Review confirms award rates below NMW not suitable for ongoing employment

In April, a Full Bench of the Fair Work Commission handed down its decision in a long-running review of entry-level classifications contained in 70 Modern Awards. As of July 2023, these classifications attach rates which fall below the National Minimum Wage (NMW). The decision confirmed the provisional view that such classifications – principally based on the C14 level within the Manufacturing Award – should have purely “transitional” application to new entrants, meaning progression to a higher classification level will become essential upon completion of an initial period of employment.

The review into the lowest classification levels within the identified awards commenced in 2019 but gathered momentum following the decision in the 2022-23 Annual Wage Review, which saw the NMW re-aligned to equate to the C13 level within the Manufacturing Award, being the level above the C14 (which had historically been the reference point for the NMW). The decision to align the NMW with the C13 classification meant that the NMW exceeded award rates applicable to the C14 classification from ppc 1 July 2023, creating a disparity not previously encountered, in which unskilled entry-level employees captured by 70 Modern Awards could lawfully be subject to a rate of pay lower than the NMW (which is the minimum rate applicable to award-free workers).

Having determined that changes must be made to ensure employees captured by a Modern Award could not remain indefinitely subject to a rate of pay which falls below NMW, the Full Bench observed in its provisional conclusion that:

“We consider as a general proposition that a fair and relevant safety net of terms and conditions requires that the C13 rate be the lowest rate applicable to ongoing employment that extends beyond an initial phase of induction, training and basic skills acquisition”.

To achieve the desired outcome of the lowest rate for ongoing employment matching the NMW, Modern Awards containing a classification attaching a rate below the NMW are set to be varied as follows:

(NOTE:  the following summary has been limited to Modern Awards of relevance to ES Subscribers).

Awards NOT requiring variation

During the exhaustive review, the Commission identified 20 Modern Awards that contain an entry-level classification attaching a rate below NMW which will not require any further amendment. This is because the entry-level classification is already clearly identified as representing an introductory level which can only be applied for a maximum period (often three months employment) before progression to the next level is required. Modern Awards in this group include the Hospitality Industry (General) Award 2020, Registered and Licensed Clubs Award 2020, Gardening and Landscaping Services Award 2020, Nursery Award 2020 and Premixed Concrete Award 2020.

Awards to be increased in line with NMW

A small number of Modern Awards which contain an entry-level classification attaching a rate less than NMW will retain their existing classification definitions but have the lowest rate INCREASED to match the NMW. Included in this group are the Children’s Services Award 2010 (with respect to the Children’s Services Employee – 1.1 and Support Worker – 1.1 classifications), the Business Equipment Award 2020 (Technical Employee – Level 1), and the Electrical, Electronic and Communications Contracting Award 2020 (Electrical worker grade 1).

Awards to have classification definitions refined

Most Modern Awards containing an entry-level classification attaching a rate lower than the NMW will have their classification definitions refined to clarify that the lowest classification can only apply for a limited time before progression to the next highest classification becomes essential.

In many cases, including with respect to the C14 classification within the Manufacturing Award, progression to the next classification will be required upon completion of a maximum of three months’ employment. Modern Awards in this category also include the Vehicle Repair, Services and Retail Award 2020, Amusement, Events and Recreation Award 2020, Animal Care and Veterinary Services Award 2020, Food, Beverage and Tobacco Manufacturing Award 2020, Graphic Arts, Printing and Publishing Award 2020, Joinery and Building Trades Award 2020, Pastoral Award 2020 (in respect of piggery attendants), Textile, Clothing, Footwear and Associated Industries Award 2020 and the Timber Industry Award 2020.

In a small number of Modern Awards, including the Concrete Products Award 2020, Cement, Lime and Quarrying Award 2020 and the Fitness Industry Award 2020, progression off the entry-level classification will become essential upon completion of a maximum of six months employment.

Next steps

The Commission will publish draft determinations varying the 70 Modern Awards in line with their provisional conclusion. Parties will then have four weeks to comment on the draft determinations before the variations are finalised. The intended operative date of all proposed changes is 1 January 2025.