Why employers cannot ‘choose’ their employees modern award coverage!
Employers are regularly faced with various challenges, one of which includes determining the appropriate modern award coverage for their employees. Modern awards are industry or occupation specific instruments which set out the minimum terms and conditions of employment in relation to the National Employment Standards (NES). Modern awards outline entitlements such as wages, hours of work, rosters, breaks, allowances, penalty rates, overtime and more.
Modern awards play a crucial role in ensuring fair treatment and appropriate compensation for employees. One common misconception among employers is the idea that they have flexibility in choosing a modern award which applies to their employees. It is important to note that modern award coverage is determined by factors such as industry, occupation, and job responsibilities, and it is essential for employers to understand why they cannot select coverage for their employees. Furthermore, modern awards account for factors such as skill level, experience and the nature of the work performed.
How to determine modern award coverage?
Modern award coverage is firstly determined by the industry in which the company or organisation operates under. Reflecting on the industry type will help to determine if an industry award best applies. However, if there is no relevant industry award, or an industry award does not cover the employee’s specific responsibilities, then an occupational award may apply. If an occupational and/or industry award is not appropriate, employers should refer to the Miscellaneous award. If an employee does not fall under the Miscellaneous award, they may then be considered award free. When an employee is award free the National Minimum Wage and NES will form the minimum terms and conditions of employment.
Can an employee be covered by multiple modern awards?
An employee can only be covered by one modern award. If more than one award appears to cover an employee, an employer should compare the employee job responsibilities outlined in their Position Description (PD) against the classification definitions in both modern awards. It is important for employers to consider which job responsibilities the employee would be performing more of, to determine the appropriate award.
A modern award has been determined, what’s next?
Once a modern award has been determined, it is important to consider which classification level best applies for the employee. When determining classification levels, it is important to compare the employee’s PD against the relevant classification definitions outlined under the relevant award.
Generally speaking, an employee’s classification level depends on the tasks a position is required to perform, the responsibilities of role, as well as an employee’s qualifications and/or experience. Once the applicable classification level has been determined, you should then refer to the corresponding minimum award rate for that position’s classification level.
It is important to note that some modern awards contain ‘pay points’ or ‘progression points’, which enable an employee to advance gradually. With that being said, as an employer it is important to refer to this clause in the relevant modern award to determine pay point progression.
What is the importance of getting modern award coverage correct?
Correctly determining modern award coverage is crucial for employers. Employers should determine modern award coverage on an individual basis, and correctly classify them in accordance with the award. Incorrectly determining coverage may result in underpayments for employees. Underpayments can occur when employers do not understand award coverage resulting in an employee not receiving entitlements and allowances, they are eligible to receive.
Employers who incorrectly determine modern award coverage may be fined and/or penalised for non-compliance. Employers may be required to backpay employees, pay interest on underpayments and/or face financial penalties.
We understand that navigating the modern award determination process may be overwhelming and difficult to understand. However, as we have just explained, it is extremely important to get this right, to minimise the potential risk of facing consequences. Not to fear though, we are here to help you! HR Business Assist offers modern award interpretation as part of our Premium and Partnered HR subscription or on an ad-hoc basis. Be sure to contact the team at HR Business Assist today if you have any queries regarding modern award coverage!
HR Business Assist | P 1300 138 551 | E support@hrbusinessassist.com.au