As a business owner, you may find that modern awards do not always have the right employment requirements for your employees. For example, some employees may want to alter the hours they work, but their award restricts their starting and finishing times. To modify some of the terms in the relevant award, you can introduce an individual flexibility agreement (IFA). This agreement will document the changing of some terms of the award, so they better suit your business and the employee. This article will explain what IFAs are and how they might be advantageous for your business and your employees.
What is an IFA?
Modern awards set out the minimum terms and conditions of employment, including pay rates and leave entitlements. An IFA is a written agreement that you can use to change the effect of specific clauses in your employee’s award or any other registered agreement.
An IFA is helpful to make alternative arrangements that better suit both your needs and your employee’s needs. However, you cannot use it to undercut an employee’s entitlements, such as those outlined in the National Employment Standards (NES). The NES sets out ten minimum standards of employment, including:
- maximum weekly hours of work;
- parental leave;
- annual leave;
- public holidays; and
- redundancy.
You need to be aware of these minimum terms when considering what you would like to include in your IFA.
Better Off Overall Test
As an employer, you must ensure that the employee is ‘better off overall’ with the IFA than without it when compared to their award. One way of doing this is by looking at the:
- financial and non-financial benefits of the IFA for the employee; and
- employee’s personal circumstances.
Ensuring that your employee is better off overall under the IFA is crucial as, if there is a dispute, the Fair Work Commission (FWC) will look closely at this requirement.
Continue reading this article below the formHow Can IFAs Change Modern Awards?
IFAs can alter the clauses of modern awards in several different ways. Some examples of this are outlined below.
Working Hours
Your employee’s award may state that the hours that they work must be between 9 am – 5 pm. However, your employee needs to leave at 3:30 pm every day. Here, you can enter into an IFA so that the hours of work are instead 7:30 am – 3:30 pm.
This arrangement will be more convenient for your employees and will not negatively impact you.
Penalty Rates
Under a modern award, a waiter in a restaurant may be entitled to a minimum wage of $19.49 per hour and a 25% penalty rate for working on Saturdays. This means that their wage per hour on a Saturday would be $21.69.
However, you can use an IFA to remove the Saturday penalty rate and, instead, have a base wage of $22.50 per hour. This way, you will not have to worry about adding on penalty rate loading, and your employees will still receive fair payment.
Allowances
Under some modern awards, employees are entitled to:
- payment for travel expenses;
- travelling time; and
- vehicle allowance.
Under an IFA, you could instead pay the employee a sum of money which will cover all entitlements and allowances.
As an employer, it is essential to understand what employment laws have changed and their implications for your business — particularly the changes to the Fair Work Act 2009 through the new Closing the Loopholes legislation.
How Do I Prepare an IFA?
The process of preparing an IFA is quite quick. Once your employee has started working for you, you can begin to prepare an IFA. Here, both you and your employee must genuinely agree to the terms of the IFA. You cannot force the employee to sign the agreement by threatening to cease their employment at your business.
Both you and your employee must sign the agreement, and you must provide a copy of it to your employee. If you do not properly prepare the IFA, you may face a fine from the FWC.
Key Takeaways
Some modern awards are very prescriptive and require you to meet a lot of requirements. An IFA can be an easy way of getting around the restrictive clauses in your employee’s award, creating flexible working arrangements and ensuring that both parties are better off overall. IFAs can vary:
- working hours,
- overtime rates,
- penalty rates,
- allowances and
- leave loading.
If you require assistance preparing 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.
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