To ensure compliance with Australian employment law as well as to be able to pay and manage employees compliantly, it is of utmost importance that employers are aware of the Modern Awards and Enterprise Agreements applicable to them and their employees, the difference between the two and what kind of entitlements these contain, to be able to pay and manage staff compliantly. In the below article, we explore these in further detail and what exactly the difference is between these two types of documents.
The Fair Work Act 2009 (Cth) sets out the minimum entitlements and employment conditions for employees in Australia, generally referred to as National Employment Standards or NES. However, there are often further entitlements and employment conditions set out within Modern Awards or Enterprise Agreements that are in addition to these minimum entitlements. Enterprise Agreements and Modern Awards are detailed documents, which provide more favourable conditions for employees above those set out in the NES.
It is not uncommon for employers to be unfamiliar with what exactly these documents are, or even be aware of which will apply to their business and the employees. To make things complex, there could be multiple Modern Awards, agreements, and/or the NES applicable for one business.
National Employment Standards (NES)
The National Employment Standards (NES) are 11 minimum employment entitlements that have to be provided to all employees, and are set out within sections 61-125 of the Fair Work Act 2009 (Cth).
The 11 minimum entitlements of the NES are:
- Maximum weekly hours
- Requests for flexible working arrangements
- Offers and requests to convert from casual to permanent employment
- Parental leave and related entitlements
- Annual leave
- Personal/carer’s leave, compassionate leave, and family and domestic violence leave
- Community service leave
- Long service leave
- Public holidays
- Notice of termination and redundancy pay
- Fair Work Information Statement (the FWIS) and Casual Employment Information Statement (the CEIS).
As these are “the” minimum entitlements the employees get in Australia, Modern Awards and Enterprise Agreements can only provide more favourable conditions and entitlements to the employees. Therefore, the NES applies to employees who are not covered by any Modern Award or Enterprise Agreement.
Modern Awards
Modern Awards are legally enforceable documents, which set out the minimum terms and conditions of employment for employees on top of the NES. There are 121 different Modern Awards, and these provide for additional employment terms specific to various industries and/or occupations (depending on the coverage of the Award). Most employees in Australia are covered by a Modern Award, as these cover a very broad range of work, depending on either the type of industry the business operates in (Industry Award Coverage) or the type of work the employee is specifically performing, if there is no industry coverage (Occupational Award Coverage). Employees that are not captured by any Award will generally be “award-free”. It is possible in some instances that different employees of one employer are covered by different Modern Awards. Therefore, the employees should generally be covered under a Modern Award if they work in an award-covered industry or if they perform the duties covered by a Modern Award’s classifications. It is pertinent for employers to not assume, especially if multiple Modern Awards are applicable to their employees, that the employment conditions and entitlements are same or similar across different Modern Awards. Thus, an ability to interpret the Modern Awards is very important to ensure compliance with employment law.
The list of all the Modern Awards is provided on the Fair Work Ombudsman website, as well as in the BetterHR portal:
https://www.fairwork.gov.au/employment-conditions/awards/list-of-awards
Enterprise Agreements
An Enterprise Agreement sets out the minimum terms of employment between one or more employers and their employees or a group of their employees. The employment conditions and entitlements for employees set out within an enterprise agreement are supposedly more favourable than those in a Modern Award and the NES. Therefore, an applicable agreement replaces any applicable modern awards or the NES to act as the base terms and conditions of employment for those employees who are covered by the Enterprise Agreement.
The process of making an enterprise agreement involves enterprise bargaining between the employer and their employees as well as approval from the Fair Work Commission. Thus, due to the bargaining process, EAs can be beneficial to both employers and their employees. Whilst the employers can bargain more flexibility in working conditions to suit their business needs, the employees can bargain higher wages or other benefits and entitlements to make up. The examination of the bargained EA using the BOOT test by the Fair Work Commission ensures that the employees are “better off overall” and provided more favourable conditions and entitlements than those provided by an applicable Award or NES.
Multi-Enterprise Agreement: These EAs are made between one or more employers who may not have a single interest and employees to be covered by the agreement.
Greenfields Agreement: A greenfields agreement is an enterprise agreement relating to a genuine new enterprise (including a new business, activity, project, or undertaking) that is made at a time when the employer or employers have not yet employed any of the persons who will be necessary for the normal conduct of the enterprise and who will be covered by the agreement
Employment Contracts and Individual Flexibility Agreements
These are the contracts signed between an employer and individual employees to define the employees’ duties, remuneration, working hours and conditions and flexibility, and other conditions such as non-compete clauses, etc. Apart from being compliant with Australian employment law, these contracts must also be compliant with Australian contract law. Whilst the employers and employees can bargain the terms in these contracts freely, employers have an obligation to ensure that the terms and conditions contained within these contracts are not less favourable than any applicable enterprise agreement, modern award, or NES.
Hierarchy of Application
If an employee is covered by different instruments such as an employment contract and/or EA, Modern Award, or NES, the usual hierarchy of the applicability of these instruments: Employment Contract (provided that they are not less favourable for employees) > Enterprise Agreement > Modern Award > NES.
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