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As an employer, you must ensure that you understand your obligations to your employees and their legal rights to earn a minimum wage. Failure to pay your employees correctly can result in employees or the Fair Work Ombudsman (FWO) commencing proceedings against your business. The Fair Work Act 2009 (Cth) sets out the obligations that you have as an employer to meet this minimum payment. You should determine your employees pay by either: 

  • an applicable award; 
  • an enterprise agreement; or 
  • the national minimum wage. 

This article will discuss the differences and how they may apply to your employees.

Correct Rates of Pay

There are a number of legal instruments which govern employment law in Australia.

The Fair Work Act 2009 (Cth) (and its regulations) set out a national framework of obligations for businesses. This extends to employment laws and standards, which can be:

These laws and standards work together to set out employment law obligations for both employers and employees.

National Minimum Wage

If no award or enterprise agreement is in place, the national minimum wage will cover your employees. As of the 1st July 2020, the national minimum wage increased by 1.75% to $19.84 per hour or $753.80 per 38-hour workweek. Casual employees must also receive at least a 25% casual loading.

If you have employees that you were previously paying the minimum wage, you must review and update their employment agreements. You should ensure the agreements reflect this increase to their wages to meet the new minimum requirements.

Further, failure to comply with paying the minimum wage means your company will be open to legal proceedings from your employees or the Fair Work Ombudsman. Additionally, you will be liable to pay any outstanding wages to your employees.

Each year a Fair Work Commission Expert Panel reviews the national minimum wage. Any changes come into effect on the 1st of July each year. Therefore, it is important to keep track of changes to the minimum wage to ensure you are complying with current legislation.

Modern Awards

Does an Award Cover My Employees?

A modern award may cover employees. A modern award sets out the minimum terms and conditions that you must meet within a contract, one of which is pay. Employees covered by an award may be entitled to a different minimum wage and entitlements than covered by the national minimum wage.

Therefore, it is vital to understand which award(s) cover your employees to ensure that you pay them correctly.

Awards are industry and occupation-based, and you should determine the relevant award by each employee’s industry and employment duties. When deciding on which award may apply to your workers, it is important to focus on the following clauses:

1.  The Coverage Clause

The coverage clause sets out which industry the award applies to.

For example, the restaurant award covers employers in the restaurant industry.

Some of the types of employers the restaurant award covers include:

  • businesses whose primary focus is selling food and beverages to eat on the premises;
  • restaurants;
  • tea rooms;
  • night clubs; and
  • reception centres. 

2.  The Job Classification

Within the industry award, there will also be a job classification clause that covers your employees’ specific duties. Consequently, your employees’ job classification will depend on their:

  • duties;
  • skillset; and 
  • level of experience, including training requirements for each role.

For example, some of the classifications within the restaurant award include:

  • waiters and waitresses;
  • baristas (in mainly eat-in cafés);
  • kitchen hands, cooks and chefs including apprentice chefs;
  • clerical and office employees; and
  • security and storeroom employees.

Furthermore, your employees may work in different roles. Therefore, more than one award may cover your business.

If you are unsure of which award(s) cover your business, you can use the find my award tool on the Fair Work Website. 

New versions of awards are released regularly, and some changes are being made to existing awards due to industries being affected by COVID-19. It is essential to keep up to date with these changes, and if you are unsure of your obligations as an employer, it is important to seek legal advice.

What Does the Award Cover?

Each award will cover several conditions you will be required to meet for each employee, such as:

  • pay: specific rates will apply to different employees, depending on their experience and duties. This will include casual loading for casual employees;
  • overtime and penalty rates: the figure you need to pay your employees may differ if they are required to work overtime, on the weekends or public holidays; and
  • allowances: you may be required to pay your employees for allowances such as uniform and travel.

Changes to Award Payments

The 1.75% national minimum wage increase also applies to all award wages. These increases were put into practice in 3 stages:

  • group 1 awards – from 1st July 2020;
  • group 2 awards – from 1st November 2020; and
  • group 3 awards – from 1st February 2021.

To find out which group your award(s) fall into, you should refer to the full list of awards on the Fair Work website.

Enterprise Agreements

An enterprise agreement is an agreement that you can enter into with your employees, allowing you to differentiate from the terms outlined in their applicable award. Moreover, the enterprise agreement covers the entitlements your employees receive, including pay rates and allowances.

This allows businesses to decide on their staff entitlements without having to navigate the award system, which can be complex and confusing.

Importantly, these agreements have been approved for operation by the Fair Work Commission (FWC) because they leave employees better off overall when compared to the applicable modern award.

This is called the better off overall test (BOOT). These agreements cannot contravene the national employment standards or include any unlawful provisions.

When creating an enterprise agreement, you should be aware that:

  • the FWC must approve them;
  • they should leave the employee better off overall than they would have been under the applicable award;
  • a majority of the employees that will be covered by the agreement must be involved in the negotiation process; and
  • a majority of applicable employees must approve of the final agreement.

If you have entered into an enterprise agreement with your employees, you must follow the terms of this agreement.

Breaching an agreement is the same as breaching a modern award or legislative instrument. The FWC may fine and penalise you, and the FWO may investigate and prosecute you.

Key Takeaways

Your employees are entitled to receive the relevant minimum wage. Each employee must be either covered by: 

  • an applicable award; 
  • an enterprise agreement; or
  • the national minimum wage. 

Understanding and deciding which award(s) may apply to your employees can be a complex and time-consuming process. If you would like assistance with understanding your obligations as an employer, contact LegalVision’s employment lawyers on 1300 544 755 or fill out the form on this page.

Frequently Asked Questions

What is the national minimum wage?

The national minimum wage will cover your employees if there is no award or enterprise agreement in place. The national minimum wage as of the 1st July 2020 is $19.84 per hour or $753.80 per 38-hour workweek.

What is a modern award?

A modern award identifies the minimum terms and conditions you must meet within a contract, including pay. Further, your employees covered by an award may be entitled to a different minimum wage and entitlements than the national minimum wage.

What is an enterprise agreement?

It is an agreement between you and your employees that allows you to differentiate from the terms outlined in their applicable award. The enterprise agreement will cover your employees pay, allowances and entitlements.


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