A Guide To Modern Awards For Business Owners

July 10, 2024

Table of Contents

In Australia, modern awards play a significant role in regulating employment conditions and wages for employees under the Fair Work Act 2009. As a business owner, it is important to understand what modern awards are and how they can affect your business operations.

But what exactly are modern awards? How do they work and how can you ensure that your business is compliant with them? This guide aims to answer these questions and provide a comprehensive overview of modern awards for business owners.

What are Modern Awards?

A modern award is a legal instrument that sets forth the baseline terms and conditions of employment across particular industries or job categories. It binds both employers and employees who engage in activities governed by the award, ensuring a standardized approach to employment conditions. These awards outline crucial employment entitlements including:

  • Pay: This refers to the gross wage or hourly rate employees must pay for their work. Modern awards stipulate the minimum pay rates, ensuring fair compensation based on the classification of the employees and the industry they work in.
  • Hours of work: These are the standard hours an employee is required to work each week, which typically includes the maximum number of ordinary hours before overtime becomes payable.
  • Rosters: Modern awards determine how work rosters should be organized, including notice periods for changes and any necessary consultation with employees.
  • Breaks: This encompasses both meal and rest breaks, specifying the duration and frequency of breaks employees are entitled to during their work shifts.
  • Allowances: These are additional payments made to employees to cover work-related expenses or special conditions, such as travel expenses, tools, uniforms, or working in hazardous environments.
  • Penalty rates: These are higher pay rates that apply for work performed outside of normal hours, such as on weekends, public holidays, or late-night shifts.
  • Overtime: This refers to the extra hours worked beyond the standard weekly or daily hours. The award provides for the payment of overtime rates to compensate employees for these additional hours.

If no specific award covers an employee, they’ll fall under the National Employment Standards (NES), which establish the minimum employment conditions. However, if an applicable modern award exists and it includes more favourable minimum entitlements than the NES, the business must adhere to the award to ensure that employees receive the superior benefits.

Why is it Essential for Business Owners to Understand and Adhere to Modern Awards?

As a business owner, a crucial part of managing your workforce involves accurately applying awards. It’s your responsibility to identify any relevant awards for your employees and ensure ongoing adherence to these regulations. Failure to do so can lead to significant consequences, including substantial fines from the Fair Work Ombudsman—up to $63,000 for corporations and $12,600 for individuals as of this article’s publication date. Additionally, inaccuracies can result in underpayment claims and other entitlement issues.

Remember that company directors can be held personally accountable for certain breaches and damages claims, meaning the corporate veil won’t always shield directors when it comes to compliance with employment laws.

Another critical consideration is the potential for significant reputational damage. This risk was starkly illustrated in the public downfall of George Colombaris’ Made Establishment company. Non-compliance can harm your business’s reputation both internally, with your employees, and externally, with customers, clients, and other stakeholders. Therefore, understanding and adhering to modern awards is not just a legal requirement but also a business imperative.

How Can I Work Out Whether A Modern Award Applies To My Business And Various Employees?

To determine the appropriate award for each position within your business, start with Fair Work Australia’s Award Finder. This resource enables you to input job titles and industries, helping to identify the relevant award. Should your search yield no results, you can access a comprehensive list of awards on the Fair Work Website here.

After identifying potential awards, it’s crucial to examine two main sections of each award:

  • The coverage clause (usually clause 4): Every award contains a ‘coverage’ clause detailing the categories of employers and employees it applies to, along with any exceptions. This clause is key to determining if your business or specific roles within it are governed by the award.
  • The job classifications (in the pay clause or schedule): The classifications clause defines how to determine an employee’s level and minimum entitlements. If an employee ranks above the highest classification level, the award might not apply. Review the classifications to see where each role fits. If unsure about a classification, apply the more senior level to avoid underpayment risks. This step ensures compliance and protects your business from potential legal and financial issues.

What If I Can’t Find A Modern Award That Applies To My Business?

 If no specific industry modern award covers your business, there are three broader awards you should be aware of:

  • The Miscellaneous Award 2010: Acts as a universal safety net for Australian employers whose operations aren’t covered by any other modern award. This award is crucial when evaluating the appropriate award for a position because of its extensive reach, potentially including employees not addressed by other specific awards.
  • The Manufacturing Industries and Occupations Award 2010: Targeted at businesses in manufacturing and related fields, this award also includes various other specified occupations.
  • The Professional Employees Award 2010: This is primarily for professionals in fields like engineering, science, and information technology.

Are Managers And Higher-Income Employees Covered?

Even if an industry has a corresponding modern award, it might not apply to higher-income managers or employees. An employee is considered to have a higher income if they have agreed to and receive an annual salary that exceeds the high-income threshold, which is currently set at $167,500 annually.

The calculation of this income includes the value of non-cash benefits. However, it excludes variable payments like commissions and overtime and statutory superannuation contributions, which cannot be predetermined.

Final Thoughts

Determining which modern award applies to your business can be a complex task. It is important to do thorough research and consult with legal professionals if needed, as not complying with the applicable award can result in significant penalties for your business.

It is also important to regularly review and update your compliance with modern awards, as they are subject to change over time. By staying informed and up-to-date, you can ensure that your business is operating within the law and treating your employees fairly.


  1. Can an employee be covered by multiple modern awards?

    Yes, an employee can be covered by multiple modern awards if they perform duties that fall under different award classifications. In this case, the employee is entitled to the most favourable provisions from each award.

  2. Can an employer and employee agree to not follow a modern award?

    No, employers and employees cannot agree to disregard or opt out of a modern award. Modern awards are the minimum standards that must be followed in terms of pay, leave entitlements, and working conditions for employees covered by that award.

  3. Can an employer pay their employees less than the minimum wage stated in a modern award?

    No, employers must pay their employees at least the minimum wage stated in the applicable modern award. This is a legal requirement, and paying employees below the minimum wage can result in penalties for the employer.

  4. What should I do if my business is not covered by a modern award?

    If a modern award does not cover your business, you are still required to comply with the National Employment Standards (NES) under the Fair Work Act. The NES outlines minimum entitlements for all employees in Australia, including maximum weekly hours, annual leave, personal and carer’s leave, and notice of termination.

  5. How can I ensure my business is compliant with modern awards?

    To ensure your business complies with modern awards, you should regularly review and update your employment contracts and policies to reflect changes in award rates or conditions. It is also important to keep accurate records of all employee hours worked and any additional payments, such as overtime or penalty rates. Seeking advice from a legal professional can also help ensure compliance with modern awards.

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