Award Modernisation – What Does It Mean For Your Business?

The Australian Industrial Relations Commission (AIRC) is currently undergoing the process of creating a set of modern awards based upon broad industries and occupations, which will replace several thousand existing federal and state awards. These awards will operate from 1 January 2010 and will supplement the National Employment Standards.

Recently, the Shadow IR spokesman, Michael Keenan called on the government to reconsider the process, saying that the award modernisation process will increase labour costs by up to 22% and lead to job losses. So what is the process, and how will if affect your business?

What does the award modernisation process involve?

The aim of the award modernisation process is to create a comprehensive set of modern awards along industry or occupational lines, dealing with essential matters. These essential matters include:

• minimum wages

• the type of work to be performed

• overtime and penalty rates

• salaried arrangements (where appropriate)

• allowances

• leave and leave loading

• superannuation

• consultation

• and other matters including conditions of employment for outworkers and industry specific redundancy schemes.

Modern awards must also include a flexibility term permitting employers and individual employees to negotiate individual agreements on certain matters.

Under the Workplace Relations Act 1996 (Cth), the matters that must not be included in modern awards include terms about deductions and payments for the benefit of an employer, long service leave, right of entry, discriminatory terms, or terms that apply differently in different states (subject to a transitional period of five years in which some terms of this type may be allowed).

The award modernisation process will not affect enterprise based awards.

How is the award modernisation process being implemented?

The award modernisation process is being implemented by a Full Bench of the AIRC in four stages, which commenced in July last year and will finish in December this year.

The AIRC has already released a number of awards for the Stage 1 "priority industries", including coal mining, fast food, retail and hairdressing, manufacturing, hospitality, racing, security services, higher education, private sector clerical employees and, the textile, clothing and footwear industries.

Consultation is currently occurring between the AIRC and affected parties about the Stage 2 and Stage 3 industries and the form of awards that should apply. To see a full list of the industries that are being considered by the AIRC in each stage click here.

How will the award modernisation process affect your business?

The award modernisation process:

• could have the affect of significantly rationalising the awards which apply to an employer (particularly where a number of state awards have traditionally regulated the business)

• could potentially extend award coverage to employees who have traditionally been award free (but is not intended to extend award coverage to managerial employees who have been traditionally award free or high income employees with a guaranteed annual income above a certain amount (expected to be $100,000).

As identified by Michael Keenan, the indications to date are that the award modernisation process could increase labour costs for some employers by 22%, although the precise effect of the award modernisation process on business is yet to be known.

What should employers do?

Employers should:

• monitor the award modernisation process as it affects their businesses closely

• review applicable modern awards as they are released and assess the impact of these awards on their businesses

• consider whether they should enter into workplace agreements now so as to replace the application of the modern award whilst the workplace agreements are in operation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.