A modern award sets minimum pay rates and conditions for employees in a specific industry or occupation. There are over 100 of them in Australia and most businesses are covered by at least one. Here is how to find out which one applies to you and what it actually requires.
Modern awards are one of the most misunderstood parts of Australian employment law. Many small business owners either do not know they exist, assume they do not apply because they are paying above minimum wage, or have never checked which award covers their industry.
All three assumptions create risk. Here is what you actually need to know.
What is a modern award?
A modern award is a legal document that sets out minimum pay rates and employment conditions for a specific industry or type of work. Modern awards sit on top of the National Employment Standards and cannot reduce NES entitlements. They cover things like:
- Minimum hourly and weekly pay rates for different classification levels
- Penalty rates for weekends, public holidays, and overtime
- Allowances for specific types of work
- Break entitlements
- Rostering and notice requirements
(Fair Work Ombudsman — Modern Awards)
How many modern awards are there?
There are more than 100 modern awards in Australia covering most industries and occupations. Some of the most common ones for small businesses include the General Retail Industry Award, the Hospitality Industry General Award, the Clerks Private Sector Award, the Building and Construction General On-site Award, and the Professional Employees Award.
Does a modern award apply to my business?
If your business is in the national workplace relations system, which covers most private sector businesses in Australia, a modern award almost certainly applies to at least some of your employees. The exceptions are employees on registered enterprise agreements, some high-income employees, and certain senior managers.
The Fair Work Ombudsman has an award finder tool that lets you search by industry and job role. (Fair Work Ombudsman — Find My Award)
“Paying someone above the award minimum wage does not mean the award does not apply. The award also sets penalty rates, allowances, and conditions. Paying $30 an hour to a retail worker does not mean you can ignore the Saturday penalty rate.”
What happens if I get it wrong?
Underpaying an employee under their applicable award is a serious matter. The Fair Work Ombudsman has broad investigative powers and can require back payment of wages, interest, and impose significant penalties on businesses found to have underpaid workers. Wage theft is also now a criminal offence in several Australian states.
Underpayment is often not deliberate. It happens when businesses do not know which award applies, or when pay rates are set once and not updated as award rates increase each year. The Fair Work Commission reviews award rates annually, with changes typically taking effect on 1 July each year.
What do I need to do?
- Identify which award or awards cover your employees using the Fair Work award finder
- Check that current pay rates meet or exceed the award minimums for each classification
- Review penalty rate obligations for weekends, public holidays, and overtime
- Update pay rates each July when new award rates take effect
- Reference the applicable award in employment contracts
What if I have been underpaying without knowing?
If you discover an underpayment, the best approach is to self-correct quickly. Calculate the shortfall, pay it back with interest, and fix the underlying process. Voluntary self-disclosure to the Fair Work Ombudsman is treated more favourably than underpayments discovered through complaints or audits.
Jigsaw HR can help you identify which awards apply to your business, review your current pay rates, and set up a process to stay compliant as rates change.
Not sure if you are paying your team correctly? Jigsaw HR can do a compliance review. Book a free call to get started.