Modern Award Changes in 2020

In an effort to reduce instances of non-compliance with awards, employers will be required to update employment contracts in order to comply with the modern award changes. The deadline for these updates to have been made is 1 March 2020, which is the same day the new clauses come into effect.

Am I affected?

These changes have come about following the finalisation by the Fair Work Commission to introduce new annualised salary clauses, for employees covered by the following awards:

• Banking, Finance and Insurance Award 2010
• Broadcasting and Recorded Entertainment Award 2010
• Clerks – Private Sector Award 2010
• Contract Call Centres Award 2010
• Health Professionals Award 2010
• Hydrocarbons Industry (Upstream) Award 2010
• Horticulture Award
• Hospitality Industry (General) Award 2010
• Legal Services Award 2010
• Local Government Industry Award 2010
• Marine Towage Award 2010
• Manufacturing and Associated Industries and Occupations Award 2010
• Mining Industry Award 2010
• Oil Refining and Manufacturing Award 2010 
• Pastoral Award 2010
• Pharmacy Industry Award 2010
• Rail Industry Award 2010
• Restaurant Industry Award 2010
• Salt Industry Award 2010
• Telecommunications Services Award 2010
• Water Industry Award 2010
• Wool Storage, Sampling and Testing Award 2010

If you are an employer who hires employees under any of the above awards and you also pay those employees an annual salary that incorporates entitlements that would ordinarily be paid separately, you will likely be affected and will need to comply with new rules around notification, record keeping and reconciliation.

Why are these changes being introduced?

The changes have been brought in to help regulate an often-overlooked area of employment contracts.

Award-covered employees are usually paid an annual remuneration that incorporates monetary entitlements such as penalty rates, overtime rates and loadings that would otherwise be payable as separate amounts. The issue is that these salaries are seldom being reviewed on an annual basis to ensure that they still comply with the latest award covering those particular employees. Therefore, award-covered employees may be missing out on the monetary entitlements they would be eligible for if these entitlements were not rolled-up into the one figure.

What changes have been made?

Employers are now required to implement updated practices by Human Resources and payroll departments to ensure that employees are always being remunerated in a way that affords them all of their entitlements.

These practices include:

• calculating what the employee would have been paid if their entitlements were made as separate payments, as opposed to an annualised payment;
• keeping a record of unpaid breaks and start and finishing times to ensure accurate calculation of the entitlements owed; and
• developing a system by which the employee acknowledges the calculations for each pay cycle are correct (either in writing or electronically).

While the exact requirements will depend on the award they are inserted in to, the model clauses tell us that employers will be required to carry out certain obligations, such as:

• informing any employees who are covered by an award of exactly which award and provisions relate to their employment;
• the mathematical method by which the employee’s annualised wage has been determined; and
• what the outer limit of ordinary hours that would usually attract overtime or penalty rates, but that the employee is required to work (as these rates are factored into their annualised salary) is.

New provisions have also been introduced for enterprise agreements, which will represent the ‘baseline’ for ‘the better off overall test’ (BOOT). This test is used to consider if the agreement should be approved by the Fair Work Commission. 

What do employers need to do to ensure compliance?

With the changes, employers will be liable to monitor the benefits under the relevant awards to ensure their employees are being adequately compensated. They will be expected to update the annual remuneration to capture additional benefits where necessary.

A failure to comply with the modern award changes will result in a breach of a modern award and will become subject to the civil penalties as outlined in the Fair Work Act 2009 (Cth).

If you are an employer who is unsure if the changes apply to your employee’s contracts, you should seek legal advice to avoid potential penalties. Contact Cairns Employment Lawyers for a free initial consultation.