A modern award is a document that sets out the minimum terms and conditions of employment. There are over 120 modern awards in Australia, each designed to provide protections and entitlements specific to a mix of industries, occupations or a combination of both. Modern awards provide for entitlements in addition to those set out in the National Employment Standards (‘NES’) and offer an extra layer of protection to an employee. 

What do modern awards deal with?

The Fair Work Act 2009 (Cth) (‘FWA’) specifies the minimum standards that apply to all employees in the private sector and amongst other things, allows modern awards to deal with the following matters:

  • Minimum wages for that award’s industry/occupations;
  • Skill-based classifications and career structures;
  • Incentive-based payments, piece rates and bonuses;
  • Types of employment;
  • Flexible work arrangements;
  • Arrangements for when work is performed;
  • Overtime and penalty rates;
  • Annualised wage rates or salaries;
  • Allowances, including for particular expenses, responsibilities or working conditions;
  • Leave, leave loadings and arrangements for taking leave;
  • Superannuation;
  • Procedures for consultation, representation and dispute settlement.

Award conditions and entitlements are over and above the minimum requirements set out in the FWA and the minimum requirements of the National Employment Standards.

Who is covered by a modern award?

A national system employee or employer (an employee or employer in the private sector), is covered by a modern award if the award is expressed to cover them (that is, their industry and role).

Whilst the Fair Work Commission (‘FWC’) can vary the coverage of a modern award (for example to include or exclude additional parties), it cannot vary an award in a way that would result in an employee or employer no longer being covered. An exception to this is where they will be covered by a different modern award.

Who is not covered by a Modern Award?

Whilst the majority of employers and employees in the private sector are covered by awards, there are some who won’t be. Generally, modern awards will not apply where:

  • an enterprise agreement applies to an employment relationship. If, however, the base rates of pay in an agreement are lower than those in the relevant modern award, the base rates of pay in the modern award will apply.
  • A person is in a managerial role at the ‘top of an organisation’ and is a ‘high income employee’. A ‘high income employee’ means an employee whose annual earnings exceed the ‘high income threshold’ and who have accepted a formal guarantee of those earnings which remains in force. The ‘high income threshold’ figure is updated annually.

A person can check if they are covered by a modern award via the FWC website. Employees who are not covered by an award or an agreement are commonly referred to as ‘award and agreement free’. ‘Award and agreement free’ employees may have an employment contract and are entitled to the national minimum wage and the NES.

Do modern awards override the NES?

No.

Modern awards may contain terms that are ancillary, incidental or supplementary to the NES as long as the effect of those terms is in no way detrimental to any employee, when compared to the NES.

What if there is a modern award and an employment contract?

The existence of an employment contract does not void an employee’s entitlement to the minimum conditions provided in a relevant modern award and NES.

The modern award standards will override any employment contract which provides lesser entitlements than the applicable modern award or NES.

Can modern awards be varied?

Yes. The FWC can vary a modern award itself or it can be varied with an application by an employee, employer or union representative.

There are limited grounds upon which a modern award can be varied. Generally modern awards can be varied where there is a need to correct an error, remove ambiguity and/or remove uncertainty. The FWC can also vary minimum wages on work value grounds or on other grounds where it is ‘necessary to achieve the modern award's objective.

What about state public sector employees?

Each state (except Victoria) has a system of state awards. In Queensland, this is established under the Industrial Relations Act 2016 (‘IRA’).

The coverage of the IRA is limited to state public sector employers and local councils.

The Queensland Industrial Relations Commission administers the state awards in Queensland. As with modern awards in the private sector, state awards establish a ‘safety net’ for state public sector employees.