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Modern Awards Explained: A Guide for Business Owners

  • 20 May 2022
  • Studio Legal

Written by Gital Ben-Zvi, Alyce Evans and Jennifer Tutty, Principal

If you’re running a business, it’s important (if not crucial) that you have an understanding of employment law in Australia and how it applies to your business. But where to begin? From the Fair Work Act and Workplace Health and Safety Standards to Anti-Discrimination Laws and Modern Awards, there’s a lot to get your head around.

In this week’s blog, we provide an overview of the employment law landscape, before taking a deep dive into the topic of modern awards.

If you’re a business owner looking to understand modern awards, or an employee wanting to understand your rights, we’re here to help.

Employment Law – An Overview

Fair Work Act 2009 (Cth)

The Fair Work Act 2009 (Cth)(the Act) is arguably the most important piece of employment law legislation to be aware of as a business owner. The Act includes a set of minimum terms and conditions for the majority of employees within the private sector in Australia, known as the National Employment Standards (NES).

Industrial Instruments (Modern Awards)

In addition to the Act, there are also a number of industrial instruments – including modern awards – that may apply to your business. It is important to be aware of the application of an award to your employees and ensure ongoing compliance if an award does apply.

Other Industrial Awards Legislation

As an employer, there are a number of other legal obligations that you need to be aware of. These include Workplace Health and Safety Standards, Anti-Discrimination Laws and Privacy Laws. More information about your employees’ rights and your obligations can be found on the Fair Work Australia website.

Modern Awards

Modern awards are a key part of the employment law landscape, and something that every business owner needs to understand. It is important that you are aware of any awards that apply to your employees and ensure that these are complied with. Before we go into this further, let’s take things back to basics.

What is a Modern Award?

A modern award is a document, which sets out the minimum terms and conditions of employment for a particular industry or occupation. It applies to employers and employees who perform work covered by the award.  

Modern awards set out minimum entitlements such as:

– Pay;

– Hours of work;

– Rosters;

– Breaks;

– Allowances;

– Penalty rates; and

– Overtime.

If no award covers your employee, then the NES minimum standards apply.

If an award applies and includes better minimum entitlements than the NES minimum standards, your business must follow the award and ensure your employee receives the better entitlements.

Why do business owners need to know about (and follow) modern awards?

As a business owner, applying awards correctly may just be the most important thing to get right. The responsibility lies with you as a business owner to understand if an award applies to any of your employees and ensure ongoing compliance.

If you get it wrong, there can be heavy consequences in the form of substantial penalties issued by the Fair Work Ombudsman (up to $63,000 for companies and $12,600 for individuals – at the date of this article), as well as claims for underpayment and other entitlements.

Keep in mind – directors of a company can be personally liable for certain breaches and damages claims. This means that a ‘corporate veil’ does not always apply to directors when it comes to compliance with employment laws.

Another key consideration (and one you’re probably aware of if you’ve seen the very public downfall of George Colombaris’ Made Establishment company), is the significant reputational damage that your business can suffer if you don’t meet your minimum obligations. This can cause damage both internally with your employees as well as externally with your customers, clients and other stakeholders.

How can I work out whether a modern award applies to my business and various employees?

To figure out which award applies to each role within your business, a good starting point is Fair Work Australia’s ‘Award Finder’. This tool allows you to search based on job title and industry to narrow down which award may apply. If this search doesn’t provide any options, a full list of each award can be found on the Fair Work Website here.

Application and scope of the award

Once you’ve narrowed down which awards could potentially apply, there are two key sections of each award that provide guidance as to application and scope of each award:

1. The coverage clause (usually clause 4): Each award includes a ‘coverage’ clause that sets out the type of employers and employees that are covered, as well as exclusions to the award.

2. The job classifications (in the pay clause or schedule): The classifications clause sets out criteria to determine the level of the employee and accordingly, their minimum entitlements. If an employee is more senior than the highest level in the classifications, the award may not apply. If you’re unsure which classification applies, we recommend applying the more senior classification level to avoid underpayment.

Top tip: It is important to be aware that more than one award may apply to your business depending on the jobs your employees do so an award assessment should be completed for each role within your business.

What if I can’t find a modern award that applies to my business?

It’s time to familiarise yourself with ‘catch-all’ awards.

If there is no industry-specific modern award that appears to cover your business, there are also three ‘catch-all’ modern awards to be aware of, as these may apply:

The Professional Employees Award 2010: This generally applies to engineers, scientists and information technology (IT) professionals.

The Manufacturing Industries and Occupations Award 2010: This covers employers of employees in the manufacturing and related industries, as well as other specified occupations.

The Miscellaneous Award 2010: This covers all employers in Australia who are not covered by any other modern award, that employ staff within the classification of this award. This award is important to consider as a final possibility each time you do an award assessment for a role because its broad coverage may capture employees not covered under another industry or occupation award.

What about managers and higher-income employees?

Managers or higher-income employees may not be covered by a modern award even if one applies to the industry in which they work.

A higher-income employee is an employee who has been guaranteed and has accepted an annual income amount that is higher than the high income threshold, which is $158,500 from July 2021 (note: this changes each year).

This amount includes the value of non-monetary benefits, but does not include payments which can’t be calculated in advance such as commissions and overtime, or statutory superannuation contributions.

I am still unsure… Is there anyone who can help me to work out whether a modern award applies to my business?

Award assessments and classifications can be difficult and an area which many businesses find confusing.

To get support, you can contact Fair Work Australia and they will help out with determining whether an award applies. Their contact number is 13 13 94.  

If after speaking to Fair Work or conducting your own assessments, you are still confused or not confident about where you have landed, you should definitely contact your lawyer. This is not something you want to get wrong!  Feel free to get in touch with Studio Legal for help with award assessments and classification advice.

Written by Gital Ben-Zvi, Alyce Evans and Jennifer Tutty, Principal

Further Information

If you have any questions about employment law or modern awards, please contact us through our online form or via email at hello@studiolegal.com.au.

DISCLAIMER

The information in this article is of a general nature. It does not constitute formal legal advice, and should not be relied on as such. Please see the full disclaimer in our website terms. Please contact Studio Legal if you are seeking advice about a specific legal matter.