ACT Chamber

Fair Work Act and Modern Awards

B2B Editor1 August 2014

Fair Work Act and Modern Awards

Most Australian workers are covered by a Modern Award set down by the Australian Industrial Relations Commission (now known as the Fair Work Commission or FWC). Modern Awards are generally specific to a particular industry – such as Retail Sales, or Construction, or Restaurants – and set out the minimum wages and conditions of employment that apply by default to workers within that industry.

Because each Modern Award is generally intended to apply to workers in a specific industry, they can vary greatly from each other. The Professional Employees Award 2010 , for example, takes a “light touch” approach to conditions of employment, and provides good flexibility in the form of benefits for workers. However other Modern Awards are far more restrictive and place more obligations on employers. For example, in its 137 pages the Building and Construction General On-site Award 2010 lays down extensive rules regarding hours of work, overtime arrangements, penalty payments, shiftwork, meal breaks and rest breaks, and much more. Well over 100 different allowance rates may be paid under the Award in defined circumstances, and most workers will be entitled to be paid multiple allowances for each day’s work.

Fortunately, there are alternatives to having to comply with myriad Award terms contained in multiple Modern Awards.

Firstly, an Enterprise Agreement is an Agreement made between the employer and the workers of an enterprise. Enterprise Agreements are normally made to cover all workers of an enterprise but can also be expressed to cover only defined groups of workers. An Enterprise Agreement is a great way to simplify pay arrangements, and to set rules about how and when work is performed that actually suit your business. Businesses can also use an Enterprise Agreement to drive a desired cultural change where, for example, employee remuneration might be linked to the achievement of performance targets by the individual, the team, or the organisation.

There’s a downside, of course, and an Enterprise Agreement won’t be approved by the Fair Work Commission if it doesn’t pass the “Better Off Overall Test” – so wage costs for individual employees are unlikely to decrease. The key is to design an Agreement so that each employee is Better Off Overall in a way that also leaves the employer Better Off Overall. You will also want an Agreement that makes things simpler and easier for your managers and whoever calculates your payroll. Most organisations find that implementing an Agreement provides substantial gains that outweigh the costs.

The other type of Agreement worth considering is an Individual Flexibility Agreement (IFA) made directly between an employer and an individual worker. An IFA can be made by a worker covered either by a Modern Award or an Enterprise Agreement, and is capable of modifying the application of specific terms of the Award or an employee might, for example use an IFA to implement a simple pay structure based on average working patterns, where shift penalties, overtime payments and allowances can all be rolled into one payment. The worker benefits by having a predictable regular income, while the employer benefits by not having to constantly recalculate payments for the employee.

While Enterprise Agreements and Individual Flexibility Agreements can provide great benefits for both employers and their workers, the process for getting a valid agreement in place has certain complexities, and that’s where support from a team experienced in the requirements can be invaluable. The ACT & Region Chamber of Commerce & Industry has many years’ experience in supporting businesses in our region, and we’ve helped many businesses put successful agreements in place.

For more information on your options as an employer
Contact the Chamber today
Tel: 02 6283 5200
or visit

Greg Schmidt, Director, Workplace Relations ACT & Region Chamber of Commerce & Industry