Employment Agreements

Employment Agreements

Most awards / enterprise agreements require employers and employees to agree to certain things at the start of the employment relationship (e.g. whether an employee is full time, part time or casual). While complying with this obligation, an employer should also take the opportunity to set out other key requirements.

Verbal agreements can be difficult to enforce but easy to challenge.

Unless terms are contained in an employment agreement, it is possible for them to be implied. This can create uncertainty and increase legal costs if there is a dispute later on.

Employment agreements take many forms, including:

  1. Letter of Engagement (with or without standard terms of employment)

At the very least, there should be a letter of engagement which covers off on the basic issues, such as:

  • parties
  • position
  • commencement date
  • applicable Award / enterprise agreement
  • employment type (ie full time, part time, casual, daily hire, pieceworker)
  • remuneration

Standard terms of employment are often used to supplement a letter of engagement to cover off on other matters which are important to employers, including:

  • standards of service and behaviour
  • set offs
  • confidentiality
  • intellectual property
  • WH&S requirements
  • reporting requirements
  • use of equipment
  • obligations when employment ends
  • notice of termination
  1. Annualised Salary Agreements

Some Awards including: Clerks Award; Banking Finance and Insurance Award; Manufacturing and Associated Industries and Occupation Award; Legal Services Award 2010 contain annualised salary provisions.

An annualised salary clause enables an employer to pay an employee (usually “white collar” workers) an annual salary in satisfaction of minimum weekly wages, allowances, overtime and penalty rates and annual leave loading.  To be effective an annualised salary agreement should comply with the relevant Award and the salary should be high enough to absorb the relevant components.

Most Awards require an employer to pay wages, which is a rate per hour.  The rate changes when the employee workers overtime, on weekends or on public holidays.

By contrast a salary is an amount for the year, irrespective of the hours worked or whether work is performed outside ordinary hours, on a weekend or public holiday.

To work out whether the proposed annual salary covers the payment requirements, you need to model your expectation to satisfy yourself it absorbs the minimum payment obligations.  You should keep track of hours and redo the modelling progressively throughout the year to ensure you continue to comply.

If you need assistance with this modelling or auditing, please contact us.

  1. Individual Flexibility Agreements (IFA)

An IFA is a particular type of agreement which is allowed in most Awards and Enterprise Agreement. It allows an employer and employee to agree to vary the application of certain parts of an award/enterprise agreement (e.g. when hours are worked, overtime rates, penalty rates, allowances and leave loading).

There are strict rules that need to be followed for this type of agreement and there is an obligation on an employer to demonstrate how the employee will be “better off overall” (BOO Test).

  1. Guarantee of Annual Earnings (high income employees)

An employer can enter into a written undertaking to pay a high income employee a guaranteed amount of money for a specified period.

Any applicable modern award ceases to apply to an employee while the guarantee is in place, but re-applies when the guarantee ends.

  1. Enterprise Agreements

Many workplaces are governed by a number of modern awards – which are industry or occupational specific. For administrative ease, an enterprise agreement can be made about terms and conditions of employment between employers and employees at the enterprise level.

With an Enterprise Agreement a union will be the default bargaining agent of employees.

There are strict rules which require employers to bargain in good faith, notices to be given within stipulated timeframes, permitted content, voting and the application to the Fair Work Commission for approval.

One of the benefits of an enterprise agreement is that it can be tailored to meet the needs of a particular enterprise. This type of agreement can include a range of matters, such as:

  • Rates of pay;
  • Employment conditions;
  • Consultative mechanisms;
  • Dispute resolution procedures; and
  • Deductions from wages for purposes approved by employees.

There is a technical process to follow in order to get the agreement approved by Fair Work Australia.

Policies and procedures

A policy or procedure is a direction to an employee.

They are used to clarify an employer’s expectation, particularly in relation to conduct and behaviour. Non-compliance with a policy or procedure can be used to manage unacceptable conduct or behaviour.

Effective employment agreements, policies and procedures, when consistently followed, assist employers in defending a range of claims including:

If you would like us to prepare employment agreements, policies or procedures for you, please contact our Toowoomba Lawyers.

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