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.
- 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  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.