The Modern Award System

The Modern Award system

We have all heard the terms ‘Modern Award’ and most likely phrases such as; ‘award rate’, ‘paying below or above the award’, and ‘award obligations’ at some stage or another in business. However, as a business owner can you say with confidence that you know what the award system is and how it works?

This article aims to makes things a bit clearer, so that as a business owner, you can be sure that your employees are engaged under the correct award and that you are aware of that award’s relevant conditions.

What is a modern award and to whom does it apply?

With the exception of certain state and federal government employees most employees in Australia are covered by the National Workplace relations system. 

National Workplace relation system employers must ensure that they engage their employees in accordance with the minimum conditions as set by legislation, a relevant modern award, or an approved enterprise agreement.

Modern awards do not strictly apply to employees engaged under a FairWork approved enterprise agreement. However, FairWork will consider the conditions set out in any applicable modern award when considering whether or not to approve an enterprise agreement application.

There are currently 122 modern awards, which cover the majority of industries and occupations in Australia. Each award sets out the minimum pay rates and employment conditions, which employers must adhere to. Employment conditions include things such as: rest times, working hours, rosters and allowances.

Whilst the award sets out the minimum pay and conditions, employers may wish to, or market forces may direct an employer, to pay above the relevant award rate and conditions.

The reason that there are so many modern awards is because each industry and occupation is uniquely different. For example, what might be extremely relevant to a worker in the construction industry might have no relevance to a worker in the airline industry. Rather than having one very long and complex document that covers each industry and occupation in Australia, the Fair Work Commission has developed separate awards for workers in each of the main industries and occupations.

It is important to remember that for some businesses some of their employees will be covered by one award whilst another group of their employees will be covered under another. This will be determined by each employee’s role and occupation within the business and the relevant industry to which that role relates. This is particularly relevant for businesses, which offer a wide range of services and employ workers from a broad group of occupations.

Finding the right award?

You can view the complete list of current awards here:

http://www.fairwork.gov.au/awards-and-agreements/awards/list-of-awards

Sync or Swim recommends that business owners download and become familiar with the awards, which cover the employees in their business. Each modern award is basically set out in the same way, which makes it easy to navigate and find important sections quickly. Whilst some of the awards are quite large, the table of contents at the beginning of the document make it easy to navigate between sections online.

To work out if a particular award applies to the employees of your business, head to clause 4 of that award. Clause 4 is also known as the ‘coverage clause’, which sets out the type of employees covered by the award. It will often list specific occupations within an industry so that you can be certain you have located the right award for your workers.

The particular job classifications and their applicable duties are usually contained in a schedule at the back of the award. You will need to look at this to work out what classification your employees are so that you can ensure that you are paying them the correct amounts.

It is very important as a business owner to ensure that you have the right award and right job classification in mind when working out your employees wages and entitlements. Getting this wrong may lead to your business owing workers large amounts of back pay, and having to participate in costly legal disputes if it turns out you have been underpaying your employees over a long period of time.

It is important to remember that the purpose of the award system is not just about ensuring that your employees are paid their entitled hourly rates but also about ensuring workers’ rosters; rest times and allowances are appropriate with regards to the needs of the industry or occupation they work in.

What if there is no award relevant to my business?

Unfortunately, not every industry or occupation in Australia has an applicable award. However, the fact that there is not an award for a particular industry or occupation does not mean that an employer is able to prescribe whatever minimum conditions they like in regards to their employment arrangements.

All national system employers, irrespective as to whether they engage workers under an award or not, must adhere to the 10 minimum national employment standards and the national minimum wage entitlements. You can view the national employment standards here:

http://www.fairwork.gov.au/Employee-entitlements/national-employment-standards

Where there is no award relevant to the function your employees perform in your business, it is important to ensure that as a minimum you engage your workers in accordance with the 10 national employment standards referred to above.

Sync or Swim also recommends looking at the award of a similar industry or occupation to see if the conditions contained in that award are appropriate for your business. For example, despite its important and widespread presence in the Australian business landscape currently there is no modern award for Arboriculture or Arborist Services.

Accordingly, many Arborist companies engage their workers in accordance with the conditions contained the ‘Gardening and Landscaping Services Award’.

Whilst ‘Gardening and Landscaping Services’ may seem similar enough to Arborist Services, the coverage clause of the ‘Gardening and Landscaping Services Award’, which defines the ‘gardening and landscaping services industry’ is not really broad enough to make it applicable to Arborist services. However, it is the closest award available. Such uncertainty makes it very difficult for Arboriculture businesses to feel confident that they are doing the right thing without needing to conduct extensive research and obtain expert reassurance.

There are a number of other industries and occupations, which like Arborist Services, are not represented in the modern award system. This is unfortunate as it makes it all the more difficult for business owners who are wanting to do the right thing to do so when there is no relevant framework provided by the government.

Where to from here?

The Fair Work Commission reviews each modern award annually. Therefore, as an employer, you must annually check to make sure you are continuing to meet your minimum obligations in terms of pay and conditions to your employees as set by the appropriate modern award.

The Fair Work website, http://www.fairwork.gov.au/, is an excellent resource for finding out more about modern awards and employee entitlements.

If you are unsure about anything in this article or would like Sync or Swim to conduct a HR review of your business, please do not hesitate to get in touch with our expert staff today via the ‘contact us’ tab of this website or on 1300 851 281.

Article by: Paul Bright, Business Development and Compliance Specialist.