The Fair Work System: how it affects you?

Last updated: December 2020 | 5 min read

The Fair Work system has a number of key features you need to know.

  • 122 modern awards that replace awards in most industries
  • transition to modern award pay rates
  • a set of 10 National Employment Standards (NES) for all employees
  • a Fair Work Information Statement that must be provided to all new employees
  • state system employers moving into the national workplace relations system

Modern awards

Modern awards are industry or occupation-based minimum employment standards which apply in addition to the NES. They were created to establish one set of minimum conditions for employers and employees across Australia who works in the same industries and occupations.

From 1 January 2010 modern awards replace thousands of federal and state-based awards (pre-reform awards) and cover most workplaces. The commencement of modern awards means that there have been changes to minimum terms and conditions for many employees. The changes vary by state, industry and employer.

A modern award will cover all employers and employees who perform work in an industry or occupation covered by that particular modern award. However, modern awards may not apply to some managers or higher income employees (who have an appropriate guarantee of annual earnings of more than $113,800 p.a. during the year ended 30 June 2011 – indexed annually) even if a modern award covers the industry in which they work.

Modern awards will not apply to an employer who is bound by an enterprise award. An enterprise award regulates the terms and conditions of employment only in the single business specified in that award.

Modern awards contain terms and conditions about:

  • base rates of pay
  • overtime and penalty rates
  • types of employment
  • enabling the employer and employee to agree on an individual flexibility arrangement
  • work arrangements (e.g. rosters, variation to working hours)
  • hours of work
  • rest breaks
  • classifications
  • allowances
  • leave and leave loadings
  • superannuation
  • procedures for consultation, representation and dispute settlement.

Some modern awards also contain terms about redundancy.

Transitional arrangements for modern award pay rates

Transitional arrangements, found in most modern awards, give employers and employees time to adjust to the changes in pay rates.

Modern awards may contain:

  • model transitional provisions that phase in changes to pay rates from 1 July 2010 across a four year period
  • specific transitional provisions unique to the modern award and dealing with pay and/or other conditions – see the award for details
  • no transitional arrangements - the full terms of the modern award apply from 1 January 2010.

Transitional provisions can be found in a schedule at the end of the modern award document.In most cases, the model transitional provisions will apply. The model transitional provisions allow employers to wait until 1 July 2010 to start paying the new base rates of pay and certain loadings and penalties under the modern award. These pay rates will be phased in over a period of four years until the full modern award rate applies on the first fully pay period on or after 1 July 2014.

In this period pay rates need to be calculated with reference to the pre-modern award entitlement that used to cover the employee before 1 January 2010 as well as the relevant modern award entitlement, the difference being ‘phased’ in 20% increments.

Modern award pay rates

  • The federal minimum wage from 1st July 2016 will be $17.70 per hour;
  • Minimum wage $672.70 per 38 hour week (before tax);
  • Casual employees covered by the national minimum wage also get at least a 25 per cent casual loading.
  • Suspected contraventions will be investigated and enforced by the Fair Work Ombudsman. A contravention of a term of a modern award or a national minimum wage order may result in penalties of up to $ 10,800 for an individual and $54,000 for a corporation.

National Employment Standards (NES)

The Fair Work Act provides a safety net of enforceable minimum employment terms and conditions through the National Employment Standards (NES).

The NES sets out 10 minimum workplace entitlements which apply to all employers and employees in the national workplace relations system from 1 January 2010 (however only certain entitlements apply to casual employees).

The NES replaces the non-pay rate provisions of the Australian Fair Pay and Conditions Standard (the Standard), which applied up to and including 31 December 2009.

Fair Work Information Statement

From 1 January 2010, all employers covered by the national workplace relations system have an obligation to give each new employee a Fair Work Information Statement (the Statement) before, or as soon as possible after, the employee starts employment.

State system employers moving into the national workplace relations system

From 1 January 2010, sole traders, partnerships, other unincorporated entities and non-trading corporations in New South Wales, Queensland, South Australia and Tasmania are covered by the national workplace relations system rather than their own specific state system.

There are special rules for these employers to help them move into the national workplace relations system including:

  • state awards that covered there employers and employees before 1 January 2010 (known as Division 2B State awards) will continue to apply until 31 December 2010, after which employees will be covered by the relevant modern award. Employees under State awards must receive conditions that are at least equal to the minimum entitlements in the NES (to the extent that they apply) and the national minimum wage
  • state employment agreements (known as Division 2B State agreement) will continue to apply until terminated or replaced. Employees under State employment agreements must also receive conditions that are at least equal to the minimum entitlements in the NES (to the extent that they apply) and the base rates of pay in an applicable State award (while operative), or the relevant modern award or, if there is no operative State award or relevant modern award, the national minimum wage.
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