Three Award-Winning Questions

Cawley Hennings, Special Counsel at IRiQ, offers monthly, practical insights into all things industrial.

With the 2023-24 modern award review underway, the Fair Work Commission is exploring potential changes to modern awards on the back of many changes in recent years. We share some of the most popular questions on how to “win” at modern awards in 2023.

Do modern awards apply to employees on annual salaries?

A modern award will only cease to apply to particular employment when an employee has an annual rate of earnings of $167,500 or more (October 2023).

So, if your employee is covered by a modern award but you are paying earnings of less than $167,500, there are a few things to consider about annual salaries.

1. Where a modern award applies, employers must comply with all of the monetary and non-monetary terms and conditions, rights and obligations contained in the modern award.
2. This does not prevent an employer from paying award-based staff an annual salary. However, the salary should generally be expressed as compensation towards all entitlements under the modern award (not just ordinary hours). Otherwise, payments for additional hours and other entitlements under the award may be payable on top of the agreed regular salary payment.
3. The employment contract should include an offsetting clause which specifically applies and offsets against any legal entitlement payable to an employee in the current and any future pay period.
4. Notwithstanding this, employers using a “common law” offsetting clause such as this must ensure that the annual salary paid is at least equal to the amount the employee would have received in hourly or weekly rates, loadings, penalties, overtime, allowances, etc under the modern award in each pay period.
5. The only exception to this is that some modern awards permit annual wage arrangements (see below, noting that some modern awards limit these arrangements to specific classifications). When implemented in a compliant employment contract, these require employers to ensure the amount paid across the year is more than the modern award entitlement – rather than in each pay period.

What is the new requirement relating to directions to take leave during annual shutdowns?

The Fair Work Commission inserted a model clause into 78 modern awards permitting employers to issue directions to take annual leave during shutdown.

The new clause requires employers to give two months of written notice if they will shut down and require employees to use any accrued annual leave during that time. The notice should be personally addressed to a work email or personal email on record – perhaps supplemented with notices on an intranet site or noticeboard.

Employees who commence after the two months’ notice has been given to existing staff should be provided the same notice as soon as practicable after they start work. This could simply involve providing them the earlier notice sent to the other employees, including it in a clause of their contract or letter of engagement.

How do changes to modern awards affect employers with enterprise agreements?

Enterprise agreements are tested against the “reference awards” they will supplement or replace. The Fair Work Commission applies the better off overall test (“BOOT”) which is a global analysis of the agreement terms which are both more as well as less beneficial.

Consequently, changes to the terms and conditions in a modern award will impact on the BOOT analysis for enterprise agreements. An agreement that was previously approved may be challenged on the next occasion if the underlying modern award contains new entitlements which have been overlooked in a new agreement.

Modern award rates of pay can affect – and override – the corresponding rates in an enterprise agreement where the award rates rise above those in the agreement.

More broadly and perhaps significantly, a strong knowledge of modern awards is essential to bargaining. It is impossible to bargain for the removal, replacement or amendment of the most onerous terms and conditions in a modern award if unfamiliar with what those terms may be.

IRiQ Law has that expertise and we set our clients up to win at awards, contracts and enterprise agreements, as well as award interpretation advice, payroll compliance and wage audits.

Modern Awards with Annualised Wage Arrangement Clauses

Banking, Finance and Insurance Award 2020

Broadcasting and Recorded Entertainment Award 2020

Clerks – Private Sector Award 2020

Contract Call Centres Award 2020

Horticulture Award 2020

Hospitality Industry (General) Award

Hydrocarbons Industry (Upstream) Award 2020

Legal Services Award 2020

Local Government Industry Award 2020

Manufacturing and Associated Industries and Occupations Award 2020

Marine Towage Award 2020

Mining Industry Award 2020

Oil Refining and Manufacturing Award 2020

Pastoral Award 2020

Pharmacy Industry Award 2020

Rail Industry Award 2020

Restaurant Industry Award 2020

Salt Industry Award 2020

Telecommunications Services Award 2020

Water Industry Award 2020

Wool Storage, Sampling and Testing Award 2020