Australia: Workplace Relations Update: Fair Work Wage Review and Modern Awards

Contents

• Fair Work Australia's 2010 annual wage review
• Guidance on the transitional arrangements in modern awards

Fair Work Australia's 2010 annual wage review

On 3 June 2010, the Minimum Wage Panel of Fair Work Australia handed down its inaugural annual wage review determination, awarding an increase of $26.00 per week to the rates of pay for employees covered by modern awards and Division 2B enterprise awards. Importantly, the Minimum Wage Panel did not increase the rates of pay for employees covered by Division 2B State awards. In respect of all other employees (who are not junior employees, trainee employees or employees with a disability), it set a national minimum wage order of $569.90 per week. It has also set a special national minimum wage for employees with disability and set a casual loading of 21%.

The process of this annual wage review was described in our March 2010 update here.

The conduct of the annual wage review

The Fair Work Act 2009 (Cth) requires Fair Work Australia to conduct an annual wage review each financial year and to make a national minimum wage order. Fair Work Australia performs its function by reviewing modern award minimum wages as well as making a national minimum wage order for award-free employees each year (who are not junior employees, trainee employees or employees with a disability). Any increases to rates of pay as a result of the annual wage review are payable from the first full pay period to commence on or after 1 July of that year, unless there are exceptional circumstances justifying the increases coming into operation on a later date. Our January 2009 update (click here) provided an outline of the role of Fair Work Australia in determining minimum wages.

The 2010 annual wage review decision

Fair Work Australia has:

• reviewed modern award wages and decided to increase minimum weekly wages contained in modern awards by $26.00, with proportionate increases in hourly minimum wages (69 cents per hour based on a 38 hour week) and annual salaries. This increase also applies to transitional instruments, including Division 2B enterprise awards
• set a national minimum wage order, being a rate of pay for employees without coverage of awards or agreements (who are not junior employees, employees to whom training arrangements apply or employees with disability) at $569.90 per week or $15.00 per hour
• set two special national minimum wages for employees without coverage of awards or agreements with disability:
  • for employees whose productivity isn't affected, a minimum wage of $569.90 per week or $15.00 per hour based on a 38 hour week
  • for employees with a disability whose productivity is affected, an assessment under the Supported Wage System
• declined to vary minimum wages, casual loadings or piece rates in Division 2B State awards as they will be the subject of a separate exercise by Fair Work Australia when it will terminate the Division 2B State awards on 31 December 2010
• maintained the casual loading for employees covered by modern awards at 25% and set a casual loading for employees without coverage of awards or agreement of 21%, with a view to increasing the loading in instalments until it is bought into line with the standard casual loading in modern awards by 2014
• deferred until the 2010-2011 annual wage review setting a special national minimum wage for junior employees and employees without coverage of awards or agreements to whom training arrangements apply.

Fair Work Australia has determined that the increases as a result of the 2010 annual wage review will be payable from the first full pay period to commence on or after 1 July 2010, there being no 'exceptional circumstances' warranting a delay and that increased costs to employers as a result of the introduction of modern awards had already been taken into account with the transitional provisions contained within modern awards.

In making its decision, Fair Work Australia took into account a variety of factors including the performance of Australia's economy, which was better than other developed economies over the period of the GFC; the relative stability of inflation; and the increase in employment and aggregate hours. Since the decision of the Australian Fair Pay Commission in July 2008, productivity, prices and real earnings have grown but minimum wages have not. Fair Work Australia concluded that a significant increase in minimum wages was warranted and the state of the economy was such that the increase would not threaten business viability, employment growth or add to inflation.

Implications for employers

Employers should start preparing now to implement the increase to minimum rates of pay as a result of the annual wage review. Employers will also need to consider how the increases to rates of pay impact on, and are impacted by, the transitional arrangements contained in modern awards.

If you have any questions or would like further information about the 2010 annual wage review decision and its impact to your business, please contact a member of Gadens Lawyers' workplace relations team.

By Meryl Remedios of Gadens Lawyers, Sydney

Guidance on the transitional arrangements in modern awards

On 31 May 2010, the Fair Work Ombudsman released a guidance note in relation to the transitional arrangements contained within modern awards that deal with phasing in of pay-related entitlements over four years from 1 July 2010. The guidance note has been published to provide the community with an understanding of how the Fair Work Ombudsman has interpreted and will apply the transitional provisions contained within modern awards, which is relevant to its role in providing education, assistance and advice to employers and employees, and ensuring compliance with, and enforcing the terms of, the Fair Work Act 2009 (Cth) (FW Act) and modern awards.

What are the transitional provisions?

As we have previously outlined (click here), the Australian Industrial Relations Commission has included, in all modern awards, detailed procedures to transition employees from the industrial instruments that used to apply to them, to the new modern awards. This is mainly due to the fact that there were such different terms and conditions of employment applying around Australia to employees who are now covered by a single modern award.

The transitional provisions have been included in modern awards in an attempt to cushion the impact of the new terms and conditions of employment provided for by the modern awards, and they deal with:

• minimum wages and piecework rates (including for junior employees)
• casual or part-time loadings
• Saturday, Sunday, public holiday, evening or other penalties
• shift allowances / penalties.

Why a guidance note?

The guidance note has been provided to give a clearer understanding of how to implement the transitional provisions contained in the modern awards. The guidance note is based on the Fair Work Ombudsman's interpretation of the transitional provisions and what the likely application of these provisions will be. While in some circumstances the transitional provisions are quite easy to implement (such as where you are transitioning from a casual loading of 20% to 25%), others can be quite complicated (such as, for example, when you have to transition from an additional flat dollar payment for working a night shift, to a night loading of 25%).

The guidance note also:

• deals with matters such as take-home pay orders and over-award payments
• gives further clarification of the Fair Work Ombudsman's views as to the impact of the transitional provisions in modern awards on less clear areas, such as:
  • the impact on overtime
  • the impact of a payment in lieu of annual leave for casual employees (which was mainly relevant in New South Wales, and some other federal awards).

A copy of the guidance note that has been released by the Fair Work Ombudsman is available from the Fair Work Ombudsman's website (http://www.fwo.gov.au), or is available here.

Implications for employers

There is no doubt that the transitional provisions in modern awards are very complicated, however the Fair Work Ombudsman's guidance note should provide some assistance in implementing those provisions. Employers should be aware, however, that the guidance note can be varied or revoked at any time, and complying with the guidance note will not necessarily protect you from a prosecution in which it is alleged that you have breached a modern award.

If you would like assistance with implementing the transitional provisions in a modern award that applies to your business, please contact a member of Gadens Lawyers' workplace relations team.

By Michael Cooper of Gadens Lawyers, Sydney

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.