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This is not advice. Items herein are general comments only and do not constitute or convey advice per se. The information contained in these articles is for guidance only and should not be relied upon without obtaining professional advice having regard to your direct circumstances.


The impact of the new IR Standards

As from January 1, 2010 new National Employment Standards (NES) and ‘modern’ Industrial Awards will be introduced, further enshrining the rights of employees. This is the final stage of the Rudd government workplace reforms. The NES will apply to all employees, regardless of industry, occupation or income and it will see high income earners receiving statutory entitlements that currently do not exist.

Australia presently has over 4800 awards in operation, as of 1st January 2010, these will be reduced down to less than 100 ‘modern’ awards. These ‘modern’ awards will be more streamlined and will remove state differences which is a bonus for employers that operate nationally. However there are also some important implications of these changes.

There have been previous assurances from the Rudd Government that the modern awards will not extend to cover employees who are currently award-free. This now appears to be incorrect as initial advice on some of the draft modern awards has seen some employees now falling into the award regime.

National Employment Standards (NES)

The NES included the following:

1. The maximum weekly hours of work to 38 hours – The maximum hours per week for an employee will be 38 hours subject to ‘reasonable’ additional working hours. Averaging provisions may be included in the new ‘modern’ awards but it is not clear if employers who have award free employees will be able to take advantage of this provision. Taking this away may prove costly for many small businesses, particularly those that are affected by seasonal elements.

2. Flexible working arrangements for parents – An employee (with 12 months service) who is a parent, or has responsibility for a child under school age, will be entitled to request a change of working arrangements in order to assist them to care for the child. This can include change in working hours, change in patterns of work and changed in location of work.

If this occurs, employers must give written notice of the decision to allow/disallow the request. A refusal can only be on ‘reasonable’ business grounds. If this is challenged, then the matter can be referred to a third party who has the power to deem that the reasonable business grounds are not sufficient, meaning that you may be required to allow it.

3. Parental leave and related entitlements – Employees will have, as a minimum – should they choose – 12 months unpaid parental leave, but may request up to 24 months unpaid parental leave from their employer. Again, employers can only refuse on ‘reasonable’ business grounds. A 24 month absence may mean that many employees may lose key components of their skills if the business processes change.

4. Annual leave - Employees will continue to be entitled to four weeks paid annual leave per year.

5. Personal/Carer’s leave and compassionate leave – Subject to any extra entitlement within an industrial award, employees will continue to be entitled to ten days of paid personal/carer’s leave per year and two days unpaid carer’s leave for each occasion (subject to paid leave being exhausted). The statutory entitlement of two days paid compassionate leave per occasion also remains unchanged.

6. Community service leave – This is a new statutory entitlement for many employees who are currently award-free. An employee will be entitled to be absent from work to engage in prescribed community service activities such as jury service and emergency services duties. This includes travel time and reasonable rest time following activity

7. Long service leave – Employee rights under state laws are enshrined to ensure they cannot be bargained away.

8. Public holidays – An employee is entitled to be absent from work on public holidays and to be paid for the ordinary hours that would have normally been worked at their base rate of pay. An employer is permitted to ‘reasonably’ request an employee to work on a public holiday. However, an employee may refuse the request if it is not ‘reasonable’ or if the employee’s refusal is ‘reasonable’.

9. Notice of termination and redundancy pay – The NES will set out the base periods of notice in cases of termination as well as, for the first time, base statutory entitlements to redundancy pay. Employers will need to ensure that any notice periods in existing contracts do not fall beneath the new national standards.

Employees over the age of 45 will also have a statutory entitlement to an extra week’s termination notice; this is an entitlement that was previously only given in award covered employees and was not in national standards. The statutory entitlement to redundancy pay is also new for many employees. Employers with fewer than 15 employees will continue to be excluded from the requirement to pay redundancy pay.

10. Fair work information statement – Employers will be required to give each new employee a ‘Fair Work Information Statement’ which contains information regarding the NES, Modern Awards, the right to freedom of association and the role of Fair Work Australia.

Award ‘Modernisation’

In addition to the NES, employers must make themselves aware of significant changes occurring within industrial awards. The traditional State and Federal Award structure which consists of over 4800 awards is being brought into the modern age with new ‘modern awards’ coming into place on the 1st January 2010.

This will reduce the current number of award down to less than 100. Employers will be required to not only adhere to the NES but also with the modern award applicable to their employees, which extend to employees beyond the NES. Whilst there is an argument that awards will become simplified, employers will have to ensure their contracts or arrangements reflect the changes in the new awards.

Failure to respond to changes in the award could mean you underpay or deny entitlements to employees – putting your business at risk of complaints and investigations. Some of the items that will be covered by the ‘modern’ awards are minimum wages, ordinary hours of work, overtime rates, penalty rates and allowances, procedures for consultation and dispute settlement and industry specific redundancy schemes.

High income earners will not be subject to ‘modern’ awards. However, we are yet to see a definition of high income earner. It is expected that this will be set at $100,000 per annum, however, it is not yet clear if this is base cash salary or if it includes other salary packaged benefits.

It has been said that the ‘modern’ awards will provide for a level of flexibility via the use of a flexibility clause which will allow an employer and employee to come to an alternate agreement regarding:

• Arrangements for when work is performed

• Overtime rates

• Penalty rates

• Allowances; and

• Leave loading.

However there will be strict conditions for these ‘flexibility’ agreements and an employee cannot be coerced into signing an agreement nor can it result in an overall reduction in terms and conditions for the employee. In other words the employee must still receive the same as the award or better.

Flexibility Agreements

Flexibility Agreements must be set out in writing, signed by each party and state each and every term of the award that is being varied, detail in what way the term is varied and detail exactly how it does not disadvantage the employee.

Take the common case of incorporating leave loading into an hourly rate, it appears that this will need to be the subject of a flexibility agreement and therefore will need to be in writing in the format prescribed by the award. Verbal arrangements or simple one-line arrangements in a letter of offer to an employee will not be permissible. Many employers will be ill-equipped to meet the stringent requirements of these agreements and may find themselves caught by this clause unless they get professional and informed advice.

The other concern is that either party may end the agreement by giving 28 days notice, whereby the employee will return to the full terms and conditions of the relevant modern award. On just what grounds an employer can terminate the agreement is unclear but it is of concern that an employer may restructure things to suit an employee and then be given only four weeks’ notice if the employee changes their mind and wants to go back to the award. This has the potential to impact other employees within the organisation.

Practical implication for employers

The long reaching impact of the new NES and the ‘modern’ awards will mean that virtually every employment contract in Australia will need to be reviewed. Employee policies will also need to be reviewed to ensure that they do not contradict the NES and the ‘modern’ awards. It is crucial that business owners and managers are fully aware of the implications of these changed entitlements. For those businesses without in-house HR expertise, now may be the time to consider outside assistance. It is strongly recommended that employers start to plan now for the change and strategise. Ignorance will be no defense.

David Chapman
My Business April 2009


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