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Modern Awards: Your Questions Answered

Posted by: on 29 May 2015 in Compliance, Finance

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May 29 – by David Bates 

The 2015 Workforce Guardian from ADP webinar series is proving extremely popular – and the May webinar was no exception! Focussed entirely on Modern Awards, this fourth webinar in our 10 part series generated huge interest.

In this week’s blog, we’ll answer some of your Modern Award-related questions to help you ensure you and your business are meeting your legal obligations. 

  1. What on Earth is a ‘Modern Award’?!

Modern Awards are legal ‘instruments’ which contain additional terms and conditions of employment for employees working in specific industries or occupations.

There are currently 122 Modern Awards, and they must be read in conjunction with the ten National Employment Standards (NES).

Modern Awards replaced thousands of old state and commonwealth Awards (which are now referred to as ‘pre-Modern Awards’), and they cover most employees in Australia.

  1. Can I Choose Which Modern Award Applies to my Employees?

No. Modern Awards apply as a matter of law and not choice or employer preference. This means your employees may be covered by Modern Awards even if you’ve never heard of them before(!).

This is very important, because failing to comply with your Award-related obligations can lead to investigations, prosecutions, and very hefty penalties.

A Modern Award will generally apply to an employee if:

  • It covers the employer’s industry or the employee’s specific occupation, and
  • It contains a classification level that covers the work the employee performs

There are two key times when an otherwise applicable Award won’t apply to an employee:

  • The employee earns more than the ‘High Income Threshold’, and they’ve been issued with a ‘Guarantee of Annual Earnings’, or
  • The workplace is covered by a registered Enterprise Agreement
  1. Can’t I Just Pay an ‘Above-Award’ Wage or Salary and Forget About the Award?

No. You’re certainly free to pay an above-Award wage or salary, but this won’t automatically mean you can ignore the other employee entitlements imposed by the Award.

Remember that Awards impose monetary-based entitlements such as allowances, and overtime and penalty rates. These must always be provided to eligible employees who are covered by the Award.

You can ‘incorporate’ those entitlements in an above-Award wage/salary but, if you do, you must also:

  • Confirm in writing which monetary entitlements have been included in the employee’s wage/salary calculation, and
  • Ensure the amount being paid to the employee is at least equal to – or more than – than the amount the employee was entitled to receive under their Modern Award

Most employers who pay an over-Award wage/salary fail to comply with these additional obligations, resulting in underpayments and other breaches of the Award.

  1. How Do I Find out Which Awards Apply to My Employees?

Finding applicable Awards is generally a 4 step process:

Step 1: Review the full list of Modern Awards and look for the ones most likely to apply – and remember there may be more than one. Start with ‘Industry’ Modern Awards first and, if you can’t find one that applies to your particular industry – or if the Industry Award does not contain a classification that covers the employee in question – look for an Occupational Modern Award that might cover the work done by your employee instead.

For example, let’s say you’re looking for an Award that covers a clerical employee working in a private accounting firm. As there is currently no Industry Award for the accounting profession, you may conclude that the Clerks – Private Sector Award – which is an Occupational Award – is the Award most likely to apply.

Step 2: Carefully read the ‘Coverage’ clause within the Modern Award(s) to confirm it definitely covers your employee.

Step 3: Confirm your employee definitely fits into one of the classifications set out in the Modern Award. If not, the Modern Award generally won’t apply.

Step 4: Check whether the employee is excluded from Award coverage because they earn more than the High Income Threshold (see above).

  1. What if My Employee is ‘Award-Free’?

Award-free employees must be paid a wage/salary that is at least equal to the National Minimum Wage. They must also be provided with all applicable National Employment Standards (NES).


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TAGS: Fairwork FAQ Legal Obligations Modern Awards

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