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5 Things You Need to Know About Modern Awards as a Business Owner

Published April 30, 2020 (last updated on November 29, 2023) | Adam Wyatt - Content Writer


A modern award is a document which sets out the minimum terms and conditions of employment on top of the National Employment Standards for those employees who are covered as determined by the coverage rules contained within the Award.

The intention of the Modern Award system in Australia is to capture the majority of industries and occupations and provide for further specific entitlements/conditions which may be relevant. It is important to note though, that not all businesses and occupations will have Modern Award cover-age.

The details in Modern Awards range from how much pay your employees are entitled to, all the way through to additional requirements on how much notice of termination they must give and receive .

In the past few years, the details of Modern Awards in Australia have experienced changes, leaving some employers unsure of what they need to offer employees. Here are five things you need to know about Modern Awards in Australia to make sure you’re operating according to your obligations.

1. What is a Modern Award?

In Australia, A Modern Award isn’t a trophy or a certificate; it’s a document with details about the terms and conditions for specific occupations and/or industries.

A Modern Award as a document outlines the minimum terms and conditions of employment on top of the National Employment Standards.

Common clauses provided by a Modern Award include:

  • award flexibility

  • consultation

  • dispute resolution

  • types of employment

  • termination of employment

  • redundancy

  • minimum wages

  • allowances

  • superannuation

2. Why Modern Awards Are Important

Modern Awards are important documents as they can set the terms and conditions of employment for most employers and employees.

The onus is on business owners to understand if an Award applies to any of their employees. If an Award does apply, then business owners are obligated to apply the provisions of that Award to the applicable employees.

If you’re thinking this sounds a bit difficult, then you’re not wrong. Understanding and apply the pro-visions of Awards is not an easy task.

3. What Award Am I Under?

Knowing which Modern Award your employees are under is the first step to compliance with Mod-ern Awards. A Modern Award are generally industry or occupation based, and apply to employers and employees working in the industry or performing certain types of work.

If you’re unsure what Modern Award your employees are under, feel free to get in contact with Employsure for free initial advice. We can help set you on the path to better understanding your obligations.

4. Modern Awards Don’t Apply to Everyone

Some workers do not fall under one of the categories provided in a Modern Award and are often referred to as Award-free employees.

A registered agreement is a type of agreement which sets out the terms and conditions of em-ployment and which is agreed between an employer (or multiple employers) and two or more em-ployees (group of employees).

An employer could also be covered by a registered agreement, which may set aside or incor-porate modern award terms. It is important to note whilst an Agreement might set aside terms and conditions of an award, if the base rates of pay in an agreement fall lower than the award, the rates of pay in the award will apply.

The most common type of Registered Agreement is an Enterprise Agreement.

a) Enterprise agreements in a nutshell

Enterprise agreements are agreements made at an enterprise level between employers and em-ployees, and potentially their representative, about terms and conditions of employment.

They can also be made by more than one employer, with a group of employees.

An Enterprise Agreement generally only covers your business after you have been involved in a negotiation process and an agreement has been reached. The process has a number of different steps. Once agreement is reached between the parties, the Agreement then needs to be approved by the Fair Work Commission before it is registered to take effect.

There are however circumstances when an Enterprise agreement which you were not involved in negotiating will apply to your business. This might happen when there is a transfer of business. For example if you have bought a business with an agreement in place and there has been a transfer of employment as defined in the Fair Work Act 2009, the agreement might apply as a result of the transfer.

Enterprise agreements are quite common in trades and unionised industries, however they can be found in any industry. They can also outline the terms and conditions of apprenticeships.

A key factor for business owners considering an Enterprise Agreement is that the Agreement will need to meet the Better Off Overall Test to be approved. This means the Agreements terms and conditions must not be less favorable than the Modern Award relevant to their role and/or in-dustry .

b) Modern Awards don’t apply to high income earners with guaranteed earnings

If your employee earns over $148,700 per year and you have a written agreement guaranteeing the employee at least this amount in annual earnings, a Modern Award will not apply.

Some managerial and senior employees who do not earn above the high income threshold may also not be covered by a Modern Award (Award-free). This may be the case even if there’s a Mod-ern Award directly related to your industry, as an employee may not be covered by the award if it does not provide scope for their role.

c) Some other employees aren’t covered by a Modern Award

Other employees (who are not managerial or senior) may also not be covered by a Modern Award. You should be cautious of determining your employee to be ‘Award-free’ as an incorrect classifica-tion may result in you underpaying the employee. Consider seeking workplace relations advice to confirm your employee’s Award/s or Agreement/s.

If it is case that you have an ‘Award-free’ employee, details of their pay entitlements will be accord-ing to the National Employment Standards (NES). The NES details the national minimum wage and multiple other minimum entitlements, which act as the minimum for all employees – including those who are not covered by either an Award or an Agreement. Learn more about the minimum wage and how it affects your business here.

5. How Do Modern Awards Apply to Small Businesses?

As discussed, it’s really important all business owners and employers are aware of the current Modern Awards, and how they apply to their employees. It’s important your workplace observes all the conditions and entitlements outlined in the awards for each employee. Employers who are not compliant with legislation and Modern Awards, place their business at risk of fines and back dated wages associated with underpaying employees

As a business owner, navigating the world of Modern Awards can be tricky, and it’s easy to slip up.

Don’t get stuck, get the help of professionals who specialise in workplace requirements. At Em-ploysure, we’re dedicated to ensuring every Aussie workplace is fair, helping business owners un-derstand their requirements so your business runs more smoothly and efficiently.

Get in touch today and we’ll help you navigate the complex world of Modern Awards.

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