Under the Fair Work Act more than 4000 State and Federal Awards under the previous legislation were consolidated into the approximately 130 Modern Awards which now apply. The Modern Awards apply to employers in particular industries, rather than to named groups of employers or employer groups as applied previously, and build on the National Employment Standards, covering such additional matters as minimum wages, types and classification of employment and when work is performed, overtime and penalty rates, annualised salary arrangements and superannuation.
All Modern Awards contain provisions allowing employers and individual employees to enter into agreements varying the operation of the Award for the individual employee in relation to:
- the hours in which work is performed,
- overtime and penalty rates, and
- allowances and leave loadings.
These agreements are known as “Individual Flexibility Arrangements”. To be valid and enforceable, the agreement must be in writing, be made without coercion and result in the employee being “better off overall” compared to the award provisions. The agreement may be terminated by either party with four weeks notice in writing.
The Fair Work Act provides that a Modern Award will not apply to a “high income employee”, which means an employee whose guaranteed annual earnings exceed an indexed high income threshold, which is currently $148,700 per annum. Importantly, however, it is not enough that such an employee have a contractual entitlement to the relevant amount. For the Modern Award not to apply, the employer must give a formal, written guarantee and the employee must agree to accept that undertaking. This can also be agreed with prospective employees before they commence employment. Effectively, this is a means for contracting out of award for higher income employees.