay period, an over-award payment may compensate for the non-payment of amounts due under the modern award (ie the employer must ensure the amount of the over-award payment exceeds the amount the employee would have received if the provisions of the modern award were applied).

Wage increases
 
In the case of wage increases from the Annual Wage Review, there is no legal obligation to pass on the increase to employees who were receiving a wage that was equal to the last increase (3.4% in 2011) or more above the relevant modern award wage as at 1 July 2011.

Fair Work Australia usually determines that the increase from the Review may be absorbed into over-award payments.

Source: Paul Munro, IR Consultant.
 
Post details