Employment awards: is it time for them to go?

Elizabeth Ticehurst, Director, Employment, KPMG Law
Elizabeth Ticehurst, Director, Employment, KPMG Law

As an employment lawyer, I am witness to a lot of frustration. Employing someone should be an easy thing. Ensuring that employees are receiving the correct pay and conditions should be an easy thing. But unfortunately, many times it involves complicated research, time and expense to determine whether an award applies and where a particular employee fits within the classification system. It is an inexact science that sits uneasily with a lawyer’s desire for precision and certainty, and it adds needless complexity to the already complicated regulation of employment in Australia.

The existence of awards is the result of a curious quirk of history. The Constitution that took effect in 1901 left the regulation of employment and industrial relations up to the states, but the Commonwealth retained the power to legislate on ‘conciliation and arbitration for the prevention and settlement of industrial disputes extending beyond the limits of any one state’.[1] This power was used to create the Court of Conciliation and Arbitration, which had the power to resolve matters in dispute by making arbitral “awards”, which could bind a large number of employers in different states. At the same time, each state also had its own system for resolving industrial disputes and making arbitral awards applicable within the state. The result was a haphazard network of state and federal awards stipulating minimum wages and other working conditions across a range of industries, occupations and employers.

As part of the Fair Work reforms introduced in 2009, a “modernising” process was commenced, which resulted in 122 new “modern awards” to replace the more than 1500 old federal and state awards. But the new system is far from perfect, and many of the old problems remain. For example:emp

  • Employers can be covered by more than one award. Whilst the modern awards broadly cover industries, rather than named employers, it is still possible for a company to be covered by two or more awards that apply to staff doing different jobs. Adding to the complexity, the same employer may also have staff who are covered by an enterprise agreement, and still other staff who are not covered by any award or an agreement.
  • The old awards are still preserved for certain purposes. For example, if an employee was entitled to long service leave under an award prior to 1 January 2009, their long service leave entitlement under that award may be preserved (even if it is less beneficial than the state long service leave entitlements that would otherwise apply).
  • The awards can be difficult to interpret and confusing for the very people to whom they apply. For example, would an employee providing demonstration cooking lessons inside a retail store be covered by the General Retail Award, the Fast Food Industry Award or something else? What about the case where an employee performs a mix of duties that could fall under two or more awards?
  • The majority of employers are small and medium size businesses, many of which lack the resources to obtain specialist advice on award coverage.
  • Employers can avoid parts of the award that do not suit their business by entering into an enterprise bargaining agreement, but most small and medium size businesses lack the information, time and resources to go through this process.

Part of the rationale for retaining the award system is that they provide an important safety net for a significant number of workers. However other safety nets exist, in the form of the national minimum wage and the National Employment Standards (NES). Provisions for basic loading, allowances and other entitlements could be simplified and included in legislation that has general application, rather than only benefiting workers that are covered by an award. Some isolated historical benefits may be lost in the course of this amalgamation, but the resulting streamlining of pay, conditions and entitlements would be an enormous relief to employers, and would result in a system that is easier to understand for everyone. A precedent for this reform already exists in New Zealand, where a similar awards system was abolished in 1987.

It is time for Australia to follow suit.

 

[1] Constitution s51(35)

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