Award Modernisation and the Transitional Provisions
Although most of the functions of the Australian Industrial Relations Commission (AIRC) have been transferred to Fair Work Australia, its work in relation to modern awards continues until the end of 2009. Part 10A of the Workplace Relations Act 1996 requires the AIRC to engage in an award modernisation process. This process requires the AIRC to formulate awards which apply to corporations throughout Australia in the relevant industry or occupation. During this simplification process, hundreds of existing federal and state awards will be replaced.
The Commonwealth Government included transitional provisions to soften the impact of the award modernisation process on both employers and employees. Due to the many different terms and conditions in existing awards, the modernisation process may, in some circumstances, result in increased award conditions and corresponding cost increases for employers. Similarly, in other circumstances, award conditions may decrease thus leading to potential disadvantages for employees.
On 2 September 2009 the AIRC released a significant decision on the transitional provisions. In order to reduce the potential complexity of the transitional provisions, the AIRC decided to adopt model transitional provisions intended to reduce the potential for confusion while promoting consistent outcomes. The model provisions were considered under two headings: the model commencement and transitional clause and the model phasing schedule.
Model Commencement and Transitional Clause
The AIRC considered that it would not be appropriate, even on a transitional basis, to require an employer to maintain over-award payments. The AIRC therefore provided that the monetary obligations imposed on employers by the modern award may be absorbed into over-award payments. Furthermore, employers will not be required to maintain or increase any over-award payment.
The model provisions also provide that neither the making of the modern award nor the operation of the transitional provisions is intended to result in a reduction in take-home pay. Fair Work Australia may take action to remedy any reduction in take-home pay.
Model Phasing Schedule
The model phasing schedule includes provisions for phasing in changes to entitlements resulting from the making of modern awards.
The AIRC limited the number of matters that are governed by phasing provisions to the main matters affecting pay. The matters included in the model provisions relating to phasing are:
- minimum wages, including wages for junior employees, employees to whom training arrangements apply and employees with a disability;
- Saturday, Sunday, public holiday, evening and other penalties;
- casual and part-time loadings; and
- shift allowances.
The AIRC determined that any cost increases resulting from the introduction of modern awards should be gradual and spread over a lengthy period, unless there was broad agreement that some other approach should be adopted in relation to a particular modern award.
The phased approach will apply both to increases in the specified wages and conditions as well as reductions in those wages and conditions. Phasing will commence on 1 July 2010. The result will be that where the phasing provisions are included in a modern award, the pre-modern award conditions related to minimum wages, casual and part-time loadings, Saturday, Sunday, public holiday, evening and other penalties and shift allowances will continue to apply until 1 July 2010 when the modern award obligations will commence. In most cases, there will be five equal instalments of 20%. There will be a further four instalments on 1 July of each year concluding on 1 July 2014, thus spreading the impact of the changes over a five year period.
The model transitional provisions do not include provisions for allowances.
