Employment Awards under review – How will you be effected?

There are currently 123 Modern Awards in Australia. Awards are categorised according to specific industry and/or job type and apply to employees who are not covered by an enterprise agreement or other registered agreement. Simply put, Awards set out the minimum wage and employment conditions for a vast number of Australian employees.

All Modern Awards are currently under review by the Fair Work Commission. To learn more about how this well effect you and your employees read on.

The Modern Awards review process

Under s 156 of the Fair Work Act 2009 (“Act”), all Modern Awards are subject to mandatory four-yearly reviews. Variation of Modern Awards can occur outside the four-yearly cycle; however, we won’t go into that right now as the Fair Work Commission (“FWC”) is currently conducting a four-yearly review of all Modern Awards!

The current review commenced on 1 January 2014 and is expected to conclude within the coming months. The review process is designed to be open and transparent, with any interested party having the opportunity to engage in the review. Most submissions to the FWC are generally from unions and other employee associations, employer groups and large employers.

The FWC may soon vary any number of the Modern Awards providing the variations are justified by ‘work value reasons’ (see s156(4)), which includes reasons justifying the amount that employees should be paid for doing a particular kind of work. When reviewing minimum wages, FWC will consider the nature of the work; the level of skill or responsibility involved in doing the work; and the conditions under which the work is done. Some considerations under the ‘modern awards objective’ include: the need to promote flexible modern work practices and the need to ensure a simple and sustainable Modern Award system for Australia.

Not only does the review process allow for the maintenance of a healthy and relevant system of Modern Awards, it provides the FWC with the power to change, create and revoke Awards where necessary, in response to a range of evolving economic and social circumstances.

Scope of the review

The FWC is currently reviewing a number of ‘common issues’ across all Modern Awards in addition to specific issues in Modern Awards (such as penalty rates) on a group basis. Some of the common issues under review include: annual leave; casual employment; and public holidays. The FWC will also review the alleged inconsistencies between specific Modern Award provisions and the National Employment Standards.

What do industry bodies want?

Annual leave – there has been support from employers across Australia to give employees the option of cashing out annual leave, citing high demand from workers for increased flexibility. Many enterprise agreements permit cashing out of annual leave and industry bodies argue that it’s unfair that the entitlement is only available to Award-free employees. However, cashing out of annual leave, rather than employees having regular holidays from work could have serious health and safety repercussions. The Act already provides a limited framework in respect of cashing out of annual leave for Award-free employees and the FWC is strongly tipped to extend that framework to Award covered employees.

Penalty rates – there has been a strong push by various industry bodies to have weekend penalty rates reduced. While weekend penalty rates have been a feature of the Award system, penalty rates were developed at a time when working on Sunday would involve significant disadvantage. On the other hand, employees have argued that those who benefit are amongst the lowest paid and rely heavily on penalty rates as a significant component of their income. Which such clashing views, it will be interesting to see how the FWC resolves this issue.

Likely repercussions

So far, the FWC’s review into Awards has been wide-reaching. To better assist in the review process, employers will need to identify any significant issues they have come across in the operation of Modern Awards and whether there have been any material changes in circumstances since award modernisation occurred. Given the considerable impact that award variations may have on business operations, employers will need to closely monitor this review process and be aware of any changes which may affect their business.

Stay tuned for our further updates.