Are you a business owner that knows what Modern Awards apply to your staff, but don’t really know what to look for or what it all means? Many employers just skip to the pay guide, which is often found as a separate document when Googling the Modern Award. They tend to ignore the rest of the Modern Award, because they don’t know what to make of these long and intimidating documents. This article will provide you with a few tips on how to read them.
Modern Awards are Just One Kind of Industrial Instrument
The first thing to understand is that there are a several types of industrial instruments. These are instruments that have legal application to those employees it covers. Modern Awards and Enterprise Agreements are the most commonly known ones. I’m going to cover Modern Awards in this article, as it applies to the vast majority of employers and employees.
Industry Award vs. Occupation Award
The first important thing that you should remember when looking at Modern Awards is that there are two different types. Their names give away what they are. Note that an occupation Award may apply to an individual even where an industry Award applies to the majority of the rest of the employees of the business. One employee can only be covered by one Award, but it may not be the one that you think.
Now let’s look at the sections commonly found in most Modern Awards.
Coverage
The first section to look out for in a Modern Award is coverage. If you’ve been advised by an expert that this Modern Award is the correct Award, then you probably don’t need to spend much time here. This section explains why this Award does or does not apply to certain employees. But in light of the paragraph above, it’s worth double-checking that this occupation Award applies to the employees in question. In certain industries, this Award should be ignored. If I take the Clerks – Private Sector Award 2010 as an example, it says that it does not apply to employees working in numerous industries. At the present moment this lists 22 such industry Awards in section 4.6. This is a common Award for clerical or administration staff, but it doesn’t necessarily apply. In addition, an employee could appear to be covered by more than one Award, so a decision needs to be made about the most appropriate one.
Casual Employment
Although not every business will have casuals, many will at some point in their business life cycle. This section will stipulate the casual leave loading that you need to pay on top of the minimum hourly rate. As casuals are not entitled to annual leave, personal/carer’s leave or redundancy, they receive an additional amount to cover this forfeited benefit. This section may also make reference to the minimum number of hours that a casual employee can be paid for each shift, (typically two or three hours), and the conditions for any possible exceptions to this rule. To help you manage paying casuals more easily, check out this article here.
Minimum Weekly Wages
I would hazard a guess that this section is the most commonly viewed part of all Modern Awards. It stipulates the minimum hourly rate of pay for employees at various classification levels. Employees with greater experience or responsibilities are ranked at a higher classification level. Some Modern Awards break this down by level only and others by level and year. You can end up with over 10 different classification levels in some Awards.
Classification
This section is quite important and it relates to the paragraph above. The classifications break down each of the levels and years and define what type of work employees perform, typical duties or skills and even indicative job titles. This helps you to work out what level applies to a particular employee.
Apprentices
Although not relevant to all businesses, this is particularly important for trades people. This section stipulates the rates of pay for apprentices, expressed as a percentage of the regular minimum weekly wages. It may also state conditions of employment that are relevant to the role.
Allowances
This section applies to more employees than you probably realise. It could be something as simple as a first aid allowance, which is for employees that hold appropriate first aid qualifications and are appointed by the employer to perform first aid duties. Other examples of allowances include travel or excess travelling, vehicle, leading hand, clothing, equipment and tools, meals, cold work, split shift, living away from home or higher duties.
Overtime & Penalties
This is unfortunately overlooked far too frequently. Many employers pay employees 40 or even 50 hours a week at the same hourly rate. This is actually unlawful. Fair Work Australia says that the maximum number of ordinary hours that an employee can be paid is 38. Check out their information statement.
Shiftwork
This will define what a shiftworker is. It will also cover additional payments, or loadings, required to be paid to employees in addition to the minimum hourly rate when working on shifts.
Hours of Work
The spread of hours considered ‘ordinary’ are different depending on the industry. Offices have different needs to restaurants, as far as working hours are concerned. When employees are asked to work outside of these ordinary hours, penalty rates apply.
Payment of Wages
Modern Awards sometimes specify the day of the week that you can and can’t pay your employees, and also whether it needs to be weekly or fortnightly, rather than monthly for example. Monthly is the longest pay frequency permitted under Australian law.
Superannuation
Most employers assume that $450 in gross monthly wages is the threshold from which superannuation needs to be paid for employees. The threshold is actually Award dependent. For example, section 30 of the Restaurant Industry Award 2010 states that the threshold for contributions is $350. This section also stipulates if salary sacrificed superannuation contributions need to be paid more frequently than quarterly, such as monthly. Lastly, the list of default superannuation funds can be found here. When a new employee fails to select a superannuation fund, you still need to pay their superannuation into an Award-compliant fund by the deadline. Choose one of the funds listed in the Modern Award and make it your default employer fund. This needs to be written on the superannuation choice form before handing it to the employee to complete.
Annual Leave
Annual Leave loading still applies to many employees. Unless you have an employment agreement that specifically states that the remuneration of the employee covers this, you need to pay this additional amount to employees when they take Annual Leave. Conditions for annual close-downs are also prescribed, including the amount of notice than an employer needs to provide to the employee.
Arguably, all clauses in Modern Awards are important. Covering them all in one article would be far too overwhelming. Hopefully this summary of the more common or overlooked but important sections will help empower you to run a more compliant business. If you’re stuck, contact a bookkeeper with strong payroll skills who will be able to assist, or otherwise an HR specialist.
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