What if no award or agreement applies?
It is possible that an employee will not be covered by an award or an agreement. These employees are called “award/agreement free”.
Where do award / agreement free employees work?
Award/agreement free employees can appear in any business, even if most of the other employees are covered by an award or an agreement. Generally, this will be because the terms of an award or agreement do not extend to cover a particular employee and/or their role.
What are the most common types of award / agreement free employees?
The most common types of award/agreement free employees are those employed in professional roles (such as lawyers and accountants) or senior managers (such as regional or national managers, or chief executive officers).
Some awards and agreements extend to employees at these high-level roles, so care must be taken before deciding to treat an employee as award/agreement free.
Even though an employee may be award/agreement free, some minimum statutory entitlements continue to apply, specifically the National Minimum Wage Order and the National Employment Standards.
The National Minimum Wage Order
The National Minimum Wage Order is made by the Fair Work Commission (FWC) each financial year, usually taking effect from 1 July each year.
The National Minimum Wage Order sets the minimum wage that can be paid to any award/agreement free employee. At the same time as making the National Minimum Wage Order, the Fair Work Commission also changes the minimum rates of pay specified in awards by a similar amount.
Quite often, award/agreement free employees are paid above the national minimum wage for reasons including:
- industry custom and practice around payment of wages for that profession;
- the required level of skill and responsibility for a role; and
- the effect of supply and demand on the market rates for a role.
Can I pay an employee less than the National Minimum Wage Order?
There are penalties if an employer fails to pay an award/agreement free employee at least the amount specified in the National Minimum Wage Order. Such underpayments can lead to penalties of up to tens of thousands of dollars for employers.
National Employment Standards (NES)
Award/agreement free employees also have access to the NES provided for in the Fair Work Act 2009 (Cth). This includes:
For all employees
National Employment Standards
- a right to refuse to work “unreasonable” additional hours beyond their maximum weekly hours (i.e. 38 hours for a full-time or casual employee);
- up to two days’ unpaid carer’s leave for each occasion that the employee needs to take time off to care for a family member or member of their household;
- up to two days’ paid compassionate leave for each permissible occasion (the death of a member of the employee’s family or household); and
- up to five days’ unpaid family and domestic violence (DFV) leave over a 12-month period for an employee experiencing DFV to deal with the impact of DFV.
For all employees, except for casual employees
National Employment Standards
- entitlement to notice of termination, and redundancy pay in certain circumstances;
- up to two weeks’ (76 hours) paid personal leave per year;
- up to four weeks’ (152 hours) paid annual leave per year; and
- the entitlement to be absent, without loss of pay, on public holidays.
The effect of contracts
As mentioned above, award/agreement free employees are often paid above the national minimum wage. These above-minimum rates of pay are typically recorded in a contract.
A contract can be written or verbal.
A verbal contract is just as binding as a written contract; however, where a contract is purely verbal, it may be harder to prove what terms and conditions of employment were agreed.
Where an employee (whether or not they are award/agreement free) has a contract that specifies a rate of pay above the minimum set by the National Minimum Wage Order or another instrument, they have a contractual right to be paid that specified amount.
Where an employee is paid more than minimum wage set by the National Minimum Wage Order (or another instrument), but less than the amount specified in their contract, they can sue their employer for breach of contract.
What if my employees are covered by awards/agreements?
To identify whether your employees may be covered by a modern award or agreement, click the relevant link below.
