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Many underpayments stem from employers not knowing which award is relevant for their employees or ignoring awards altogether. It is, therefore, important to get award coverage right. In addition to day-to-day entitlements relating to pay, awards may also speak to major workplace changes. This includes:
- redundancy; or
- when casual employees are converting to part-time employees.
Understanding which award applies can be a complex exercise. This is because:
- there are over 120 awards;
- they are difficult to understand; and
- more than one award can apply to a particular business.
What Is a Modern Award?
Modern awards are quasi-legislative instruments which set out minimum pay rates and terms of employment, such as:
- minimum rates;
- penalty rates;
- allowances; and
- the right to consultation if a major workplace change occurs (e.g. redundancy).
If employees are award-covered, employers must comply with the terms of the award failing which they breach the Fair Work Act 2009 (Cth).
You can find the complete list of awards on the Fair Work website.
Understanding Award Coverage
Each award includes a ‘coverage’ clause that sets out the award’s scope. You should consider the specific language of each coverage clause. Typically, there are three parts to this clause, each which outline:
- the type of employers. These are specific for industry awards and broad for occupational awards;
- which employees. The award generally outlines this by reference to the classifications; and
- any exclusions to the award.
Industry vs Occupational Awards
Employees can be covered by an award if they work within a particular industry or if they have a particular occupation.
Classifications set out a non-exhaustive list of criteria to determine employees’ appropriate level. Applying the correct classification level to each employee is important for two key reasons:
- if the classifications do not capture an employee, the award may not apply. This can occur, for example, if the employee is more senior than the highest level set out in the classifications; and
- these classifications will determine the employee’s entitlements, including their rate of pay.
Classifications are based on things like:
- seniority; and
When it is unclear which classification applies, the more prudent approach is to apply the more senior classification level to avoid underpayment.
‘Coverage’ clauses typically also include exclusions. Such exclusions may assist with overlapping awards.Continue reading this article below the form
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Are There Any Relevant Fair Work Decisions?
In addition to the awards themselves, the Fair Work Commission may issue decisions that affect how an award is interpreted.
Can More Than One Award Cover One Business?
More than one award can cover one business. This can occur because an industry award’s classifications do not capture the duties that a particular employee performs.
What if I Think an Employee Is Award-Free?
Employees can be award-free.
However, it is important to be cautious when determining whether an employee is award-free. You could face significant underpayment liability if you determine this incorrectly. This may also be relevant by reference to unfair dismissal claims as to whether an employee is award-free impacts on:
- their eligibility to bring an unfair dismissal claim; and
- how to conduct a redundancy.
Understanding which award is relevant for your employees has a significant impact on:
- how you run your business practically (e.g. rostering); and
- your legal liability (e.g. underpayment and unfair dismissal claims).
Determining whether an award applies and if so, which one, is a complex exercise which requires a clear understanding of:
- your business;
- the roles and associated duties; and
- how the terms of an award work.
If you have any questions about working out which award is relevant to your employees, contact LegalVision’s employment lawyers on 1300 544 755 or fill out the form on this page.
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