What is a modern award?
Modern awards are industry and occupation specific instruments, with the force of legislation, containing legally binding minimum entitlements for employees whose employment is covered by them. These entitlements apply in addition to the National Employment Standards (NES). Modern awards typically provide minimum entitlements in relation to: pay rates, hours of work, rostering arrangements, breaks, allowances, and consultation obligations.
An example of an industry Award is the General Retail Industry Award. An example of an occupation Award is the Clerks Award, which applies (with some exceptions) to anyone employed in an administrative role, across industries.
How to determine whether an employee is covered by a particular Award?
In order to determine whether an employee is covered by a Modern Award, and the specific Award that would cover an employee, an employer needs to consider a number of factors, including:
- the terms of the particular Award, particularly as they relate to coverage and classification;
- the nature of the employer’s business; and
- the role and duties of the relevant employee.
Employers should also take note of whether the nature of a particular employee’s employment overlaps with any other Awards (and if so, which Award best applies), and carve-out provisions within Awards which exclude coverage.
Certain employees might also be excluded from coverage of an Award despite ordinarily fitting within the classifications set out in the Award. The Fair Work Act 2009 (Cth) provides that Awards will not apply to employees who are already covered by an enterprise agreement, or where they are a high-income employee, and a guarantee of annual earnings is in place (currently set at $162,000, but set to increase as at 1 July 2023).
Implications for employers
Employers should be aware that they cannot contract out of Award coverage, despite any terms in an employment contract that state to the contrary. This means that, at a minimum, employees will be entitled to the conditions set out in the relevant Award, irrespective of the conditions imposed under the employment contract.
Whether an employee is Award covered may also impact upon their access to remedies in an unfair dismissal application. Employees that are dismissed from their employment may be eligible to bring an unfair dismissal application, provided they have completed at least 6 months of service with the employer (12 months for a small business employer) and either:
- earn below the high income threshold; OR
- earn above the high income threshold, and are covered by a Modern Award or enterprise agreement.
To avoid any misunderstandings, employers should always take care to determine at the commencement of employment, whether employees’ roles are covered by an Award and if so:
- to correctly classify them within the level and pay grades prescribed by the applicable Modern Award.; and
- to ensure that all minimum Award entitlements are met (or exceeded) in relation to covered employees.
For further information, please contact:
Kristy Peacock-Smith, Partner, Bird & Bird
kristy.peacock-smith@twobirds.com
