Have you been tasked with formalising an employee’s position? It can seem like a daunting process, especially when faced with terms such as contracts, agreements, awards and employment standards. The HR Dept can help simplify this complex situation, starting by explaining each concept:
Employment Contracts
Employment contracts are formal agreements that establish the agreed terms and conditions of an employment relationship. They should clarify at least:
- Position title
- Working hours
- Remuneration
- Notice periods
- References to any Modern Award or Enterprise Agreements that may apply (more of these later!)
It’s important to note that employment contracts can’t contain anything less than what is set out by the NES.
An employment contract can be in writing, a spoken agreement, or can be inferred from the conduct of the parties. However, we always recommend having a written document that records an employee’s terms and conditions in writing.
National Employment Standards
The NES lists the 11 minimum conditions for all employees under the national workplace relations system. These conditions are:
- Maximum weekly hours of work
- Requests for flexible working arrangements
- Casual conversion
- Parental leave
- Annual leave
- Personal/carer’s leave and compassionate leave and family and domestic violence leave
- Community service leave
- Long-service leave
- Public holidays
- Notice of termination and redundancy pay
- Fair Work Information Statement
If a workplace agreement or an employment contract is put in place, it must contain all of the entitlements in the NES. Employers can’t provide employment conditions to employees that are less than the NES.
Modern Awards System
The Modern Awards System came into play on 1 January 2010. In employment law, the modern awards system provides for minimum employment standards which are applicable in addition to the National Employment Standards (NES). Modern Awards outline the entitlements of employees including wages and conditions based on industry and occupation
The situation is slightly different for employees who are managers or high-income earners. They may not be covered by the modern award applicable to the industry they work with specifically if they earn more than $183,100 per annum.
There are currently 122 Modern Awards covering the majority of employees in Australia.
Within any business, employees are probably going to be covered by different Modern Awards, depending on their role in the company.
Enterprise Agreement (EA) or Enterprise Bargaining Agreement (EBA)
EAs and EBAs are collective agreements that go through a rigorous application and approval process through the Fair Work Commission.
They set out the minimum terms and conditions of employment in addition to any applicable Modern Awards – while they can override an award, they cannot contain anything less than the NES.
Enterprise agreements must meet the ‘better off overall test’ (BOOT) when compared to the relevant award. In reality, this means that the employee must be better off financially when entering into the agreement than they would have been under a Modern Award.
Enterprise agreements must have an expiry date of no more than four years from the date of approval of the agreement by the Fair Work Commission.
A dispute resolution clause, a consultation clause and flexibility clause are also compulsory.
Need more clarification around employment contracts? The HR Dept can help!