Changes to the Australian workplace relations system
What are the changes to the Australian workplace relations system?
From 1 January 2010, several important changes in Australia’s workplace laws affect all employers and employees in the national workplace relations system.
The changes include the introduction of new National Employment Standards (NES), many state employers moving into the national system, and the commencement of modern awards.
From 1 January 2010, modern awards and essentially replace existing awards, notional agreements preserving state awards (NAPSAs) and the Australian Fair Pay and Conditions Standard (the Standard).
Other changes introduced on 1 July 2009 include:
- revised enterprise bargaining arrangements
- streamlined protections dealing with workplace rights and industrial activities including protection against discrimination and unfair dismissal
- two new organisations to regulate the system - Fair Work Australia and the Fair Work Ombudsman.
The new national workplace relations system covers the majority of workplaces in Australia.
Sole traders, partnerships & trustees moving into the national system in most states
From 1 January 2010, sole traders, partnerships, other unincorporated entities and non-trading corporations in New South Wales, Queensland, South Australia and Tasmania are covered by the national system rather than their own specific state system.
Why am I no longer covered by the state system?
The New South Wales, Queensland, South Australian and Tasmanian State governments have enacted legislation to allow them to refer certain workplace relations matters to the federal government. This means that all private sector employers in these states are covered by the national system. However, State public sector and local government employees in these states will continue to be covered by the relevant State system.
The West Australian government has decided not to refer their workplace relations powers to the Commonwealth at this stage. All sole traders, partnerships, unincorporated entities, non-trading corporations and public sector employers in West Australia remain in their state system.
How do these changes affect my business/workplace?
All employers in the national system must now comply with new:
- General protections, unfair and unlawful dismissal laws
- agreement making obligations
- transfer of business rules
- workplace rights specified in the Fair Work Act 2009.
From 1 January 2010 employers in the national system, must:
- comply with the National Employment Standards (NES) – the safety net of 10 minimum employment entitlements set out in the Fair Work Act 2009
- ensure that the wages provided to employees at a minimum comply with the wages set out in a modern award or the national minimum wage order.
From 1 January 2010, both employers and employees also have new rights and responsibilities to achieve fairness and flexibility in the employment relationship.
I used to be in the state system until 1 January 2010. How do these changes affect me?
There are special transitional rules for employers who were previously covered by the state system in New South Wales, Queensland, South Australia and Tasmania to help transition them into the national system:
- State awards that applied to their business before 1 January 2010 continue to apply for 12 months (until 1 January 2011). These will be known as “Division 2B State Awards”.
- State employment agreements that applied to their business before 1 January 2010 continue to operate until terminated or replaced by an enterprise agreement or workplace determination under the Fair Work Act 2009. (‘State Employment Agreements’ are agreements that determine terms and conditions of employment and are made under a state industrial law). From 1 January 2010 these will be known as “Division 2B State employment agreements.”
Division 2B State Awards and Division 2B State employment agreements operate alongside the National Employment Standards (NES). This means that employees must receive at least the minimum entitlements in the NES, which may be supplemented by other entitlements in their Division 2B State Award or Division 2B State employment agreement.
For more information on how your workplace is affected by the new national workplace relations system, see your relevant state website:
What if I work in the ACT, Northern Territory, Victoria or Western Australia?
ACT and Northern Territory
All employees and employers in the ACT and Northern Territory are under the national workplace relations system. The Fair Work Act 2009 applies to all employees and employers in the territories. From 1 January 2010, the NES and modern awards also begin to apply.
Victoria
All private sector employees and employers in Victoria have worked under the national system since 1996. The Fair Work Act 2009 has applied to private sector employers and employees in Victoria since 1 July 2009. From 1 January 2010, the NES and modern awards also begin to apply.
Western Australia
Western Australia has elected not to join the national system at this stage. Most employees of incorporated entities in Western Australia are already covered by the national system, but those of sole traders, partnerships or other unincorporated organisations will continue to operate under the WA state system.
For more information on the WA state workplace relations system:
Labour Relations division of the WA Department of Commerce
What are my obligations as an employer following 1 January 2010?
As an employer, you must:
- give each new employee the Fair Work Information Statement before, or as soon as practicable after, the employee commences employment
- meet minimum rates of pay in a modern award or national minimum wage order
- meet terms and conditions of the applicable modern award, if one exists and applies
- meet the terms and conditions of the National Employment Standards (NES).
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Award modernisation
What is award modernisation?
Award modernisation is the creation of a system of modern awards to operate within the national workplace relations system from 1 January 2010.
Each modern award has been made by a Full Bench of the Australian Industrial Relations Commission (AIRC) and together with the National Employment Standards (NES) makes up a new safety net for employees covered by the national system.
A dedicated section on award modernisation is available on the Australian Industrial Relations Commission (AIRC) website.
What are modern awards?
Modern awards commence from 1 January 2010, covering most employers and employees in the national workplace relations system.
Modern awards are industry or occupation-based minimum employment standards which apply in addition to the National Employment Standards (NES).
In most cases your current federal (pre-reform) award, NAPSA or State reference trasitional award are replaced by a modern award on 1 January 2010. However, Division 2B State awards continue to operate up to and including 31 December 2010. Employees to whom a Division 2B State award applied will then be covered by the relevant modern award from 1 January 2011. Where the new arrangements result in a change in minimum pay rates, loading or penalties, these changes may be phased in under most modern awards.
Modern awards:
- are industry or occupation-based
- cover employers and employees who perform work in the industries or occupations described by a particular modern award
- cover employers and employees in the national workplace relations system
- are legally enforceable.
Modern awards have been created to:
- provide a fair minimum safety net of enforceable terms and conditions of employment for employees, when combined with the NES
- that is economically sustainable
- that promotes flexible modern work practices and the efficient and productive performance of work
- that support a flexible and productive workplace relations system, by promoting collective enterprise bargaining, but not providing for statutory individual employment agreements
- that ensures a stable and sustainable modern award system for Australia.
When do modern awards take effect?
While modern awards are scheduled to start from 1 January 2010, many modern awards contain either or both:
- a model phasing schedule under which wage rates are phased in starting from 1 July 2010
- specific transitional provisions which phase in certain conditions
In most cases in modern awards with the model phasing schedule, the wage rates will be phased in over 5 annual instalments. This transition period gives employers and employees who are affected by modern awards enough time to introduce the changes.
However, Division 2B State awards continue to operate up to and including 31 December 2010. Employees to whom a Division 2B State award applied will then be covered by the relevant modern award from 1 January 2011.
How do modern awards affect my business/workplace?
You need to be aware of the minimum terms and conditions in the modern award that applies to your industry or occupation.
There may be new provisions about:
- minimum wages, including piecework rates
- types of employment (eg. full-time, part-time, casual)
- overtime and penalty rates
- work arrangements (eg. rosters, variations to working hours, flexible working arrangements)
- annual wage or salary arrangements
- allowances (eg. travel allowances)
- leave, leave loading and taking leave
- superannuation
- procedures for consultation, representation and dispute settlement
- employing outworkers and the work they perform
- an industry-specific redundancy scheme.
Your modern award will also have a flexibility term which means employers and employees will be able to negotiate changes to meet their individual needs relating to issues specified in the clause.
Modern awards operate in conjunction with the National Employment Standards (NES). These standards provide a safety net for all employees in the national workplace relations system, including those not covered by a modern award.
Be sure to check whether any terms and conditions of employment have changed, and if there are any transitional arrangements which may affect these changes.
Am I covered by a modern award?
Most employers and employees previously covered by a federal award or a notional agreement preserving state award (NAPSA) or State reference transitional award will be covered by a modern award from 1 January 2010.
Note that different rules apply for employees coming into the national system from the NSW, Queensland, South Australian or Tasmanian state systems on 1 January 2010 (eg. employees employed by sole traders, partnerships, other unincorporated entities and non-trading corporations in those states).
If these employees were covered by a state award immediately before 1 January 2010, they will be covered by a ‘Division 2B State award’ from that time. Division 2B State awards continue until 31 December 2010 when they terminate. After that time employees formerly covered by these will be covered by the relevant modern award.
If a modern award does not exist for a particular industry or occupation, there may be an agreement that applies. Employees not covered by any award or agreement may be covered by a transitional minimum wage instrument.
A modern award will not apply to employees who are paid a guaranteed amount of $113,800 p.a. (during the year ended 30 June 2011 – indexed annually). This means that the terms of the modern award may not apply to many managers and higher income employees - even if there is a relevant modern award for their industry.
What modern awards apply to my business/occupation?
Finding your modern award depends on several factors including your job type and duties, and who your employer is. Alternatively, you may be covered by an agreement or a transitional federal minimum wage instrument as well as a modern award.
You can find all of the modern awards by visiting the Australian Industrial Relations Commission website. A list of the modern awards can be found by selecting ‘Award Modernisation’, ‘Full Bench Proceedings’ and then ‘Modern Awards’.
If you are not sure which modern award applies, call the Fair Work Infoline on 13 13 94 and an adviser will help you identify the correct award.
Find out you're covered by:
What happens if my business is not covered by a modern award?
Businesses covered by the national employment relations system but not by a modern award are still required to comply with:
- the relevant transitional minimum wage instrument or national minimum wage order in relation to rates of pay, and
- the National Employment Standards (NES) for minimum terms and conditions of employment other than pay.
There may be an agreement, such as an enterprise agreement, or a transitional collective or certified agreement that applies to your business or a part of your business. All employees will have a common law contract of employment and some employees may have transitional individual agreement (see below).
Terms in modern awards, any agreements or contracts of employment cannot provide for an entitlement less than the NES. Any terms in modern awards, agreements or contracts of employment that attempt to provide for entitlements less than the NES will have no effect and cannot be enforced.
How do I find out the terms and conditions that apply under my modern award?
Modern awards may contain terms and conditions about:
- minimum wages, including piecework rates
- types of employment (eg. full-time, part-time, casual)
- overtime and penalty rates
- work arrangements (eg. rosters, variations to working hours, flexible working arrangements)
- annual wage or salary arrangements
- allowances (eg. travel allowances)
- leave, leave loading and taking leave
- superannuation
- procedures for consultation, representation and dispute settlement
- employing outworkers and the work they perform
- an industry-specific redundancy scheme.
Your modern award will also have a flexibility term which means employers and employees will be able to negotiate changes to meet their individual needs relating to issues specified in the clause.
Some modern awards also contain terms about redundancy.
What do transitional arrangements mean?
Modern awards may contain a model phasing schedule, specific transitional provisions or no transitional arrangements at all.
Some modern awards contain a model phasing schedule, which means that rates of pay and some other conditions such as casual and part-time loadings, weekend penalty rates and shift allowances will not come into force until 1 July 2010 and may be phased in over 5 annual instalments.
In addition to model phasing schedules, other specific transitional arrangements are needed in some industries and occupations to lessen the impact of the transition between previous wages and conditions and those in the relevant modern award. These modern awards contain transitional provisions which allow increases and decreases in minimum conditions affecting pay to be phased in over time.
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Phasing pay rates - general
I’m an employee, will my pay be reduced?
Modern awards and related transitional provisions are in no way intended to result in less take-home pay.
However, should this occur, Fair Work Australia may make any order it considers appropriate to remedy the situation upon application by you or your representative.
When do new pay rates take effect?
While modern awards will generally operate from 1 January 2010, a number of modern awards include a model phasing schedule under which pay rates and some related entitlements will be phased in progressively to assist affected employers and employees in the move to the modern award system.
Under the model phasing schedule, any increases or decreases in wages, loadings, penalty rates and shift allowances will be phased in over 5 annual instalments from 1 July 2010. Subject to other transitional provisions which may be contained in specific modern awards, all other entitlements under modern awards apply from 1 January 2010.
Consult your relevant modern award for specific transitional arrangements.
What is the “model phasing schedule”?
The model phasing schedule is included in many modern awards.
The model phasing schedule allows wages, some penalty rates, casual loadings and shift allowances which are higher or lower than pre-existing conditions to be introduced progressively over five annual instalments from 1 July 2010.
Where wages and penalty rates are affected by the model phasing schedule, the pre existing rates will continue to apply until the first full pay period on or after 1 July 2010.
The purpose of the model phasing schedule is to lessen the financial impact of the new wages and penalty rates by progressively phasing in the increases and decreases in minimum conditions affecting pay.
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Phasing pay rates - for employers
I’m an employer, I pay my employees more than the award, do I have to increase pay or entitlements?
Your monetary obligations as a result of modern awards may be absorbed into any over-award payments you may be providing.
Modern awards do not require you to maintain or increase any over-award payments to your employees, although reducing their pay may be a breach of their employment contract.
I have never paid penalty rates before, what do I do?
Where an employee was not, or would not have been (e.g. new employers need to check what their employees would have been entitled to), entitled to a penalty rate before 1 January 2010, the modern award penalty rate will not apply at all until the first full pay period on or after 1 July 2010.
From the first full pay period on or after 1 July 2010 until the first full pay period on or after 1 July 2014 the modern award penalty rate(s) can be progressively phased-in in 20% annual instalments.
The penalty rate(s) in the modern award will apply in full from the first full pay period on or after 1 July 2014.
The below table shows how much of the modern award penalty rate(s) you need to pay for each year in this situation:
| Before the first full pay period on or after 1 July 2010 |
0% (none of the penalty rate in the modern award applies) |
| From the first full pay period on or after 1 July 2010 |
20% |
| From the first full pay period on or after 1 July 2011 |
40% |
| From the first full pay period on or after 1 July 2012 |
60%
|
| From the first full pay period on or after 1 July 2013 |
80%
|
| From the first full pay period on or after 1 July 2014 |
100% (the penalty rate in the modern award applies in full) |
Please note that where an employee was, or would have been, entitled to a casual loading before 1 January 2010 (including the default casual loading for award-free employees), the casual loading that you need to pay is worked out by reference to both the pre-modern award casual loading and the casual loading set out in the modern award.
Do the model transitional provisions apply to all types of employees or just adults?
The model transitional provisions apply to all categories of employees covered by the modern award, not just adults. This includes juniors, trainees, apprentices and employees with a disability.
What do I pay my employees if the pre- modern award provides a penalty payment for a period of time, and the modern award gives an overtime payment for the same period of time?
- From 1 January 2010 until the first full pay period on or after 1 July 2010 - you need to pay both the overtime rate and the pre-modern award penalty rate.
- From the first full pay period on or after 1 July 2010 – you need to pay the full overtime rate and 80% of the pre-modern award penalty.
This is because overtime rates commenced in full from 1 January 2010 and penalty rates from pre-modern awards are phased out in 20% increments over a four year period from the first full pay period on or after 1 July 2010.
What happens when the penalties under the pre-modern award and modern award are the same?
If a pre-modern award loading or penalty rate is exactly the same as the modern award loading or penalty rate,. then the modern award loading/penalty rate applies in full from 1 January 2010.
What if I don’t calculate the wages correctly? Will I be fined or prosecuted by FWO?
The FWO’s first objective is to educate people about the changes to rates of pay that occur from 1 July 2010 and to assist them understand how to calculate rates of pay under the transitional arrangements.
Under the Fair Work Ombudsman investigative process and litigation policy, it is generally the case that if an employer readily fixes a mistake (i.e. by making good any underpayments and putting in place systems to ensure they get it right in the future), the FWO will take this into account in determining what, if any compliance action may be appropriate. Normally the FWO would not prosecute an employer in such circumstances.
However, if an employer has deliberately breached the law, or if the employees concerned are vulnerable workers, then, consistent with its Litigation Policy, FWO will treat the matter seriously, and litigation may be considered to be an appropriate compliance response.
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Industry Allowances
What is an industry allowance?
An industry allowance is a payment that is made to all employees across an industry, for all hours they work, to compensate for the nature of work in the industry.
The terms of each instrument need to be considered to determine whether a particular allowance is considered an ‘industry allowance’ and it is important to consider the nature of the allowance rather than what it is called.
It is possible, for example, that one modern award can cover more than one industry or occupation and that each of these industries or occupations may have had a separate ‘industry allowance.’ Alternatively, only one of the industries covered by the modern award may have had an industry allowance.
What impact do industry allowances have?
Industry allowances are included in minimum wage rates for phasing purposes.
If an industry allowance formed part of an employee’s pre-modern award rate of pay it will be included in the published Pay Scale Summary.
All other allowances in modern awards commenced in full from 1 January 2010.
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Employment terms and conditions
Will there be any changes to my current entitlements?
From 1 January 2010 all national system employers must provide 10 minimum entitlements to full-time and part-time employees. These minimum entitlements are called the National Employment Standards (NES). Some, but not all of these entitlements also apply to casual employees.
Entitlements relating to parental leave and notice of termination apply to all employees (including those covered by state or territory industrial laws). However, if State or Territory laws are more beneficial to employees than the NES, then these will apply.
The 10 NES entitlements replace the 5 entitlements that previously made up the Australian Fair Pay and Conditions Standard (the Standard).
What are the National Employment Standards (NES)?
From 1 January 2010, the National Employment Standards (NES) apply to all employers and employees in the national workplace relations system.
Under the 10 minimum workplace entitlements that make up the NES, employees are protected by a safety net of fair, relevant and enforceable minimum employment terms and conditions.
Most employees covered by the national workplace relations system are entitled to receive each of these 10 entitlements. Some of these entitlements also apply to casual employees.
Do the National Employment Standards (NES) apply to me?
All full-time and part-time employees covered by the national workplace relations system are entitled to receive each of the 10 NES entitlements. Some, but not all of these entitlements also apply to casual workers.
The national workplace relations system at present covers those who are:
- employed by a constitutional corporation (these are corporations that are trading or financial)
- employed in Victoria, the Northern Territory or the ACT
- employed by the Commonwealth or a Commonwealth authority
- a waterside employee, maritime employee or flight crew officer employed in connection with interstate or overseas trade or commerce
- Sole traders, partnerships and other unincorporated private sector employers in New South Wales, Queensland, South Australia and Tasmania (from 1 January 2010).
The following are generally NOT covered by the national system:
- state government public sector employers and employees (except in Victoria where most of these are covered by the national system)
- Some local government employers and employees (depending on the nature of the State’s referral). In Victoria and Tasmania all local government employers and employees are covered by the national system.
- Corporations in West Australia whose main activities are not trading or financial
- sole traders, partnerships and other unincorporated private sector employers iin West Australia, as they are not constitutional corporations
There are two NES entitlements that apply to all employees, whether they are covered by the national workplace relations system or not. These are:
- parental leave and related entitlements
- notice of termination.
What are my terms and conditions of employment/entitlements under the National Employment Standards?
Under the Australian Fair Pay & Conditions Standard (the Standard) you were entitled to 5 minimum employment conditions:
- basic rates of pay and casual loadings
- maximum ordinary hours of work
- annual leave
- personal leave (including carer’s leave and compassionate leave)
- parental leave and related entitlements.
The National Employment Standards (NES) sets out 10 minimum employment entitlements.
These entitlements are generally the same under the NES as they were under the Standard:
- maximum weekly hours of work
- annual leave
- personal / carer's leave and compassionate leave (including some additional rights)
- parental leave (including some additional rights).
The NES also covers these additional entitlements:
- the right to request flexible working arrangements
- community service leave
- long service leave (maintenance of pre-existing entitlements)
- paid day off for public holidays
- notice of termination and redundancy pay
- a 'Fair Work Information Statement' for all new employees that makes clear your rights and entitlements under the new system and how to get advice and help.
From 1 January 2010, terms and conditions in relation to basic rates of pay and casual loadings are generally contained in modern awards subject to transitional provisions.
What types of leave are my employees entitled to?
Your permanent full-time employees are generally entitled to at least:
- 4 weeks paid annual leave (5 weeks for shiftworkers)
- 10 days paid personal / carer’s leave per year
- 2 days unpaid carer’s leave (when needed)
- 2 days paid compassionate leave (when needed)
- 12 months unpaid parental leave (with additional entitlements for some employees).
Permanent part-time employees are entitled to a pro-rata portion of the above annual leave and paid personal/carer’s leave based on the employee’s ordinary hours of employment.
In some circumstances, eligible employees may also be entitled to long service leave.
On public holidays, employees who would usually work on the public holiday are entitled to a day off with pay (subject to reasonable requests to work).
Your permanent full-time and part-time employees are also entitled to Community Service Leave for eligible community service activities such as:
- jury service
- activities dealing with an emergency or natural disaster.
Your casual employees are entitled to:
- two days unpaid carers leave and two days compassionate leave per occasion
- community service leave (except paid jury service)
- to reasonably seek a day off on a public holiday.
In addition, casual employees who have been employed for at least 12 months by an employer on a regular and systematic basis and with an expectation of ongoing employment are entitled to parental leave.
Entitlements relating to parental leave apply to all employees (including those covered by state or territory industrial laws). However, if State or Territory laws are more beneficial to employees than the NES, then these will apply.
For more information on state parental leave entitlements see your relevant state website:
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Fair Work Information Statement
What is the Fair Work Information Statement?
From 1 January 2010, all employers covered by the national workplace relations system have an obligation to give each new employee a Fair Work Information Statement (the Statement) before, or as soon as possible after, the employee starts employment.
The right for new employees to receive the Statement is one of 10 minimum standards in the National Employment Standards (NES) that apply to employment of employees.
Find out what is in the Fair Work Information Statement:
How do I obtain copies of the Fair Work Information Statement that I need to distribute to my employees?
You can download a copy from the Fair Work Online website.
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