On 2 September 2009, the Australian Industrial Relations Commission (the Commission), released a major decision on the transitional provisions which will be put in place to cushion the impact of award modernisation on employers and employees.

The award modernisation process is being conducted by the Commission pursuant to Part 10A of the Workplace Relations Act 1996, at the request of the Minister for Employment and Workplace Relations. The request requires the Commission to formulate awards which apply to corporations throughout Australia in the industry or occupation concerned, replacing many hundreds of federal and state awards containing a variety of terms and conditions. This is to be done without disadvantaging employees or increasing costs for employers.

The necessity for appropriate transitional provisions arose from the understanding that some award conditions will increase, leading to costs increases for employers, and others will decrease, leading to potential disadvantages for employees, depending on the current award coverage. The process of award modernisations involves striking a balance as to appropriate safety net terms and conditions in light of the diverse award arrangements that currently apply.

Decision

The Commission considered the submissions of many parties which dealt with matters of principle and process as well as industrial relations and economic considerations, including productivity and employment issues.

The Commission understood that it should take a cautious approach where cost increases are in prospect. As a result, it decided that any cost increases resulting from the introduction of modern awards should be gradual and spread over a lengthy period, unless there is broad agreement that some other approach should be adopted in relation to a particular modern award.

In order to reduce the potential complexity of the transitional provisions, the Commission decided to adopt model transitional provisions which aim to minimise the potential for confusion and promote consistency of 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

A number of employers submitted to the Commission that any increases resulting from a modern award should be capable of absorption into existing overaward payments. The ACTU took a contrary view.

The Commission considered that it would not be appropriate, even on a transitional basis, to require an employer to maintain overaward payments and decided to provide that the monetary obligations imposed on employers by the modern award may be absorbed into overaward payments. Further, an employer is not required to maintain or increase any overaward payment.

The Commission has also included in the model provisions 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 make an order to remedy any reduction in take-home pay.

Model Phasing Schedule

The model phasing schedule contains the provisions for phasing in changes in entitlements resulting from the making of modern awards. In determining these provisions, the Commission regarded it as important to balance the need for phasing provisions against the desirability of confining the regulatory burden as much as possible.

In order to minimise complexity and reduce the scope for confusion, the Commission decided to limit the number of matters that are governed by phasing provisions to the main matters affecting pay. As a result, 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
  • casual and part-time loadings
  • Saturday, Sunday, public holiday, evening and other penalties, and
  • shift allowances.

The Commission decided that phasing should apply both to increases in the specified wages and conditions and reductions in those wages and conditions and in most cases will be in five equal instalments. There will be 12 months between instalments and each instalment will be 20%, which will spread the impact of changes over almost the whole of the five-year period.

The phasing will commence on 1 July 2010. The effect will be that where the phasing provisions are included in a modern award, the pre-modern award conditions relating 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. There will be a further four instalments on 1 July of each year concluding on 1 July 2014.

The approach adopted by the Commission will permit employers to phase in increases in minimum wages over five years and will require them to phase in reductions in wages over the same period. The phasing will apply to the differential amount only.

The model transitional provisions do not include provisions for allowances. The reason for this is that the differences in the nature and application of allowances across the award system make it difficult to develop general rules.

Application of the Model Provisions

The model commencement and transitional clause dealing with absorption, preservation of take-home pay and review will be included in all of the priority and stage 2 awards.

The phasing schedule is only considered necessary and will only be included in the following awards:

  • Textile, Clothing, Footwear and Associate Industries Award 2010
  • Higher Education Industry – General Staff – Award 2010 (only in relation to loadings and penalties)
  • Clerks – Private Sector Award 2010
  • Rail Industry Award 2010
  • General Retail Industry Award 2010
  • Cotton Ginning Award 2010
  • Horticulture Award 2010
  • Nursery Award 2010
  • Pastoral Award 20101
  • Silviculture Award 2010
  • Wool Storage, Sampling and Testing Award 2010
  • Building and Construction General On-site Award 2010
  • Joinery and Building Trades Award 2010
  • Mobile Crane Hiring Award 2010
  • Plumbing and Fire Sprinklers Award 2010
  • Banking Finance and Insurance Award 2010
  • Graphic Arts, Printing and Publishing Award 2010
  • Health Professionals and Support Services Award 2010
  • Nurses Award 2010
  • Road Transport and Distribution Award 2010, and
  • Waste Management Award 2010.

Consideration as to whether a phasing schedule should be included was deferred in relation to the following awards:

  • Mining Industry Award 2010, and
  • Quarrying Award 2010.

If issues arise from time to time concerning the application of the transitional provisions, these can be dealt with pursuant to the dispute resolution provisions which are included in the modern award.

Significance for Employers

Employers must familiarise themselves with the requirements of the modern awards and the transitional provisions which will apply to them so that they are ready to implement the changes from 1 July 2010.