Modern awards built on the National Employment Standards and may include an additional 10 minimum conditions of employment, tailored to the needs of the particular industry or occupation. These include:
- minimum wages
- types of employment
- arrangements for when work is performed
- overtime and penalty rates
- annualised wage or salary arrangements
- leave related matters
- procedures for consultation; and
- representation and dispute settlement.
Each modern award includes a flexibility clause allowing employers and employees to negotiate arrangements to meet their individual needs, creating individual flexibility agreements [ss 145-146]. These agreements vary the effect of the award between the individual employee and employer, but do not effect other employees. If an employee has an individual flexibility agreement they must still be ‘better off overall’ than if they did not have the agreement [s 144(4)(c)]. Those agreements must also be genuinely entered into voluntarily [s 144 (4)(b)].
Who is covered by modern awards?
Modern awards cover all employees who perform work that has historically been regulated by awards. They are generally industry-specific and can be accessed via the Fair Work Commission’s website.
Modern awards do not apply to employees with guaranteed annual earnings of more than $158 500 (as at July 2021, indexed each year and pro rata for part-time employees). This high income threshold is indexed annually and adjusted in July each year in line with annual growth in average weekly ordinary time earnings for full-time adult employees. These employees and their employers will be free to agree on terms to supplement the National Employment Standards without reference to an award and may still be covered by an enterprise agreement.
An award does not apply to an employee if an employer provides a written undertaking to pay an employee annual earnings at or above the high income threshold over a period of 12 months or more.
A guarantee for a shorter period may apply in the case of a short-term, fixed-term contract or a particular type of work on a short-term basis. A guarantee does not apply to employees to whom an enterprise agreement applies.
The employer and employee must reach agreement about the undertaking before it commences operation. A guarantee may be given as a condition of accepting employment but an employer must not apply pressure to an employee in connection with the offer or acceptance of a guarantee of annual earnings. A guarantee can be given in respect of prospective employees.
How often will modern awards be reviewed?
The Fair Work Commission was previously able to review modern awards every four years to maintain a relevant and fair minimum safety net and make sure it continued to meet the needs of the community.
However, from 1 January 2018 the sections of the Fair Work Act 2009 (Cth) that covered the 4 yearly review process were repealed by an amending Act.
An review of modern awards took place in 2012, two years after modern awards commenced. This review examined whether modern awards:
- achieved the modern awards objective [see s 134], and
- were operating effectively, without anomalies or technical problems arising from the award modernisation process.
The first regular review took place in 2014, four years after modern awards commenced on 1 January 2010. Fair Work Australia was able to vary, make or revoke modern awards during this process. Each award was subject to review.
In limited circumstances, the Fair Work Commission has the power to vary, make or revoke modern awards outside the system of four yearly reviews (for example, if it is satisfied that to do so is necessary to achieve the objectives of modern awards or to remove ambiguity, uncertainty or discriminatory terms) [s 157].
The main power to vary modern award minimum wages is in annual wage reviews. Otherwise, the Fair Work Commission may only vary modern award minimum wages in a four yearly review or outside a four year review where the variation is necessary to achieve the modern awards objective if the variation is justified for work value reasons, or to update or omit a name of an employer or organisation etc, or to remove or correct an error or uncertainty, or to remove a clause that would be unlawful under discrimination laws [ss 156-157, 159-161, see also ss 162-167].
What is the process for making a modern enterprise award?
An application was able to be made to the Fair Work Commission for a modern enterprise award between 1 July 2009 and 31 December 2013. After that time period no new modern enterprise awards were able to be made. If an application to modernise an enterprise award was not received by the Fair Work Commission by 31 December 2013 that instrument ceased to operate, and the applicable modern award would then apply.
What about people who are not covered by an award?
The 11 National Employment Standards applies to all employees—whether they are covered by an award or not. Modern awards apply to most, but not all employees.
The Minimum Wage Panel makes a national minimum wage order for employees who are not covered by a modern award. The order includes a national minimum wage and special national minimum wages for junior employees, employees to whom training arrangements apply and employees with a disability. It also includes a set safety net casual loading for casual employees who are not covered by either an award or an agreement. Further information about the Minimum wage panel and the current national minimum wage is available on Fair Work Commission’s website.