How the Modern Award Transition Will Work
You are here:This article explains how employers will need to transition to the new modern award rates and conditions in those industries where the award system will have an impact.
In its decision, the AIRC has provided for a 6 month grace period from the expected start date of the new modern awards (from 1 January 2010 until 1 July 2010), before which the new award conditions will commence to phase-in.
Also, employers will generally have 5 years to transition employees to the new wage and penalty rates. The transition period will be limited to the following matters -
- minimum wages, including junior rates, training and other special rates (i.e. for people with a disability). Also included here are those industries with special industry allowances, such as the building industry;
- casual and part-time loadings;
- Saturday, Sunday, evening and other penalties (i.e. public holidays) and shift allowances.
The decision is the AIRC's response to criticisms by both employers and unions about the impacts of award modernisation, which was not meant to result in reductions in employment conditions for employees or to increase costs for employers. The Commission commented in its decision that these were "objectives which are potentially competing", and provide the context against which it has sought to create appropriate transitional provisions.
Under the decision, the AIRC has provided for 2 sets of calculations to be done before and after the 5 year transition period for implementing modernised awards -
- minimum wage rates (including the impact of Fair Work Australia increases),
- loadings and penalty rates.
The difference will then be phased-out in 5 equal instalments (20% per year), except in the case of minimum wage reductions which are less than any Fair Work Australia increase (these apply from 1 July each year as well). There is also the requirement that no employee will suffer a reduction in their ordinary take home pay as a result of the transition process at any stage of the process.
All employers and employees will be treated the same. For example, new employees will have the same minimum wage and penalty rate arrangements as existing employees.
The AIRC said that industry agreements on particular transition processes to simplify the transition will be welcomed by it.
ERS Comment - our experience with these sorts of calculations is whilst they seem simple in logic, they can be very complex to work out in practice, although nothing a good spreadsheet can't accomplish. We do expect however that employers will end up with a welter of different wage tables where they have to track employees to pay them the correct rate as they move through the phase-in period.
We expect a lot of work will be done to create these wage tables for employers to use, rather than leave employers to their own devices to work them out themselves. ER Strategies will ensure our clients have access to these tables created for them in plenty of time to meet their transition obligations.
