Modern Award “phasing in” process

Modern awards are one the biggest issues that many employers are grappling with at the moment.

Almost all modern awards include provisions to ’transition’ employers and employees from their pre-modern award entitlements to the modern award system. This transition period begins on 1 July, 2010 so it is important for employers to check their modern award to determine what, if any, transitional arrangements apply to relevant employee(s).

However, employers need to approach this transition period with great care as even lawyers and employer associations are finding the exercise to be confusing.

For example, for most employers, the model transitional provisions set out in their modern award provide for the ‘phasing in’ of increases or decreases in certain monetary entitlements. This process is referred to by Fair Work Australia as ‘phasing’ and the entitlements that are affected are referred by them as ‘transitional’ (e.g. ‘transitional wage rate’) and is as follows:

Modern Award phasing process

The phasing process is to be accomplished in five set instalments over four years (20% per year) beginning from the first full pay period on or after 1 July 2010 and ending at the first full pay period on or after 1 July 2014, when modern award rates apply in full.

This means that until 2014, wage, loading and penalty entitlements under modern awards will change on the first pay period on or after 1 July each year, and need to be recalculated accordingly.

However, for those who moved into the national system because of a referral from a State government (e.g. non-trading corporations, sole traders and partnerships in New South Wales, different rules apply and these rules depending on whether the employer’s business and / or the type of work that its employees perform was covered by a State award immediately before 1 January 2010. For example, for those with employees covered by State award, these Award terms and conditions will continue to apply in full until 31 December 2010 (as a “Division 2B State award”). The modern award will start to apply to these employees from 1 January 2011.

For more information about arrangements for employers and employees moving into the national system from a State system, the Fair Work Infoline can be contacted on 13 13 94.

The AiG case will seek to clarify two of the FWO’s interpretations of the transitional provisions – that overtime isn’t subject to phasing arrangements and that employers have to seek employees’ agreement to absorb over-award payments.

We will let our readers know of the outcome of this case when it comes to hand.

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