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Clarifying Employee Entitlements

The Fair Work system, created by the Fair Work Act 2009, is the national workplace relations system.

It applies to most employees and employers in Australia. In NSW, state public sector and local government employees are not covered by the Fair Work system unless they have registered agreements in the Fair Work Commission.

The Fair Work system has a number of key features which provides a safety net of entitlements for employees, including:

  • 11 minimum National Employment Standards (NES)
  • the national minimum wage
  • modern awards that apply nationally to industries and occupations, and the ability to make enterprise agreements replacing awards, to provide additional minimum entitlements
  • protection from unfair dismissal
  • general protections from adverse action
  • rules around industrial relations and enterprise bargaining

Disputes over employee entitlements are not uncommon, and the relevant rules to apply can be confusing for employers and employees. If you are looking for an employment lawyer in Sydney, or for further information in relation to any employment law needs, please do not hesitate to contact any member of our Employment Law Team.

  • Where do I find the minimum entitlement for employees?

    There are strict rules governing the minimum entitlements which must be provided to employees, such as minimum rates of pay, hours of work, allowances, penalty rates and overtime, leave arrangements, maximum weekly hours, notice of termination, and redundancy pay.

    For most employees, these minimum entitlements are contained in the National Employment Standards (NES) in the Fair Work Act, and industrial instruments like modern awards and enterprise agreements (or state based awards and enterprise agreements for certain NSW public sector and local government employees).

    A contract of employment may also provide additional or superior rights to those legally protected minimum entitlements – but it cannot undercut minimum entitlements contained in the NES or an applicable award.

  • Minimum Wage

    All award free national system employees must be paid no less than the national minimum wage (as at 1 July 2020 – $19.84 per hour or $753.80 per week). This is updated every year by the Fair Work Commission as part of its Annual Wage Review), or otherwise the pay rate prescribed in the relevant modern award or an enterprise agreement.

  • National Employment Standards (NES)

    The National Employment Standards set out 11 minimum employment entitlements that must be provided to all national system employees (on top of the minimum wage).

    The 11 NES entitlements are:

    • Maximum weekly hours (38 hours for fulltime employees)
    • Requests for flexible working arrangements
    • Offers and requests to convert from casual to permanent employment
    • Parental leave and related entitlements (12 months unpaid leave, paternity and partner leave, special maternity leave, transfer to safe job or no safe job leave, pre-adoption leave)
    • Annual leave (4 weeks paid leave per year – or 5 weeks for certain award covered shift workers)
    • Personal/carer’s leave (10 days paid leave per year pro-rated), compassionate leave, and unpaid domestic and family violence leave
    • Community service leave (including jury service)
    • Long service leave (as prescribed in the applicable state and territory legislation or an award)
    • Public holidays
    • Notice of termination and redundancy pay
    • Fair Work Information Statement and Casual Employment Information Statement
  • Modern Awards

    Modern Awards (Awards) are legal documents created by the Fair Work Commission (known as industrial instruments) and which set out the minimum pay and conditions for employees.

    Awards specify:

    • The minimum rates of pay
    • Hours of work
    • Overtime and penalty rates for work performed outside the ordinary span of hours and/or on weekends and public holidays
    • Allowances (meals, tools, uniforms, and others)
    • Annual leave loading

    Awards may also provide for more generous or additional conditions than are contained in the NES – such as consultation provisions around redundancy, or additional annual leave.

    Awards apply nationally to national system employers and national system employees, depending on the industry and the occupation or type of job. Working out which Award applies is not always straightforward – although the coverage clause specifies which industries are covered, and the classifications set out which occupations or jobs fall within the Award.

    There are over 100 industry or occupation specific Awards, which cover most people who work in Australia.

    It is not uncommon for some businesses to think they are not covered by the modern award system, particularly if they have engaged employees pursuant to a contract of employment or a letter of offer setting out an employee’s basic terms, conditions and rate of pay.

    For some businesses that may be right if an employee is “award free” or if the employer is not a national system employer. In other circumstances, a business may negotiate an enterprise agreement with its Award covered employees, thereby replacing the modern award. If the enterprise agreement complies with the Fair Work Act 2009 and is registered at the Fair Work Commission (FWC), then it becomes the legal industrial instrument governing the basic terms and conditions of the employees covered, to the exclusion of the modern award – and underpins any additional terms of employment set out in a contract of employment, such as above award rates of pay.

    Very senior employees in specific professions or occupations which traditionally have not been award covered might fall outside of an Award, however even where the work undertaken by employees is difficult to classify, the modern award system may still capture particular employees via the Miscellaneous Award 2010.  A full bench decision of the Fair Work Commission in United Voice v Gold Coast Kennels Discretionary Trust t/a AAA Pet Resort [2018] FWCFB 128 serves as a prescient warning for employers that at the very least, junior employees and roles are likely to be covered by an Award even if traditionally the role was award free prior to the introduction of the modern award system and the Fair Work Act.

    However, employers can utilize other arrangements for Award covered employees, including annualized salaries (via clauses in Awards off-setting clauses) or for high income employees, by using an annual guarantee of earnings.

  • High income threshold and annual guarantee of earnings, annualized salary arrangements and setting-off arrangements

    It’s important to be aware of the relevant Awards and their applicability to an industry, your business, and your employees.

    An Award does not apply where an employee earns more that the High Income Threshold and has accepted a guarantee of annual earnings – a written agreement between an employer and employee pursuant to the Fair Work Act. The employee is still covered by the Award for the purposes of an entitlement to protection from unfair dismissal.

    Award or agreement free national system employees, however, are still entitled to the safety net of minimum entitlements contained in the NES and the national minimum wage.

  • Annualised salaries and set-off clauses

    A number of modern awards were varied in 2020 to include a new annualised salary clause, which allows employers to pay an annual wage in lieu of certain award entitlements.

    Each Award is quite specific about the relevant rule, but the general gist is that annual salary arrangements can be put in place by agreement to satisfy Award entitlements such as:

    • Minimum pay rates
    • Allowances
    • Overtime
    • Penalty rates
    • Annual leave loading

    However, an employee cannot be worse off than had they been paid all of their entitlements under the Award. The salary must take into account an amount to include relevant Award entitlements – such as overtime or penalty rates – if applicable to the span of hours the employee will work.

    A copy of the agreement must be kept on file and given to the employee, and the employee’s start and finish times and unpaid breaks must also be recorded.

    The agreement must also include how the annual wage was calculated (ie. penalty or overtime assumptions) and detail the “outer limits” (ordinary hours which would otherwise attract a penalty or be classified as overtime) for each pay cycle or roster period but which won’t result in additional payment as they are covered by the annual salary. Work performed outside of the outer limits is not covered by the annual salary – and must be paid as per the Award.

    Employers are required to undertake a reconciliation of employee’s annual wages every 12 months, and when the agreement or the employment ends – to determine if an employee has been underpaid pursuant to the Award. If an employee has been underpaid, an employer must pay the difference within 14 days.

  • Set offs – annual wage arrangements not prescribed by the award

    Employers can still utilise all-inclusive salaries without using the annualised salary arrangements in Awards by using a well drafted set-off clause in employment contracts. However, to rely on such a clause, the salary arrangement must not leave an employee worse off than had they been paid all of their minimum entitlements under an Award (ie. it must cover all entitlements), and the arrangement must be recorded in an employment contract with a set-off clause clearly identifying the particular award obligations that the salary payment and above award payments will cover.

  • How Are Disputes in this Area Resolved?

    Where an employee, or group of employees, believe they have not received their proper entitlements, the first step should be to raise the concern in a non-confrontational way with the employer. It may be that the employee misunderstands the rules, or that the company misunderstands its obligations. If that doesn’t resolve the issue, the employee can always contact the Fair Work Ombudsman (FWO) to ask for help to clarify entitlements. Or, an employee or a union acting on behalf of an employee or a group of employees, may commence proceeding under the Fair Work Act in the Federal Circuit Court or Federal Court of Australia to enforce payment of workplace  entitlements.

    Many employees are afraid to raise these issues with their employer for fear that it may damage their standing as an employee, or worse still, that it may lead to the termination of their employment. It is unlawful for employers to treat employees adversely for seeking to enforce their workplace rights, and any employee who has experienced adverse treatment may be able to  pursue  a General Protections claim  in the Fair Work Commission or the Court.

    Some employees who find themselves in the same position find it helpful to speak up as a group. This will make it more difficult for the company to marginalise them.

  • We can help you

    Law firms like Atkinson Vinden are often able to negotiate a quick resolution of these types of disputes, clarifying what the law is, and ensuring the full amounts owed are paid to an employee, or assisting an employer resolve a dispute with an individual employee or union. We help both businesses and individual employees with these issues, so whatever the concern, we are here to help. Please call our team on (02) 9411 4466.


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