Last updated 27 June 2022

The objective of the Fair Work Act 2009 (Cth) (Fair Work Act) is that modern awards (each comprises 10 allowable matters) form the basis of a safety net for all employees, particularly lowly paid employees, together with 10 National Employment Standards (discussed below). The conditions contained in a modern award and the National Employment Standards represent an employee’s minimum entitlements.

It is possible for employers and employees collectively to agree to alternative terms to those contained in a modern award (though not the National Employment Standards) by making an enterprise agreement. However, any such enterprise agreement must be approved by the Fair Work Commission (FWC) and leave the employees better off overall.

The Fair Work Act also makes it possible for employers and employees to make both individual common law agreements and Individual Flexibility Arrangements. Not only are those agreements required to comply with the National Employment Standards, they are also required (where relevant) to at least meet the minimum standards set by an otherwise applicable award.

The Fair Work Act prevents employers from requiring an employee to enter into an agreement that removes basic award benefits (unless satisfactory compensatory benefits have been included).

As previously mentioned, all modern awards are limited to 10 allowable matters. These are:

  • minimum wages
  • types of employment (e.g. full time, part time or casual)
  • arrangements for when work is performed
  • overtime rates
  • penalty rates
  • annual wage or salary arrangements
  • allowances
  • leave and leave-loading arrangements
  • superannuation
  • procedures for consultation, representation and dispute resolution.

How an award works

Awards set out minimum terms and conditions with which employers and employees must comply. These terms cover all the important matters of the employment relationship, such as rates of pay, the number of hours and the spread of hours over which employees may lawfully be required to work, the circumstances in which employees are entitled to be paid overtime, leave and superannuation entitlements, and termination and redundancy arrangements. An award may also cover practical matters such as the wearing of a uniform, the provision of tools and other matters related to employment.

Employers are required to know which awards are relevant to their workforce and are required to post a copy of the award in a prominent location so that its terms and conditions can be read by every employee. It should not be assumed, however, that if no award is displayed the workplace is award-free. Employees at a workplace covered by an enterprise agreement, or a collective or certified agreement should also be told of that fact, and a copy of the agreement should be made available to them on request.

In the federal system, it is unlawful, in the absence of a properly made enterprise agreement, for parties to contract out of an award. In other words, if an award provides for a minimum rate of pay then, in the absence of some properly made enterprise agreement, it will be unlawful and therefore ineffective for the parties to agree on a lesser sum to be paid. It is not unlawful to improve on or increase the minimum conditions prescribed by an award.

Penalties apply for employers who breach terms of awards.

The Fair Work Act regulates enterprise bargaining. It is worth repeating that the purpose of introducing the modernised award structure, with its 10 allowable matters to work in conjunction with the National Employment Standards, was to ensure that there is a fixed and fair safety net below which no employee may fall in terms of their employment conditions.