The Australian Industrial Relations Commission has issued an important decision about arrangements for the transition to modern awards. The transitional arrangements will apply in respect of minimum wages, casual loadings, Saturday, Sunday, public holiday, evening and other penalties and shift allowances. In essence the Full Bench decided that where a modern award would provide different entitlements for employees in respect of the above matters, as compared to existing Federal/ State award entitlements, the following arrangements will apply in most cases:

  • The existing rates and loadings in premodern awards will continue to apply until 1 July 2010, even though the modern award itself will commence to apply from 1 January 2010.
  • Where the new modern award provides greater entitlements than those currently existing, those entitlements will be phased in over a 5 year period commencing on 1 July 2010 in annual increments of 20% of the difference between the existing rate and the modern award.
  • Where existing employees are paid over-award payments, any increases that might be generated by the effect of the transitional provisions can be absorbed by those over-award payments.
  • Where the current award provides greater entitlements than the new modern award, those entitlements will be reduced over a 5 year period commencing on 1 July 2010 in annual amounts of 20% of the difference between the current rate and the modern award rate. However, the operation of the transitional provisions should not result in a reduction in take home pay of any employees covered by the modern award.

The effect of these provisions will vary depending on the current employment regulation status of particular employers, the date the employer commenced operating and employing personnel, the date a particular employee is employed and the compounding effect of phased changes to loadings and allowances. Annual minimum wage reviews will also impact on an employer’s obligations.