Do you know which industrial instruments cover your employees? If the answer is that they are all award-free, our experts suggest it's time for a thorough review.
As an employer, would you have a definitive answer to the question – which industrial instruments cover your employees?
Our industrial relations experts have noted that this question often reveals compliance issues in many organisations.
Employers who answer that all their employees are award free, or only covered by the National Employment Standards, may stand out as a ‘red flag’ during a compliance check.
The reason? While the employer could be correct in their assessment, it can also indicate that they have not identified all the industrial instruments that cover their workforce.
What is an Industrial Instrument?
An industrial instrument is a catch-all term used for legally enforceable documents that outline employment conditions. This document may include minimum wages, penalties, allowances, loadings etc.
Employers must identify applicable instruments, classify employees correctly, and maintain compliance as regulations evolve. Proper identification of the industrial instruments represents just the first step in a continuous compliance journey for businesses.
The Three Fundamental Industrial Instruments
While the below is the three underpinning instruments, contract of employment and Individual Flexibility Arrangements may provide additional entitlements.
National Employment Standards (NES)
The National Employment Standards (NES) are the minimum employment standards that every employee is provided for in the national workplace relations system. These are the minimum entitlements that employees receive, regardless of their position.
The NES serves as the safety net of entitlements for employees and is established in the Fair Work Act 2009 (Cth). Every business within Australia must comply with the NES.
Even if employees are covered by other industrial instruments, conditions cannot fall below the minimum standards outlined in the NES.
The NES comprises of the following minimum standards of employment:
- Maximum weekly hours of work
- Requests for flexible work arrangements
- Casual employment conversion
- Parental leave and related entitlements
- Annual leave entitlements
- Personal/carer’s leave, compassionate leave and family and domestic violence leave
- Community service leave
- Long service leave
- Public holidays
- Superannuation contributions
- Notice of termination and redundancy pay
- Fair Work Information Statement (the FWIS) and Casual Employment Information Statement (the CEIS)
Modern Awards
Modern awards outline employees’ minimum entitlements and conditions beyond the NES. Currently, there are 121 modern awards, each establishing specific employment standards.
Employers must understand two key categories: industry awards and occupational awards. Additionally, the Miscellaneous Award covers employees not classified under other modern awards.
Understanding which award/s applies to your workforce ensures compliance with legal obligations and helps maintain appropriate employment conditions for your team.
Identification of the applicable modern award can be particularly challenging for employers as the modern award system is expansive and complex. It is important, however, to ensure you get it right from the start. Misclassification can lead to payroll errors that compound over time if not addressed.
Referring to the start of this article, while there are 121 modern awards, not all employees may be covered by a modern award. There is such a thing as an ‘award free’ employee. However, during a compliance check, industrial relations experts will still check your Modern Award coverage.
Enterprise Agreements
Enterprise agreements cover the same entitlements for employees but have been negotiated between the employee and employer.
These agreements work differently from the other industrial instruments:
For example, XYZ retail company negotiates an Enterprise Agreement with employees to offer higher weekend penalty rates and flexible rostering, going beyond the Modern Award. Unlike the General Retail Industry Award 2020, which sets an industry-wide minimum. Enterprise Agreements allow tailored conditions while ensuring employees are better off overall. Once approved by the Fair Work Commission, the Enterprise Agreement will replace the General Retail Industry Award 2020 for XYZ’s workplace.
As you can see from the above example, when an enterprise agreement takes effect, it replaces the applicable Modern Award for that workplace as their industrial instrument.
It is important to note that the agreement process allows businesses to develop employment conditions tailored to their specific operational needs while ensuring employees receive fair and appropriate entitlements.
NOTE: Current and past enterprise agreements can be accessed through the Fair Work Commission website.
Industrial instruments: How can employers ensure compliance
The identification and compliance with industrial instruments can be tricky. This is for several reasons including but not limited to:
- Complex regulatory interactions between the National Employment Standards, Modern Awards, and Enterprise Agreements
- Technical legal terminology that requires specialised knowledge to interpret correctly
- Updates that demand constant vigilance from employers
When evaluating compliance, industrial relations specialists typically begin by asking which entitlements govern your employees. You must understand the distinctions between them to provide accurate information, including:
- Whether you have an Enterprise Agreement in place
- Which specific Modern Award/s apply to your workforce
- Whether certain employees aren’t covered by awards
- The exact entitlements applicable to each employee category
If you are unsure about the answer to these questions or feel overwhelmed, you do not need to navigate industrial instruments in isolation. Having supported Australian businesses with compliance issues for over 25 years, our specialists often recommend businesses to utilise available resources effectively. The Fair Work Commission portal provides clear explanations of modern awards, which can be a great starting point.
For concerned employers, begin by reviewing the modern awards list to identify an applicable award. Once you have identified an applicable award, check your findings with a specialist to gain assurance and bring clarity into your processes.
Where to from here?
Proper application of industrial instruments is fundamental to employee compensation, allowances, and entitlements. Even businesses paying well above minimum requirements must follow specific award provisions, including consultation clauses, individual flexibility arrangements, payment of wages etc.
If you find the process to be confusing or time-consuming, we are here to help you get it right. Operating without this knowledge may turn out to be significantly risky for employers.
Get in touch with our team of industrial relations specialists today.
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