A contract between you and your employees is vital. It will ensure that both parties know their roles and responsibilities in the business relationship. Employment agreements and individual flexibility arrangements (IFAs) are two types of agreements you may choose to implement in your business. This article will examine the key differences between employment agreements and IFAs.
Employment Agreement
An employment agreement is an important document to have in place at the beginning of each employment relationship. While a written contract is not a legal requirement, having one is beneficial and certainly recommended for all employees. A written employment agreement will clearly outline the terms of the employer-employee relationship.
The National Employment Standards (NES), which govern the minimum entitlements owed to employees, is a good place to start when deciding on the terms of the relationship. An employment agreement must comply with the standards set by the NES. The NES sets standard requirements for:
- weekly hours;
- flexible working arrangements;
- annual leave;
- casual conversion;
- parental leave (and other related entitlements);
- personal leave and compassionate leave;
- community service leave;
- long service leave;
- public holidays;
- other types of leave;
- termination and redundancy; and
- the Fair Work Information Statement.
In addition to provisions applying the NES, you may also want to include additional terms to protect your business in your employment agreements. For example, you could include a confidentiality clause. This clause would prevent an employee from sharing any private information about your business.
IFA
An IFA also outlines the relationship between an employer and employee but is not a substitute for an employment agreement. It exists to cater to the individual needs and preferences of both the employer and the employee.
Modern awards set out the minimum terms and conditions of employment for employees, including pay. However, an IFA can vary the terms of the award to suit the individual circumstances of both parties.
Continue reading this article below the formBetter Off Overall
You need to ensure that the employee is “better off overall” under the IFA than they would be under the award. It’s your responsibility to make this assessment. To do so, you should look at the situation overall. When assessing the IFA, consider how the employee will end up financially, as well other factors individual to their circumstances.
Although you need to make an assessment of the IFA, the Fair Work Commission (FWC) has the authority to find that the IFA has been improperly made. If the FWC makes this finding, there could be a penalty. Times, where an IFA has been improperly made, include:
- making employment conditional upon signing an IFA;
- not putting the IFA in writing;
- the terms don’t meet the better-off overall test; or
- the IFA isn’t checked and updated regularly.
Elements of an Award That Can Be Altered
An IFA can generally only amend the following:
- arrangements for working hours;
- overtime rates;
- penalty rates;
- allowances; and
- leave loading.
You can draft an IFA when you and the employee agree upon the terms. Getting an employment lawyer to draft the IFA is important since the terms must comply with the requirements set out by the FWC. You will be at fault if the employee suffers an overall detriment due to the altered terms.
How to Implement an IFA
he steps for implementing an IFA are as follows:
- You will need to ensure that the employee is better off overall under the IFA than they were without the IFA in place. You will also need to ensure that the IFA does not contradict any relevant award or EA;
- The IFA is documented in writing, explaining the new terms and their application, as well as an explanation of how they do not contradict a relevant award or EA;
- Both parties sign the IFA;
- You keep a copy and give a copy to the employee; and
- The IFA remains in place until a party terminates the agreement or until the employment relationship ends.
What to Consider When Implementing an IFA
When implementing an IFA, you should:
- adopt a collaborative approach — this will involve ongoing discussion and consideration of the employee’s requests;
- check the award to see which terms are alterable;
- hold a consultation with the employee to determine what changes suit both the business and the individual;
- ensure that the IFA does not disadvantage the employee; and
- ensure that the IFA does not contain unlawful terms.
Key Differences Between an Employment Agreement and IFA
While all employees should have employment agreements, only some employees will need to enter into IFAs. Below are the key differences between an employment agreement and IFA:
|
Employment Agreement |
IFA |
|
Generally in place with all employees |
In place for individual employees subject to the needs of the business |
|
Employers will often use a standard template to draw up the agreement |
Employers will tailor the IFA to suit the specific needs of the employee |
|
Cannot contain terms or entitlements that are anything less than the NES, or an award (if applicable) |
Can alter terms of the relevant award so that the employee is better off overall |
If you need assistance determining if you should use an IFA, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
When implementing an IFA, you should adopt a collaborative approach. This will involve ongoing discussion and consideration of the employee’s requests, checking the award to see which terms are alterable and holding a consultation with the employee to determine what changes suit both the business and the individual. You should also ensure that IFA does not disadvantage the employee or contain unlawful terms.
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