As an employer, you must understand your obligations to your employees and their legal rights to earn a minimum wage. Failure to pay your employees correctly can also result in employees commencing proceedings against your business or the Fair Work Ombudsman (FWO) investigating any underpayment issues. You may subsequently face compliance notices for payment, prosecution or additional penalties.
The Fair Work Act 2009 (Cth) (the ‘Act’) sets out your obligations as an employer to meet this minimum payment to your employees. You should determine your employee’s minimum entitlements under 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.
National Minimum Wage
Generally, your business will pay employees the national minimum wage unless an award or enterprise agreement is in place.
Further, failure to comply with paying the correct minimum wage leaves your business open to legal proceedings from affected employees or an investigation by the FWO. Additionally, you will be liable to pay any outstanding wages to your affected employees.
Each year, an expert panel at the Fair Work Commission (FWC) reviews the national minimum wage. Any changes to the national minimum wage come into effect on 1 July of each year. Accordingly, it is vital for businesses to keep track of any annual changes to the national minimum wage. Staying on top of changes ensures your business remains compliant with your legal obligations.
Modern Awards
Alternatively, a modern award may cover your employees’ pay rates. This is an industrial instrument that sets out the minimum terms and conditions that you must meet as an employer, including the payment of wages.
An award may entitle some employees to a different (higher) minimum wage and entitlements than those employees covered by the national minimum wage. Therefore, it is vital to understand which award(s) cover your employees to ensure you pay them correctly.
Continue reading this article below the formDoes an Award Cover My Employees?
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 covered by the Restaurant Award 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 is also a job classification clause that covers the specific duties of your employees. Your employee’s job classification will therefore depend on their duties, skill set and level of experience and includes the 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 might be relevant to your business. If you are unsure of which award(s) are relevant, you can use the find my award tool on the FWO website.
What Do the Awards Cover?
Awards are generally specific to the industry or roles in which they operate. Each award will cover a variety of minimum conditions and entitlements that businesses must meet for employees under that award. For example, these can include:
- pay: specific rates for the payment of wages will apply to different employees, depending on their experience and duties. This will include casual loading for casual employees;
- overtime and penalty rates: additional payments your employees are entitled to may differ if they are required to work overtime, on the weekends or on public holidays;
- leave and public holidays: when an employee is entitled to be paid while not at work;
- loading: employees may be entitled to additional payments when leave is taken; and
- allowances: you may need to pay employees for allowances, like uniforms and travel.
It is possible to change or modify these terms and conditions within an award using an individual flexibility agreement (IFA). You can also use an IFA to change the effect of specific clauses in your employee’s award or any other registered agreement.
Changes to Award Payments
The July 2023 national minimum wage increase also provided a 5.75% increase to all minimum award pay rates. To find out which group your award(s) fall into, you should refer to the full list of awards on the FWO website.
Enterprise Agreements
An enterprise agreement is a specific agreement that a business can enter into with its employees. They allow differentiation from the terms and conditions of any applicable award, and generally include entitlements, pay rates and allowances. Enterprise agreements are a method that businesses can use to circumvent the often complex and confusing award system.
Importantly, the FWC must approve the operation of any enterprise agreement. This is because enterprise agreements must make employees better off overall when compared to their entitlements and wages under any relevant modern award.
It is important to be aware that to be lawful, the enterprise agreement must:
- be approved by the FWC;
- pass the BOOT;
- cover a majority of the employees who you must include in the negotiation process; and
- gain approval by a majority of employees it covers.
As an employer, understand your essential employment obligations with this free LegalVision factsheet.
Key Takeaways
In conclusion, employees are entitled to receive the relevant minimum wage. Employees are generally covered by either:
- an applicable award;
- an enterprise agreement; or
- the national minimum wage.
It is therefore crucial for employers to meet minimum wage obligations. Failure to comply may result in legal proceedings from employees or FWO investigations. You may also face requirements to rectify underpayment, with the possibility of additional penalties.
If you need help understanding and deciding on the application of any relevant awards or enterprise agreements, 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
The national minimum wage will cover your employees if there is no award or enterprise agreement in place. As of 1 July 2023, the national minimum wage is $23.23 per hour or $882.80 per 38-hour workweek. Casual employees must also receive a 25% casual loading.
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.
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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