January 1, 2010 saw the commencement of:
- Modern Awards;
- National Employment Standards (NES); and
- All States (except WA) referring their industrial relations powers to the Federal government.
These changes are aligned with provisions of the Fair Work Act (CIth) 2009, along with other significant changes such as new arrangements for Collective Agreement making and unfair dismissal laws.
Important message to State based employers
If you are a State based employer in QLD, SA, NSW or Tasmania (ie you are NOT a constitutional corporation), then the referral of IR powers means that you will automatically transition into the Federal Industrial Relations system and the Fair Work Act, Modern Awards and NES now apply to your workplace from 1 January 2010 (although there are transitional provisions that may apply to Modern Award application until 31 December 2010).
This article will discuss:
- What are Modern Awards?
- Who they apply to?
- What all Not-for-Profit employers need to know?
- What happens from 1 January 2010?
- What happens from 1 July 2010?
- What will happen to rates of pay under Modern Awards?
- What if your workplace is covered by an enterprise agreement?
- What you need to do to comply moving forward?
- What are the National Employment Standards?
- A special note about the Federal SACS Award
- What can Employer Assist do to assist you?
1. What are Modern Awards?
Modern Awards are new industry specific Awards that replace all existing Federal Awards from 1 January 2010 (except for rates of pay which will take effect from 1 July 2010).
Modern Awards include terms and conditions of employment such as coverage, minimum wages and classifications, penalty rates, ordinary hours, allowances, types of employment, breaks, flexibility arrangements, consultation and dispute settlement.
They also include other terms that supplement the NES (the NES override Awards on some matters). Modern Awards and the NES together operate as the ‘safety net’ from 1 January 2010.
2. Who do they apply to?
Modern Awards will cover all employers and employees in the Federal workplace relations system.
Modern Awards are industry or occupation-based, and will apply to employers and employees who perform work covered by the Award.
However, managers or higher income employees may not be covered by a Modern Award even if one applies to the industry in which they work. Seek advice about your management and higher income employees (ie. those earning < $ 108K per annum).
3. What all Not-for-Profit Employers should know?
Firstly you must confirm which Modern Award(s) will have coverage over your workplace.
While Modern Awards commenced operation on 1 January 2010, the AIRC has allowed for transitional arrangements over a five year period to assist affected employers and employees in the move to the Modern Award system.
The AIRC determined that any increases (or decreases) in wages, loadings and penalty rates would be phased in from 1 July 2010.
- minimum wages;
- casual and part time loadings;
- Saturday, Sunday and public holiday penalty rates;
- evening and other penalty rates; and
- shift allowances.
This period provides time for the parties affected by a Modern Award to make the required changes.
The legislation provides that an employee’s take-home pay should not reduce via this process – if it does they can apply to FWA for a take-home pay order.
4. What happens from 1 January 2010 -1 July 2010?
During the period between 1 January 2010 and 1 July 2010, the pre-Modern Award pay-related entitlements remain in effect. That means wages entitlements contained within a pre-Modern Award (e.g. a Federal Award, NAPSA or pre-reform Award) regarding any of the above continue to apply.
All other entitlements under Modern Awards and the NES apply from 1 January 2010.
5. What happens from 1 July 2010?
From 1 July 2010, if a Modern Award results in an increase (or decrease) in wages or penalty rates, some Modern Awards will allow for the incremental phasing-in of changes to minimum wages or penalty rates over a five-year period.
All employers and employees should consult their relevant Modern Award for specific transitional arrangements, including state-based differences.
6. What will happen to rates of pay under Modern Award(s)?
Commencing on 1 July 2010, minimum rates, loadings and penalties will be adjusted by a percentage of the difference between the current rate, loading or penalty and the Modern Award rate, loading or penalty (called the ‘transitional amount’).
This adjustment will occur on 1 July each year, with the last adjustment being effected on 1 July 2014, at which time the full Modern Award rate will apply.
You may, at your discretion, pay the applicable full rate of pay from 1 July 2010.
Employer Assist recommends that you seek advice on the phasing in of wage increases from 1 July 2010.
7. What if your workplace is covered by an enterprise agreement?
Base rates of pay will override wage rates in Enterprise Agreements. As such, Enterprise Agreement rates of pay must be equal to or higher than those provided for in the applicable Modern Award(s) across the entire 5 year phasing in period.
NES will override specific terms and conditions within Enterprise Agreements.
Employer Assist recommend you undertake a benchmarking exercise to ensure wage rates comply with applicable Modern Award transitional arrangements over the next 5 years.
8. What do employers need to do to comply from 1 January 2010?
- Ensure you are operating under the correct Award from 1 January 2010.
- Ensure employees are classified correctly under the applicable Award.
- Be aware of the new Modern Award provisions that have application in your workplace from 1 January 2010.
- Prior to 1 July 2010 – reclassify all positions under the new Modern Award.
- Ensure you are paying correctly.
- Ensure all current agreements and arrangements comply with the National Employment Standards from 1 January 2010.
- If you have an enterprise agreement, ensure base rates are no less than the Modern Award for the life of the agreement.
9. What are the National Employment Standards?
Modern Awards apply in conjunction with the NES to create a new safety net for employees.
The NES are:
- Hours of Work (max 38 ordinary plus reasonable additional hours);
- Parental Leave;
- Flexible Work for Parents;
- Annual Leave;
- Personal (Sick) / Carers and Compassionate Leave;
- Community Service Leave (includes jury service);
- Public Holidays;
- Information in the Workplace;
- Notice of Termination and Redundancy; and
- Long Service Leave.
10. A special note about the Federal SACS Award
Deputy Prime Minister Julia Gillard and the Rudd Government have agreed to support the Australian Services Union (ASU) in a major test case that seeks pay rises of between 18 – 37% for the 200,000 mostly female workers in the Community Sector.
The case is set to be heard by the new industrial umpire, Fair Work Australia, and will involve the presentation of an appropriate equal remuneration principle for the federal jurisdiction. The Government, whilst throwing its support behind the case, has reserved the right to argue for less than the 37% increases requested by the ASU.
The results of the test case will have a direct impact on the Federal SACS Modern Award. As such, the Moderns SACS Award was released without rates of pay. Rates of pay applicable to your organisation (if you are a respondent to the old Federal SACS Awards) will apply until such time as the pay equity case is decided. State based employers transitioning into the Federal jurisdiction as a result of the Fair Work Amendment (State Referrals and Other Measures) Bill (Clth) 2009 will continue to pay under current rates of pay until 1 July 2011, or until resolved.
The ASU are also lobbying state and federal governments to increase funding agreements to cover increased wages costs to funded services.
11. How Employer Assist can assist you to comply
To ensure compliance with the Modern Award(s) and NES, Employer Assist recommend as follows:
- Determine which Modern Award(s) are applicable to your workplace;
- Determine which workplace policies and procedures need to change to comply with the Fair
Work Act (Clth) 2009, the applicable Modern Awards and the NES;
- Determine which wage rates will apply in advance of the 1 July 2010 commencement of transitional wages provisions;
- Review your current common law contracts, policies, HR procedures and practices for compliance with the Fair Work Act, Modern Awards and NES;
- Or, if necessary, create new common law contracts, Enterprise Agreements, policies and procedures etc to comply with Fair Work Act, Modern Awards and NES;
- Re-classify positions where necessary to comply with the new Modern Award.