Employee awards are often a cause for confusion among employers, and misinterpretation of the rules that can unfortunately leave businesses vulnerable to hefty penalties.
One common misconception occurs if employers pay above award rates. Although as an employer you might assume this means that you’re complying with the award, this is not necessarily the case. Even if an employee is paid over award rates, other conditions of the award still apply.
Here is how you can make sure you’re meeting your obligations when it comes to the employment awards that cover your employees:
Learn about the awards system
Be aware of which award covers each individual employee in your organisation. If you are unsure, you can find useful information at Fair Work Australia, including a resourceful award finding tool. Some businesses may have employees who are covered under multiple awards, so it is important that you take each employee as an individual, rather than basing awards on your business as a whole.
Ensure that all your employment contracts are compliant with the appropriate award rates of pay and conditions, including the 10 minimum National Employment Standards. These minimum standards include entitlements for leave, public holidays, notice of termination and redundancy pay
If multiple awards apply to your employees, consider an Enterprise Bargaining Agreement
This is an agreement between an employer and a group of employees that sets out terms and conditions that are agreed to by both parties.
There are 122 different awards used in Australia, divided by industry and sector. The award your employees will be under depends largely on what their pre-modern award conditions were, their salary, and the number of hours they work.
Modern awards, which came into effect in 2010, are designed to replace previous employment standards. Knowing your employees’ previous awards can help you find the closest equivalent modern awards. Salaries and conditions under modern awards vary, depending on whether employees are full time or part time. Modern awards do not cover some managers or high-income earners with a salary over $123,000.
Some of the common awards include the General Retail Industry Award, the Professional Employees Award, the Clerks-Private Sector Award, and the Building and Construction General On-site Award.
What happens if I don’t comply?
Failing to comply with the terms of the relevant award can have serious consequences for your business.
For example, even if you are paying your employees over award rates, you still need to ensure you are paying appropriate penalty and overtime rates.
If you don’t, your employees may be entitled to claim back payments for penalty and overtime rates for a period of seven years, even after they leave your employment. This could leave your business with a large unexpected bill to pay, and cause significant financial difficulties in the future.
If you would like to negotiate some award conditions with individual employees, you can do so via an Individual Flexibility Agreement (IFA). An IFA is negotiated on a one-to-one basis, and is a type of flexible working arrangement that allows employees to forgo some of their award conditions in exchange for others.
There are a number of rules about IFAs to ensure neither party is left worse off, so if you are considering this option it is important that you do your research and get some advice on the legal implications.
Taking time now to ensure your business is in compliance with Fair Work Australia’s awards scheme can help you avoid financial problems in the future, and ensure that all your employees are being awarded what they are entitled to.