Chapter 5

Modern Awards and Pay

In This Chapter

Understanding and applying modern awards

Recognising that minimum wages are not negotiable

Managing juniors, apprentices and trainees

Avoiding being tripped up by transitional provisions for penalties, loadings and overtime

A ustralia is unique in the world of employment regulation in that it has applied a system of state and national awards since federation in the early 1900s — but these awards are nothing like the Academy Awards. Minimum wages and conditions of employment were awarded to classes of employees based on either their occupation, profession or industry, and usually following protracted industrial disputes between employees and employers in industries such as manufacturing, mining, transport, shearing and meat works. The awards were given legal effect by tribunals established by governments of the day with similar status to statutory regulations or ordinances. Over time these awards evolved into comprehensive codes regulating minimum terms and conditions of employment for over half of the Australian working population. In 2010, hundreds of state and national awards were collapsed into 123 national modern awards based on uniquely defined industries and occupations.

In this chapter, I explain how to determine whether a modern award applies to some or all of your employees. I describe each element of the modern award, and how you can arrange your employment relationship with staff in a way that complies with the requirements but also suits your business. I explain the system of minimum award wages and the national minimum wage for those employees not covered by a modern award, and address the special arrangements for apprentices, trainees, juniors and people with disabilities. If that’s not enough for you, I finish with coverage of the somewhat challenging transitional provisions applicable to minimum award wages, penalties and loadings.

Modern Awards and You

Okay, time to work out whether your business is covered by one or more of the employment instruments otherwise known as modern awards. Your task is to find out which awards may apply and get to know them, because the national minimum wage (NMW), modern awards and the National Employment Standards (NES) form the safety net of national minimum standards for your employees.

Finding out which award applies to your business

A common misconception among small-business owners is that they can choose an award to apply to their employees. I have no idea who spread this rumour but it’s not true. When you employ people only two possibilities exist: A modern award applies to their terms and conditions of employment or they are award-free. If they’re award-free, the NMW and the NES provide the minimum safety net of terms and conditions.

Here is how you find out whether a modern award covers your business and applies to your employee:

1. Go to www.fairwork.gov.au and download a list of the modern awards from the Fair Work Ombudsman.
2. Identify the industry that your small business operates in (not the occupation of employees).

   For example, if you own a retail pharmacy and you’re employing a pharmacist, look for a modern award that covers pharmacies, not the professional occupation of a pharmacist.

3. Read the Coverage clause of modern awards (not just the title of the modern award) to determine the award that covers your business.

   This clause defines the industry and provides a clearer indication than the title of the award of whether it may cover employees. Look for this clause in the contents list of the modern award that you suspect may cover your business. Following the example of the pharmacy business, you could readily and confidently conclude from its Coverage clause that the Pharmacy Industry Award is the modern award that covers a pharmacy business.

4. Go to the Schedule B: Classification Definitions section of the award that covers your business.

   If a classification is listed here that accurately describes the occupation, profession or job that the employee will perform for you, this is the modern award that applies to that employee. For example, Pharmacist, Experienced Pharmacist, Pharmacist in Charge, Pharmacy Manager, Pharmacy Student and Pharmacy Intern are described in the Classification Definitions of the Pharmacy Industry Award.

5. Look up the section of the relevant modern award that provides the Minimum Weekly Wages for the classification that matches your employee’s job.

Don’t be surprised if the occupation, profession or job you require isn’t accurately described in the modern award that covers your business. This is not a precise science and some jobs aren’t adequately described.

If you can’t find your required occupation, profession or job, search the coverage and classification descriptions in one or more of the occupational-based modern awards. For example, the Clerks — Private Sector Award applies only where no other industry award covers the employer, or where an industry award that covers an employer doesn’t contain a clerical occupation that reflects the job of the employee. Once again using the example of the pharmacy business, the Pharmacy Industry Award doesn’t describe jobs that are primarily clerical or administrative in nature within this area. For instance, a large pharmacy may employ a person to administer the payroll, process accounts and other office-based functions for the business. The Clerks — Private Sector Award covers work of that nature.

Getting to know your award

Finding the modern award applicable to your staff is one thing (see the preceding section). Understanding the terms and conditions contained within it is another thing altogether. But understanding these terms and conditions is well worth your while — so perhaps prepare yourself for a bit of late-night reading!

Modern awards impose the minimum obligations on you in relation to:

• Forms of employment
• Individual flexibility arrangements
• Minimum wages and allowances
• Overtime and penalty rates
• Procedures for consultation and dispute settlement
• Public holidays, leave and leave loadings
• Superannuation
• When work is performed

Forms of employment

In Chapter 2, I discuss the choices available when employing staff. In particular, I explain the differences between the various forms of employment such as full-time, part-time and casual employment. Modern awards add another dimension to the way in which staff may be employed and the entitlements attached to each of the forms. Although the arrangements are generally consistent across all modern awards some differences do occur due to the particular circumstances prevailing in an industry, so it is best to check the applicable modern award.

Full-time employment

Full-time employment is relatively simple — that is, an employee is engaged to work an average of 38 hours of work each week. This is the traditional standard working week for many employees in Australia and will suit most small businesses that are open for business for between five and seven days per week.

Full-time employees usually attend work on times of the day and days of the week that follow a reasonably predictable pattern over the full year. Although some variations on the theme of full-time employment are expressed in modern awards — for example, averaging of ordinary hours over two or four weeks and rostered days off work — the typical pattern is 7.6 hours per day, five days per week.

Although full-time employment is defined as an average of 38 hours per week, modern awards limit how you may allocate those full-time hours on each day and throughout the working week. Therefore, you must read the Hours of Work provisions of the applicable modern award to properly understand how full-time employment may be applied in your business.

Part-time employment

Part-time employees are engaged for fewer than full-time hours. The employment is regular and the hours of work generally predictable over the full year. Although a part-time employee works fewer hours, the employment is continuous in the same manner as full-time employment. Nevertheless, modern awards may impose limitations on the arrangement of hours of employment of part-time employees, and the circumstances of how they may be altered. For example, the Fast Food Industry Award is typical of the modern award arrangements for part-time employees — see the sidebar ‘Fast Food Industry Award’ for more information.

Casual employment

Casual employment isn’t defined precisely or uniformly in modern awards but is commonly understood as being employment of an intermittent or irregular nature. In this form of employment, you’re not normally obliged to offer continuing employment beyond the period of employment in which the casual employee has accepted work.

Fast Food Industry Award

Here’s how the Fast Food Industry Award covers part-time employees:

12.1 A part-time employee is an employee who:

(a) works less than 38 hours per week; and

(b) has reasonably predictable hours of work.

12.2 At the time of first being employed, the employer and the part-time employee will agree, in writing, on a regular pattern of work, specifying at least:

the number of hours worked each day;

which days of the week the employee will work;

the actual starting and finishing times of each day;

that any variation will be in writing;

that the minimum daily engagement is three hours; and

the times of taking and the duration of meal breaks.

12.3 Any agreement to vary the regular pattern of work will be made in writing before the variation occurs.

12.4 The agreement and any variation to it will be retained by the employer and a copy given by the employer to the employee.

12.5 An employer is required to roster a part-time employee for a minimum of three consecutive hours on any shift.

12.6 An employee who does not meet the definition of a part-time employee and who is not a full-time employee will be paid as a casual employee in accordance with clause 13 — Casual employment.

12.7 A part-time employee employed under the provisions of this clause will be paid for ordinary hours worked at the rate of 1/38th of the weekly rate prescribed for the class of work performed. All time worked in excess of the hours as agreed under clause 12.2 or varied under clause 12.3 will be overtime and paid for at the rates prescribed in clause 26.2 — Overtime and penalty rates.

The inflexibility of the Fast Food Industry Award can trap unsuspecting small-business owners but with some foresight and planning you can build in the flexibility that you need for your business without compromising your legal obligations.

For example, you may initially want your part-time employee to work no more than 15 hours per week, but with improvements in business and where occasional gaps in staffing need to be filled due to absences of other staff, you may want to offer the employee more hours of employment. The problem is the modern award imposes the additional cost of overtime payments and cumbersome administrative requirements to vary the agreed hours. You may think you may as well offer the additional hours to a casual employee. However, you can build into the employment contract a contingency allowing variations to the hours of employment, as and when the needs of the business change. In other words, you and your employee agree in advance that the part-time hours of work may be varied to suit the mutual interests of your business and the employee, thus satisfying the requirements of clauses 12.2 and 12.3 of the Fast Food Industry Award and not creating the requirement to pay overtime rates. See Chapter 7 for more on how you can build contingencies such as these into the employment contract.

Modern awards prescribe a loading of 25 per cent on the ordinary hourly wage in lieu of entitlements that full-time and part-time employees receive, such as annual leave, personal leave, long service leave, parental leave and contingent entitlements such as redundancy pay and notice of termination of employment.

Most modern awards provide a minimum period that a casual employee must be offered to work. For example:

• The Fast Food Industry Award requires three hours per day
• The Restaurant Industry Award requires two hours minimum engagement
• The General Retail Industry Award requires a minimum of three hours engaged, except for school-aged employees who work between 3 pm and 6.30 pm and where working the three hours isn’t possible, either because of the operational requirements of the employer or the unavailability of the young employee.

This isn’t the case of all modern awards, however — the Hair and Beauty Industry Award doesn’t impose any minimum period of engagement of a casual employee.

This lack of uniformity or logical differentiation suggests checking the applicable modern award before you employ a casual employee is prudent, to ensure you understand what you’re required to pay as a casual wage, and for how long.

Fixed-term and temporary employment

Many small-business owners refer to their regular full-time and part-time staff as permanent employees and employees engaged for a limited period of time as fixed-term or temporary. Modern awards don’t refer to permanent employment, fixed-term or temporary employment. Nevertheless, you may employ people for temporary periods and those employees are entitled to the same benefits and obligations as full-time and part-time employees for the duration of their employment.

Refer to Chapter 2 for more on the differences between fixed-term employment and the more common practice of employing a person for a specified period or task, and the requirements each may impose on you.

Individual flexibility arrangements

All modern awards include a provision entitled Award Flexibility, which allows you and your employee to agree to vary the application of certain terms of the award to ‘. . . meet the genuine individual needs of the employer and individual employee’.

The objective of this provision is to allow some measure of flexibility in the employment relationship that may not otherwise be accommodated by the terms of the modern award. Where such an arrangement is made, it overrides the modern award in respect of that matter for the individual employee.

Sounds promising, but you must be careful to ensure that your employee is better off overall in comparison to the award. Failing to adhere to the requirements for making an individual flexibility agreement may render you liable for short-falls in wages or other modern award benefits. (See the sidebar ‘Understanding the Award Flexibility provisions’ for a full example of the arrangements.)

Understanding the Award Flexibility provisions

The following is the Award Flexibility provisions from the Clerks — Private Sector Award.

7 Award flexibility

7.1 Notwithstanding any other provision of this award, an employer and an individual employee may agree to vary the application of certain terms of this award to meet the genuine individual needs of the employer and the individual employee. The terms the employer and the individual employee may agree to vary the application of are those concerning:

(a) arrangements for when work is performed;

(b) overtime rates;

(c) penalty rates;

(d) allowances; and

(e) leave loading.

7.2 The employer and the individual employee must have genuinely made the agreement without coercion or duress. An agreement under this clause can only be entered into after the individual employee has commenced employment with the employer.

7.3 The agreement between the employer and the individual employee must:

(a) be confined to a variation in the application of one or more of the terms listed in clause 7.1; and

(b) result in the employee being better off overall at the time the agreement is made than the employee would have been if no individual flexibility agreement had been agreed to.

7.4 The agreement between the employer and the individual employee must also:

(a) be in writing, name the parties to the agreement and be signed by the employer and the individual employee and, if the employee is under 18 years of age, the employee’s parent or guardian;

(b) state each term of this award that the employer and the individual employee have agreed to vary;

(c) detail how the application of each term has been varied by agreement between the employer and the individual employee;

(d) detail how the agreement results in the individual employee being better off overall in relation to the individual employee’s terms and conditions of employment; and

(e) state the date the agreement commences to operate.

7.5 The employer must give the individual employee a copy of the agreement and keep the agreement as a time and wages record.

7.6 Except as provided in clause (a) the agreement must not require the approval or consent of a person other than the employer and the individual employee.

7.7 An employer seeking to enter into an agreement must provide a written proposal to the employee. Where the employee’s understanding of written English is limited the employer must take measures, including translation into an appropriate language, to ensure the employee understands the proposal.

7.8 The agreement may be terminated:

(a) by the employer or the individual employee giving 13 weeks’ notice of termination, in writing, to the other party and the agreement ceasing to operate at the end of the notice period; or

(b) at any time, by written agreement between the employer and the individual employee.

Note: If any of the requirements of s.144(4), which are reflected in the requirements of this clause, are not met, then the agreement may be terminated by either the employee or the employer, giving written notice of not more than 28 days (see s.145 of the Fair Work Act 2009 (Cth))

7.9 The right to make an agreement pursuant to this clause is in addition to, and is not intended to otherwise affect, any provision for an agreement between an employer and an individual employee contained in any other term of this award.

The Award Flexibility provisions mean you can vary the application of the modern award in limited circumstances — but only where this arrangement means your employee is better off overall than if you applied the modern award provisions. (So the provisions are perhaps not as promising as they first seemed.) Your business interests are secondary to the employee. Nevertheless the two sets of interests don’t have to be incompatible. Your challenge is to find a means to satisfy your business interests and also benefit the employee, if you wish to have an effective individual flexibility arrangement (IFA).

Here are a couple of ways that might suit your employee and your business:

• Rolling up award allowances, overtime and leave loading benefits in the total salary paid to the employee to cover the periods such entitlements might accrue over the year. In this scenario, the employee receives the benefit of the payments in advance of the event and you’re able to spread the payments over the full year, benefiting your cash flow.
• Allowing your employee to make up for time off work spent attending occasional family related activities. This allows employees to attend activities such as school sports days, volunteering and the like, and means employees receive a really good family friendly benefit. They then make up the time that they’re absent during other times of the day or days of the week, without payment of penalties or overtime.

If you make an IFA with your employee, you may agree to terminate it when it no longer suits you. Alternatively, you or your employee may provide notice to the other person that the arrangement will terminate. On the expiry of the notice period, the conditions of employment covered by the IFA will revert to the modern award provision.

Holidays, leave and leave loading

Public holidays, annual leave, personal carer’s leave, compassionate leave, long service leave, community service leave and parental leave are generally covered by the NES (refer to Chapter 4), but modern awards may include provisions in relation to annual, personal/carer’s, and community service leave that also apply to your employees. The modern award provisions are designed to complement the NES provisions and, as such, generally provide additional benefits or new obligations, or otherwise explain how and to whom the benefits are applied. For example, modern awards may provide details of the following:

• Allowances so employers can direct employees to take leave during shutdowns of the business
• Annual leave loading
• Definitions for shift workers eligible for additional annual leave
• Penalty payments for work performed on public holidays
• Reimbursement of annual leave where the employee is ill
• Substitution of public holidays to alternative days

Other types of leave may also be provided, such as Aboriginal and Torres Strait Islander cultural leave, that aren’t covered in the NES.

When work is performed

While the NES prescribes the maximum number of ordinary hours of work that employees may be asked to work each week, modern awards prescribe the manner in which those hours may be worked. These arrangements vary across modern awards, depending upon the nature of the industry that is covered. (See the sidebar ‘Understanding hours of work provisions’ for an example from one modern award.)

Understanding hours of work provisions

Here&s how the Clerks — Private Sector Award covers how hours may be worked for those doing office-based work:

25.1 Weekly hours of work — day workers

(a) The ordinary hours of work for day workers are to be an average of 38 per week but not exceeding 152 hours in 28 days, or an average of 38 over the period of an agreed roster cycle.

(b) The ordinary hours of work may be worked from 7.00 am to 7.00 pm Monday to Friday and from 7.00 am to 12.30 pm Saturday. Provided that where an employee works in association with other classes of employees who work ordinary hours outside the spread prescribed by this clause, the hours during which ordinary hours may be worked are as prescribed by the modern award applying to the majority of the employees in the workplace.

(c) Not more than 10 hours exclusive of meal breaks (except if paid for at overtime rates) are to be worked in any one day.

Whereas the Fast Food Industry Award recognises the seven-days-per-week trading typical of the industry, as follows:

25. Hours of work

25.1 This clause does not operate to limit or increase or in any way alter the trading hours of any employer as determined by the relevant State or Territory legislation.

25.2 Ordinary hours

(a) The ordinary hours of work are an average of 38 per week over a period of no more than four weeks.

(b) Hours of work on any day will be continuous, except for rest pauses and meal breaks.

25.3 Maximum hours on a day

An employee may be rostered to work up to a maximum of 11 ordinary hours on any day.

25.4 38 hour week rosters

A full-time employee will be rostered for an average of 38 hours per week, worked in any of the following forms:

(a) 38 hours in one week;

(b) 76 hours in two consecutive weeks;

(c) 114 hours in three consecutive weeks; or

(d) 152 hours in four consecutive weeks.

The hours of work arrangements in modern awards provide a framework within which you can employ staff to meet the operational needs of your business. Staff can be employed outside the arrangement of ordinary hours; however, such work costs you more in the form of overtime payments and penalty rates.

Consulting with your staff about changes to the business

Generally, two types of changes can occur in a small business:

• Changes to improve the business
• Changes to save the business

No matter what the reason, all modern awards impose an obligation on employers to consult and share information with employees where a definite decision has been made to introduce changes in production, program, organisation, structure or technology that are likely to have a significant effect on employees.

In modern awards, changes that have significant effects include:

• Alteration of the hours of work
• Creation of the need for retraining
• Major changes in the composition, operation or size of your workforce, or in the skills required
• Reduction of job opportunities, promotions or job tenure
• Transfer of employees to another work location and the restructure of jobs
• Termination of employment

Just about every operational decision is covered by the duty to consult.

Changes to improve the business and changes to save the business always include changes of the nature of those outlined in the preceding list. Therefore, the consultation will sometimes include good news for your employees and sometimes not so good news. Although the duty to consult may seem like an annoying intrusion into the way in which you run your business, the impact is generally benign and, if handled well, positive for the business.

As a small-business owner, you’re well placed to share information about upcoming changes with your employees by talking directly to them and in a manner that is sensitive to their interests as well as your business.

Focus on the reason for the introduction of the change to your business and, in particular, explain how the change is either necessary to ensure the survival of the business, or will benefit the business and improve employee opportunities. You don’t have to divulge commercially sensitive or confidential information about the business. If the actual impact on employees is positive, celebrate the benefits of the change. If the impact is not positive, be honest and treat the employee or employees affected with respect and dignity. They will generally return the compliment.

Resolving employment disputes

No matter hard you try to keep all your staff happy, conflict can occur. One source of conflict is the terms and conditions of employment provided under a modern award and the NES.

The resolution of disputes between you and your employees about matters arising under a modern award or the NES — that is, their basic terms and conditions of employment — can be a highly emotional journey for you and your employees. Small business is by its very nature a very personal affair and where conflict occurs it takes a lot of patience, maturity and respect to resolve it satisfactorily.

Try to resolve grievances quickly and amicably. To help things along, encourage employees to bring any issues to you without fear or favour, and work to encourage trust and confidence that you will deal with problems objectively and honestly. The issues may seem trivial to you or even plain annoying, but you must treat every grievance seriously and act to resolve them objectively. If you made a mistake, admit it and rectify it. If you believe the employee is wrong, be honest but measured.

Every modern award includes a procedure where such a conflict, if not resolved at the workplace, may be escalated to the Fair Work Commission.

The Fair Work Commission can’t impose a resolution on you (unless you agree in advance to allow it to arbitrate) but it normally attempts to mediate or conciliate a resolution acceptable to you and your employee.

The Fair Work Commission will notify you if it has received a complaint from an employee and will arrange for a conference between you, your employee and representatives, usually within a couple of weeks of the filing of the complaint. You must attend the conference and must not penalise or adversely treat the employee for having made a complaint.

Superannuation

Mandatory superannuation contributions are regulated by the Superannuation Guarantee (Administration) Act 1992, the Superannuation Charge Act 1992, the Superannuation Industry (Supervision) Act 1993 and the Superannuation (Resolution of Complaints) Act 1993. Over 20 separate overriding laws regulate superannuation in Australia.

Notwithstanding the comprehensive coverage of the subject in legislation, modern awards also impose limitations on your choice of superannuation fund where employees fail to nominate their choice of fund to receive the mandatory contributions. Where employees haven’t nominated a fund, modern awards generally provide that the contributions must be made into a fund listed in the modern award.

See Chapter 6 for more detail on your superannuation obligations and the cost to your small business.

Minimum Wages, Allowances, Penalties and Loadings

I’m sometimes asked to explain to employers how minimum wages in Australia are determined. Putting aside the yearly ritual determining a single national minimum wage (NMW) known as the annual wage review, minimum wages in modern awards have been established using a loosely interrelated hierarchical structure of pay rates based on an arbitrary and somewhat eclectic view of the value of work performed by employees who are covered by modern awards.

The aim of Australia’s minimum wage system in the dim dark days of yore was to control wage-fuelled inflation through a system where award covered jobs were paid no more than another job of equivalent value, no matter what industry or occupation in which the work was performed. The system of Australian modern award minimum wages is the successor of that system, and has largely retained the same underlying objective and philosophy.

Modern award minimum wages

In Australia, 123 modern awards cover a broad range of industries and occupations. Each of these awards provides a minimum wage structure that matches jobs to a minimum weekly, hourly or yearly wage. If you can match the job performed by your employees to the correct modern award classification, you can find and apply the correct minimum wage to that employee.

You can always pay employees more than the minimum wage, but must not pay less than the wage prescribed for the job that matches the job performed by those employees.

Some modern awards prescribe multiple pay points within each wage classification, reflecting the acquisition and application of new or enhanced skills as employees continue their employment in that job. Where a wage classification in a modern award that applies to your employee has multiple pay points, your employees are eligible for progression to the higher pay points only where they have completed 12 months of continuous service in that classification level and have satisfactorily demonstrated their competence in the job.

How you can assess competence is covered in Chapter 9, when I examine the wage–work bargain, including how performance standards are established, applied and measured.

The key lesson for you as a small-business employer is not to waste your time trying to understand the full workings of the minimum wage system and why it was put in place in the way it was. The system is a product of a range of social, economic and political antecedents. Learning how to identify the modern award that covers your business and the classification description that applies to your employees is the skill that will help you comply with the law and save you money in the long term.

National minimum wage

The national minimum wage (NMW) applies to employees not covered by modern awards or enterprise agreements. A minimum wage is in place for adults, juniors, apprentices and trainees as well as employees with a disability. Minimum wages are set and reviewed by the Fair Work Commission and apply from the nearest pay period commencing on or immediately after 1 July each year. For example, the NMW applicable from 1 July 2013 is as shown in Table 5-1.

Table 5-1 National Minimum Wage by Category for 2013

Category	Subcategory	National Minimum Wage (per hour)
Adults		$16.37
Juniors	Under 16 years of age	$6.03
	At 16 years of age	$7.74
	At 17 years of age	$9.46
	At 18 years of age	$11.18
	At 19 years of age	$13.51
	At 20 years of age	$16.00
Apprentices	Year 1 of apprenticeship	$10.49
	Year 2 of apprenticeship	$12.39
	Year 3 of apprenticeship	$15.25
	Year 4 of apprenticeship	$18.11

Source: Fair Work Ombudsman (www.fairwork.gov.au).

Employees with disabilities

People with physical, mental or intellectual disabilities may be in receipt of a disability pension but still may wish to participate in employment. In some cases, the disability limits their capacity to perform a job as competently as an employee without a disability. All modern awards provide a method for assessing the capacity of employees with a recognised disability and setting the minimum wage for these employees. This capacity is known as the supported wage system.

Two special national minimum wages are also applicable to employees with a disability whose terms and conditions of employment are not covered by an award or agreement, as follows:

• Special national minimum wage 1 is for employees whose disability doesn’t inhibit their capacity to perform their job. They must be paid at least the equivalent of the NMW applicable to a person without a disability.
• Special national minimum wage 2 is for employees with a disability that does inhibit or limit their capacity to perform their job. Such employees are paid a percentage of the special national minimum wage 1 based on an assessment of their productive capacity. For example, someone with a capacity of 80 per cent would get 80 per cent of special national minimum wage 1 (that is, at least 80 per cent of $16.37 per hour for 2013).

Small businesses are great employers of people from all walks of life and most are ready to give people a go as long as they seem keen and willing. If you wish to employ a person who has a disability, even for a few hours each week, undertaking a Job Capacity Assessment before you agree to employ the person is a good way to accommodate the person’s desire for work and your need for an employee. Job Capacity Assessments are undertaken by organisations accredited by the Australian Department of Education, Employment and Workplace Relations. Job Access has been established to assist people with disabilities to enter and stay in the workforce, and its website is a great place to start finding out more (jobaccess.gov.au/Home/Home.aspx).

Allowances

Monetary allowances in a modern award fall into three categories:

• Allowances paid to compensate areas of work considered difficult, dirty, noxious, or that otherwise cause employees some discomfort associated with the nature of the industry
• Recognition of specialist qualifications and application of valuable expertise
• Reimbursement of expense-related activities undertaken in the course of performing work, such as travel and meal allowances

All modern awards provide allowances that must be paid to employees where they incur expenses in the course of performing work for their employer. For example, where employees are asked by their employer to use their own private motor vehicle to deliver goods and services, they are entitled to reimbursement of the expense incurred by payment of an allowance linked to the distance in kilometres travelled.

The key to understanding when an employee is entitled to an allowance is that the expense must be incurred in the course of performing work on behalf of the employer. Travelling to and from work from home, for example, doesn’t attract the entitlement to an allowance.

Allowances that are paid to compensate for an area of work considered difficult, dirty or noxious, or that otherwise causes some discomfort associated with the nature of the industry, normally appear in modern awards where the work covered is physical or performed outdoors, such as the building and construction industry, electrical and plumbing trades, mining, and in parts of the health industry. Allowances are paid for wet work, cold work, hot work, dirty work, work underground, above ground or in confined spaces, remote work, toxic substances handling, furnace work, work with bitumen, stonemasonry, bagging, plastering, slushing and many more.

Industry allowances paid as compensation for the nature of the required work are normally treated as income and are often applied for all purposes — such as annual leave payments. If an allowance applies to your employees, check the applicable modern award to find out whether the allowance is paid in addition to the ordinary weekly wage and whether it applies during periods of annual and personal leave.

Allowances recognising employees’ qualifications or application of some special skill are also paid and treated as income for all purposes such as annual leave and personal leave. Check the applicable award to identify the specific qualifications and skills that are recognised and paid as allowances in addition to the ordinary minimum wage.

Recognition of qualifications or application of special skill allowances can take various forms in the modern awards. For example, the Hair and Beauty Industry Award provides an allowance for employees who perform a managerial role for one week or more during the course of their employment. An employee who is required to occasionally interpret for patients of a non-English speaking background in a health service is entitled to an allowance under the Health Professionals and Support Services Award. The Building and Construction On-site Award has multiple allowances recognising the application of specific skills and functions. Check the Allowances section of the applicable modern awards to determine the eligibility of your employees.

Shift loading, penalty rates, casual loadings and overtime

All employers struggle with the idea that they must pay loadings, penalties and overtime for work performed at different times of the day and week, especially if those times and days are the main trading periods. Small-business owners are no different. However, these sorts of payments must be paid — in this section, I explain when and how obligations arise.

You can absorb loadings, penalties and overtime in the actual wage or salary paid to your employees if this suits you and your employee. This can be done as long as the wage or salary sufficiently accounts for the amount the employee would have received in the form of minimum wage, allowances, penalties, loadings and overtime. This idea of rolling-up or setting-off award allowances, overtime and leave loading benefits in the total salary paid to the employee isn’t a new concept, but does need careful attention in case you find yourself faced with a bill from the regulatory agency to make up short falls in award entitlements. See Chapter 7 for an explanation of how rolling up payments such as loadings and penalties in the total salary may be included in the employment contract.

Penalty rates and shift loadings

Any employee covered by a modern award who works outside of the traditional nine to five and Monday to Friday is more than likely entitled to a shift loading, penalty rate or overtime payment in addition to the ordinary wage. How much the employee is entitled to and the precise hours in which the additional payments occur depend upon the applicable modern award.

Penalty rates are usually expressed as a percentage of the ordinary hourly wage and are designed to compensate employees for working ‘unsociable’ hours of work, such as early mornings, evenings, weekends and public holidays.

Shift loadings are also paid to compensate for unsociable hours of work and are normally paid to employees who are engaged on fixed or rotating shifts over seven days per week. For example, nurses and other staff in public hospitals are paid shift loadings for working afternoon and night shifts. Shifts are also common in manufacturing businesses.

Sometimes the shift loading details appear in a modern award under another title such as ‘Other penalty’. The Hospitality Industry Award is an example of this — in this award, the shift loading is normally paid (when required) during Monday to Friday and penalties are paid in substitution of the loading on weekends and public holidays.

Casual loadings

Casual employees are entitled to 25 per cent loading on the applicable minimum wage during ordinary hours, but this may vary where they are also eligible for shift or penalty rates depending on the applicable modern awards.

The casual loading is usually applied to the ordinary hourly rate and added to the penalty or shift loading that’s also calculated on the ordinary hourly rate (not the loaded casual rate). This is because the loading is paid in lieu of leave entitlements, notice of termination and insecurity of employment.

So a casual working hours that required penalty rate payments would be paid as follows:

Ordinary rate + Casual loading + Penalty rate = Casual rate of pay

However, you need to check the modern award covering your business, because the arrangements aren’t uniform across industries (refer to the section ‘Finding out which award applies to your business’, earlier in this chapter, to find your relevant award).

Overtime payments

You must pay your employees for all of the hours of work that they perform for your business, including the reasonable additional hours that they perform in excess of the maximum ordinary hours per week. The fundamental question for you as the employer is: How much do you need to pay?

Overtime is the period in which work is performed by an employee in addition to the ordinary daily or weekly hours of employment. The maximum ordinary hours of work that an employee may be required to attend work is an average of 38 hours per week, plus reasonable additional hours.

Overtime payments (for example, 150 per cent of the ordinary wage) only apply where the employee has worked overtime that has been approved by you and where a modern award applicable to the employee says you must pay overtime. Employees who are award-free aren’t entitled to overtime payments and the ordinary wage would apply (unless overtime payment is provided in the employment contract).

Most modern awards require overtime payment of 150 per cent of the ordinary wage for the first two hours and double time thereafter. Each day stands alone and, therefore, two hours overtime on two days in a week are paid at 150 per cent of the ordinary rate and not double time on the second day.

Time off work in lieu of overtime payment (TOIL) is a common method used by businesses to minimise the cost of employing staff beyond their normal or ordinary hours of employment. Most modern awards allow you and your employee to agree to TOIL but make sure you check each particular modern award that relates to your business before making such an arrangement with staff.

Juniors, Apprentices and Trainees

Our national system of employment regulation recognises that some employees must be treated differently due to the nature of the employment and/or the vulnerability or special circumstances of that class of person. Young persons or juniors — that is, employees who are under the age of 21 years, employees undertaking a traditional apprenticeship or undergoing formal training to obtain a vocational qualification — are classes of employees who have terms and conditions that are fundamentally different to the adult workforce. The differences are marked in several important areas of the employment relationship:

• Employment and training agreements
• Superannuation
• Termination of employment
• Wages

One aspect that apprentices and trainees have in common with junior employees is that they tend to be younger people. Generally, the same laws that exist for adult employees apply to young people when entering into an employment relationship, whether they’re undertaking an apprenticeship, traineeship or are simply paid junior wages. However, employees under 18 years of age require a parent or guardian to sign employment contracts, IFAs and training agreements on their behalf. Important thresholds must also be met before a young person under the age of 18 years is entitled to superannuation guarantee contributions from their employer. For example, employees who are younger than 18 must be paid at least $450 per month and work at least 30 hours per week to be entitled to the super guarantee.

The important differences and characteristics of each of these classes of employee are explained in the following sections.

Juniors

Employees who are under 21 years of age and aren’t undertaking an apprenticeship or traineeship in a related vocational qualification must be paid at least the minimum wages expressed as a percentage of the adult wage under an applicable modern award, or the monetary amounts prescribed in the national minimum wage for juniors. These minimum wages are a sliding scale of wages matched to the age of the junior employee and are adjusted periodically in conjunction with decisions made in the annual wage review. As an example, Table 5-2 shows the General Retail Industry Award scale of junior rates of pay.

Table 5-2 General Retail Industry Award Junior Rates

Age	% of Weekly Rate of Pay
Under 16 years of age	45
16 years of age	50
17 years of age	60
18 years of age	70
19 years of age	80
20 years of age	90

Current minimum wages for juniors may be ascertained from government agency websites such as www.fairwork.gov.au and www.fwc.gov.au.

Unlike apprentices and trainees (see following section), junior employees aren’t excluded from the making of an application for reinstatement or compensation for unfair dismissal.

Apprentices and trainees

In the beginning (back in the ‘olden days’) . . . apprentices were employed by master tradesmen, and they learnt their trade on the job and became fully qualified after four years of work and formal training at an accredited trades school. These plumbers, carpenters, electricians, boiler makers, chefs, hairdressers, gardeners, butchers and the like then went out into the workforce, usually on their own to establish their own small businesses. Otherwise, they were free to work in their chosen field as an employee. Meanwhile the rest of us either worked full-time or extended our adolescence through lazy days attempting to obtain our first degree. (Ah, those were the days!)

Then some people got the bright idea to expand vocational education and training to every conceivable occupation and would-be profession in this big wide brown land. They opened the opportunity to undertake training to anyone who was already employed, as well as people wanting to obtain a qualification before they entered the workforce. Thus traineeships are available for occupations in every industry and forevermore shall they grow in number and complexity. (Don’t ask me who the people who had the bright idea are. They know who they are!) In this section, I cover the basic provisions for apprentices and trainees.

Apprentice and training wages

Apprentice wages are either provided in an applicable modern award or, where the apprentice is award-free, the national minimum wage for apprentices.

On the other hand, wages of employees undertaking a traineeship are provided in the schedules of most modern awards. Where an employee is undertaking a traineeship but isn’t covered by one or other of the industry-based modern awards, the minimum training wages provided in the Miscellaneous Award apply by default.

Where an award applies to the apprentices or trainees, it applies to them (subject to any express exclusions) in all other respects as if they were full-time or part-time employees.

Termination of employment

Training agreements provide the circumstance and procedures by which the traineeship may be terminated by either party as well as the criteria for successful completion of the qualification. The Fair Work Act provides the requirements to properly terminate the employment of the trainee or apprentice.

Table 5-3 outlines which provisions of the Fair Work Act related to termination of employment apply to apprentices and trainees.

Table 5-3 Fair Work Act Employment Termination Provisions for Apprentices and Trainees

Fair Work Act Provision	Apprentice	Trainee
Notice of termination of employment (NES)	Yes	No (as long as the period of employment is limited to the duration of the training)
Redundancy pay (NES)	No	No (as long as the period of employment is limited to the duration of the training)
Unfair dismissal	No (as long as the period of employment is limited to the duration of the training and termination occurs at the end of the training arrangement)	No (as long as the period of employment is limited to the duration of the training and termination occurs at the end of the training arrangement)
Unlawful dismissal and general protections	Yes	Yes

All employment termination provisions for apprentices and trainees are also subject to small-business employer exclusions and special considerations in the Fair Work Act. These aspects are discussed in detail in Chapter 17.

Training agreement and employment contract

All apprentices and trainees sign traineeship agreements with their employers through an accredited Australian Apprenticeship Centre. The training agreement is usually forwarded to the relevant state training authority that has overarching responsibility for the integrity and supervision of the training system. A registered training organisation is engaged to train and assess the competency of the apprentice and trainee and issue the qualifications.

The big mistake that many employers make is to rely entirely on the training agreement to control the entire terms and conditions of employment for that apprentice or trainee. The agreement isn’t designed for that purpose and it doesn’t cover the other terms and conditions of employment that all apprentices and trainees are entitled during the course of their traineeship. Therefore, you’re a smart employer if you complement the training agreement with an employment agreement.

The employment contract can be quite simple insofar as it can expressly refer to the training agreement as well as the other terms and conditions that apply to their employment. See Chapter 7 for an explanation of the employment contract and the template that you can use for employees undertaking traineeships.

Don’t be under the misconception that when the training agreement is completed or terminated before training has been completed the employment is also automatically terminated. You must separately terminate the employment of the apprentice or trainee. The risk of not terminating the employment properly is exposure to claims of unfair dismissal, unlawful dismissal and other breaches of the law.

Transitional Provisions for Wages, Penalties and Loadings

The modern awards commenced on 1 January 2010 and replaced federal awards and state awards made prior to the Fair Work Act (or the ‘pre-modern awards’).

However, not all of the provisions of the modern award commenced on 1 January 2010. Where a difference exists (either higher or lower) in minimum wages, casual and part-time loadings, evening, weekend and public holiday penalties, industry and shift allowances, the modern award provisions are phased in over five years ending 1 July 2014.

The transitional provisions are described in Schedule A of each modern award. The wording can get a little dense but, in summary, the transitional provisions require you to calculate the difference between the minimum wage provided in applicable pre-modern awards and the corresponding minimum wage in the modern awards (known as the transitional amount). Add or subtract (depending on whether the pre-modern award is lower or higher) 20 per cent of that transitional amount each year from the modern award minimum wage while incorporating any increases granted by the Fair Work Commission. Okay, that’s still pretty complicated! The transitional provisions for penalties, loadings and shift allowances are even more complex.

The good news is by the time you read this book the modern awards will be (or will almost be) fully operational and chances are you will have no need to apply transitional provisions. The bad news is employees have seven years to reclaim monies owed if underpaid during the transitional period. Therefore, working out whether you were paying your employees correctly over this period is worthwhile. This might be a job for you and your accountant or bookkeeper when you have a quiet moment (yeah, sure!).

If you need to calculate minimum wages between 1 July 2010 and 30 June 2014 the government agency responsible for enforcing the minimum wages has completed the hard work for you in most of the minimum wages affected by the transitional provisions. The transitional minimum wages are published in Pay and Conditions Guides that can be downloaded from www.fairwork.gov.au.