Award Modernisation

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Award Modernisation

Award modernisation refers to the nationalisation and modification of the award (wage) based system in Australia. The effect of this was to reduce the number of awards that exist and operate in the workplace, but still cover all industries, with a “miscellaneous” modern award to cover certain employees who are not otherwise covered by any other modern award (see factfinder: “The Miscellaneous Modern Award”). All modern awards (as well as a set of National Employment Standards) came into force on 1 January 2010, replacing the existing state-based awards.

Who is covered?

Modern awards cover all employers and employees in the national workplace relations system, with limited exceptions. The awards are industry or occupation-based, and will apply to employers and employees who perform work covered by the award. All states other than Western Australia have referred their industrial relation powers to the federal government, so all employers are now covered. Employees who may be excluded from cover under modern awards are:

  • some managers;
  • employees who exceed the high income threshold.

Transitional provisions

The introduction of a modern award may mean that the minimum wage of an employee increases or decreases. To ease the financial impact of an increase to an employer, or a decrease to an employee, most modern awards contain transitional provisions. These transitional provisions provide for the phasing in of the following:

  • minimum wages;
  • casual and part-time loadings;
  • weekend and public holiday penalty rates;
  • overtime penalty rates;
  • shift allowances.

To qualify for these provisions, the employer must have been paying the employee under a State Award prior to 1st January 2010. If the employee began employment after this date, the transition provisions cannot be used to phase in this increase. If the employer qualifies under these provisions, the increase can be phased in at a rate 20 percent per year between 1 July 2010 and 1 July 2014. The first 20 percent was payable on the first pay period on or after 1st July 2010.

Varying Modern Awards

The Fair Work Act allows an employer and employee to agree to an individual flexibility arrangement (“IFA”) pursuant to a flexibility term in a modern award. The IFA must, amongst other things:

  • Identify the terms of the modern award, the effect of which may be varied by an individual flexibility arrangement;
  • Require that the employee and employer genuinely agree to any individual flexibility arrangement;
  • Require the employer to ensure that any individual flexibility arrangement must result in the employee being better off overall than the employee would have been if no individual flexibility arrangement had been agreed to.

An IFA does not form part of the employment agreement and must not be used as a condition of employment. It is not compulsory for either party to agree to an IFA, and a person cannot be treated adversely or discriminated against for refusing to agree to an IFA.

Pre-existing Agreements

Australian Workplaces Agreements (AWAs) and Individual Transitional Employment Agreements (ITEAs), certified agreements, collective agreements and State enterprise bargaining agreements that were operative before 1 January 2010 continue to operate as “transitional instruments”. It is important to note that even if an employee is covered by a transitional instrument, they are entitled to receive the minimum rate of pay under the applicable modern award. This includes the national minimum wage increase that came into effect on 1 July 2010.


It is important for all employers to review the modern awards applicable to their industry and assess their impact on their business.

If you have any queries or require any advice in relation to award modernisation, or any other employment law matter please contact Tony Pattinson at Ferguson Cannon Lawyers.

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Category: Employment Law, Fact Finders, General, Industrial Relations

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