From 1 January 2010, modern awards cover most workplaces. The commencement of modern awards means that there have been changes to minimum terms and conditions for many employees. The changes vary by state, industry and employer.
Transitional arrangements in most modern awards mean that some new pay rates commence on the first full pay period on or after 1 July 2010.
Important! This means that pay rates for many employees change on 1 July 2010.
Transitional arrangements in most modern awards give employers and employees time to adjust to the changes by allowing new pay rates to be phased in over a period of four years until the full modern award rates apply on 1 July 2014.
In this period pay rates need to be calculated with reference to the pre-modern award entitlement that used to cover the employee before 1 January 2010 as well as the relevant modern award entitlement.
The Fair Work Ombudsman has a number of tools available to automatically calculate base rates of pay for most modern awards.
These tools, along with some information provided by you, can quickly and easily help you find the right pay.
On this page:
What are transitional arrangements?
From 1 January 2010, modern awards cover most workplaces.
Transitional arrangements, found in most modern awards, give employers and employees time to adjust to the changes in pay rates.
Modern awards may contain:
- model transitional provisions that phase in changes to pay rates from 1 July 2010 across a four year period
- specific transitional provisions unique to the modern award and dealing with pay and/or other conditions – see the award for details
- no transitional arrangements - the full terms of the modern award apply from 1 January 2010.
In most cases, the model transitional provisions will apply. The model transitional provisions allow employers to wait until 1 July 2010 to start paying the new base rates of pay and certain other entitlements under the modern award. These base rates and entitlements will be phased in over a period of four years until the full modern award rate applies on the first fully pay period on or after 1 July 2014.
These model transitional provisions can be found in a schedule at the end of the modern award document.
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Do modern awards reduce my take-home pay?
In some cases, the modern award rate of pay may be lower than the equivalent pre-modern award rate of pay. However, modern awards are not intended to reduce an employee’s take-home pay.
If the modern award contains lower base rates of pay, loadings and/or penalties, an employer may choose to keep paying the higher pre-modern award entitlements to ensure that existing employees do not suffer a reduction in take-home pay. However, base rates of pay, loadings and penalty rates entitlements are phased separately and care needs to be taken to ensure that the employees are paid their minimum entitlement under each.
If an employee believes their take-home pay has been reduced, they or their union, can apply to Fair Work Australia to make a ‘take-home pay order’ to ensure that the employee is not worse off.
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The model transitional provisions
The model transitional provisions allow certain entitlements which are higher or lower than pre-modern award entitlements to be progressively phased in over a period of four years starting on 1 July 2010. The full modern award rate will apply from 1 July 2014.
The model transitional provisions give employers and employees time to adjust to the changes in pay rates.
The model transitional provisions apply to:
- base rates of pay, including piecework rates
- casual and part-time loadings
- Saturday, Sunday and public holiday penalty rates
- evening and other penalty rates
- shift allowances or penalties.
If the modern award contains the model transitional provisions, the provisions are found in Schedule A to the award.
What pay rates apply from 1 January 2010?
Some modern award pay rates start from 1 January 2010. However, modern awards that include the model transitional provisions allow pre-modern award rates of pay to continue until the first pay period on or after 1 July 2010.
What pay rates apply after 1 July 2010?
Employers and employees need to check the transitional arrangements in the relevant modern award.
For modern awards which contain the model transitional provisions, some new pay rates commence on the first full pay period on or after 1 July 2010. Base rates of pay and certain penalty rates and loadings will be phased in over a period of four years until the full modern award rate applies on 1 July 2014.
Employers also need to factor in any annual wage review increases that Fair Work Australia may make. Fair Work Australia’s annual wage review is expected to take effect from the first full pay period on or after 1 July 2010.
Employers should check that they are paying the correct rates from 1 July each year.
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What happens if the new pay rate is higher?
If the pay rates under the modern award are higher than the pre-modern award pay rates the increases will be phased in over a period of four years in 20 per cent instalments, starting from the first full pay period on or after 1 July 2010. The new higher pay rates will apply in full from the first full pay period on or after 1 July 2014.
Employers also need to factor in any annual wage reviews increases that Fair Work Australia may make, which will generally take effect from the first full pay period on or after 1 July each year.
Modern awards set out minimum pay rates. Employers can choose to pay more than the minimum rates at any time. If the pay rates in the modern award are higher than those in the pre-modern award, the employer may choose to pay the modern award rates immediately. However, base rates of pay, loadings and penalty rate entitlements are phased separately and care needs to be taken to ensure that the employees are paid their minimum entitlement under each.
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What happens if the new pay rate is lower?
If the pay rates under the modern award are lower than the pre-modern award pay rates the decrease will be phased in over a period of four years in 20 per cent instalments, starting from the first full pay period on or after 1 July 2010. The new lower pay rates will apply alone from the first full pay period on or after 1 July 2014.
Employers also need to factor in any annual wage reviews increases that Fair Work Australia may make, which will generally take effect from the first full pay period on or after 1 July each year.
If the modern award contains lower pay rates, an employer may choose to keep paying the higher pre-modern award entitlements to ensure that existing employees do not suffer a reduction in take-home pay. If an employee believes their take-home pay has been reduced, they can apply to Fair Work Australia to make a ‘take-home pay order’ to ensure that the employee is not worse off.
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I’m an employer, I pay my employees more than the award, do I have to increase pay or entitlements again?
Modern awards deal with minimum obligations only. They do not require employers to increase or maintain over-award payments already being made.
Most modern awards provide that, if you are making over-award payments, monetary obligations in the modern award may be absorbed into those over-award payments.
However, employers may need to maintain an over-award payment or to allocate payments in a particular way because of their employment contracts with employees.. Employers need to consider those employment contracts on a case-by-case basis.
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What happens to commissions, piece rates and wages for employees with a disability?
Different calculations apply where employees are paid a commission, a piece rate and wages for employees with a disability.
See the specific instructions for each category of employee.
See extra information for:
How does this affect agreements?
Base rates of pay in a modern award override lesser entitlements in an agreement or contract of employment at all times, including agreements and contracts that were made before 1 January 2010. All employees covered by the modern award must not be paid less than the base rate of pay in the modern award.
However, the penalty rates and allowances in the modern award do not apply to agreement-covered employees, unless the agreement is read in conjunction with the modern award (eg. a pre-reform certified agreement (a type of collective agreement made before 27 March 2006)). Penalty rates and allowances in the modern award will override a contract of employment or non-registered agreement.
Where there is no relevant modern award, pay rates in the agreement need to be at least in line with the applicable pre-modern award, or where none exists, the national minimum wage.
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How do the model transitional provisions apply to employees who were previously award-free but are now covered by a modern award?
Some employees who were previously award-free will be covered by a modern award from 1 January 2010. This is because modern awards cover an industry or occupation rather than particular employers and organisations.
The way that the model transitional provisions apply to these employees depends on what their entitlements were or would have been (e.g. for new employees) as at 31 December 2009.
Wages
- Where an employee had or would have had an entitlement to the FMW rate, wage rates phase from the FMW rate to the wage rate in the modern award
- Otherwise, the full modern award wage rate applies from 1 January 2010
- Most employees that were previously award-free in the national system would have been entitled to the FMW rate as at 31 December 2009
- However, employees of non-constitutional corporations in NSW, QLD, SA or TAS would not have had, and could not have had, an entitlement to the FMW rate because the employer and the employees would have been part of a State system in December 2009 and the FMW rate only applied in the national system.
Penalty rates
- Penalty rates in the modern award phase in from zero in five 20% increments over four years, beginning from the first full pay period on or after 1 July 2010 and ending on the first full pay period on or after 1 July 2014 (when the penalty rates in the modern award apply in full)
- The model transitional provisions apply in this way because award-free employees did not have, and could not have had, an entitlement to penalty rates in an award-based transitional instrument (e.g. a federal award or NAPSA) before 1 January 2010.
Casual loading
- Where an employee had, or would have had, an entitlement to the default casual loading under the Australian Fair Pay and Conditions Standard, the employee’s casual loading phases from the default casual loading (20%) to the casual loading in the modern award (25%).
- Here are the minimum casual loadings for each year that the model transitional provisions apply in this situation:
|
1 July 2010 |
21% |
|
1 July 2011 |
22% |
|
1 July 2012 |
23% |
|
1 July 2013 |
24% |
|
1 July 2014 |
25%
(modern award casual loading applies in full) |
- Otherwise, the casual loading in the modern award phases in from zero.
- Here are the minimum casual loadings for each year that the model transitional provisions apply in this situation:
|
1 July 2010 |
5% |
|
1 July 2011 |
10% |
|
1 July 2012 |
15% |
|
1 July 2013 |
20% |
|
1 July 2014 |
25%
(modern award casual loading applies in full) |
- Most employees who were previously award-free in the federal system were, or would have been, entitled to the default casual loading in the Australian Fair Pay and Conditions Standard.
- However, there are a few exceptions. For example:
- Employees of constitutional corporations in Queensland were not entitled to the default casual loading because they were covered by an APCS (pay scale) derived from the minimum wage provisions of the Industrial Relations Act 1999 (QLD)
- Employees of non-constitutional corporations in NSW, QLD, SA or TAS would not have had, and could not have had, an entitlement to the default casual loading in the Australian Fair Pay and Conditions Standard because the employer and the employees would have been part of a State system in December 2009 and the default casual loading only applied in the national system.
Part-time loading
- The part-time loading in the modern award phase in from zero in five 20% increments over four years, beginning from the first full pay period on or after 1 July 2010 and ending on the first full pay period on or after 1 July 2014 (when the part-time loading in the modern award applies in full).
- The model transitional provisions apply in this way because there was no default minimum entitlement to a part-time loading in the Australian Fair Pay and Conditions Standard.
Where to go for more help, advice and assistance
If you require assistance, contact the Fair Work Infoline on 13 13 94, or chat online with our 
Live help advisor. Alternatively, you could seek more comprehensive advice about your particular situation from a professional workplace relations advisor, such as a lawyer, union or employer organisation.
For information on the award modernisation process, contact Fair Work Australia on 1300 799 675.
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