Formalising an employment relationship can seem daunting, especially when we hear words being thrown around like ‘National Employment Standards’, ‘Modern Awards’ and ‘Enterprise Agreements’. Most business owners are aware that they need to have an Employment Contract in place. However, not everyone is aware of how their employment contracts should relate to these Agreements/Standards; and further, how policies come into the picture?!

In order to make this process a little simpler, I have outlined what this all means, and how it all affects you, your business and your employment contracts.

National Employment Standards (NES)

The NES are the 10 minimum employment entitlements that are provided to all employees. They act as the foundation for all employment conditions, and apply to all national system employees, regardless of any Modern Award or Registered Agreements that apply.

Employers are not able to provide employment conditions to employees that are less than the NES. However, you can include clauses that improve on or provide greater provisions than outlined in the NES.

For more info on NES, please click here.

Modern Awards

Modern Awards set out the minimum terms and conditions of employment on top of the NES.

Modern Awards are industry and occupation based and typically cover employees within those particular industries and/or occupations. Some employees may not be covered by an award, and in this scenario the NES will form their minimum terms and conditions of employment.

Similar to the NES, you cannot provide employment conditions that are less favourable than those set out in your relevant awards. An employer and employee may agree to vary the application of particular terms of an award to meet the genuine needs of both parties utilising an Individual Flexibility Arrangement (IFA).

IFA’s are quite complex documents that we recommend seeking professional advice on.

For more info on Modern Awards, please click here.

Enterprise Agreement or Enterprise Bargaining Agreement

An Enterprise Agreement (EA) or Enterprise Bargaining Agreement (EBA) are collective agreements that go through a rigorous application and approval process through the Fair Work Commission.

They further set out the minimum terms and conditions of employment on top of any applicable Modern Awards – while they can override an award, they cannot contain anything less than the NES.

Similar to an award, you cannot contract out of an enterprise agreement so any contract must be at least as favourable as the agreement.

Typically, if a business is covered by an Enterprise Agreement, the conditions of a modern award are no longer relevant. Despite this, if the minimum wages set out in an agreement are lower than those in the relevant modern award, we recommend seeking an assessment to understand if your employees would still be considered better off overall.

For more info on Enterprise Agreements, please click here.

Employment Contracts

Employment Contracts are formal agreements that establish the agreed terms and conditions of an employment relationship.

It should outline everything an employee needs to know about the employment relationship, including (but not limited to!) position title, working hours, remuneration, notice periods and a reference to any Modern Award or EA’s that may apply.

You can also utilise the Employment Contract to outline arrangements in regard to matters such as post-employment obligations and confidentiality.

As previously mentioned, Employment Contracts cannot contain anything less favourable than what is set out by the NES or any applicable Modern Awards or EA. Any contractual clauses that are less favourable will likely not be deemed as enforceable.

Company Policies

Policies are an important part of an employment relationship. They clearly outline a company’s expectations around what is and isn’t acceptable in the workplace. Despite this, it is important to note that you do not need to include company policies and procedures in your employment contracts. In fact, we recommend against it. While you may refer to these documents within your contracts, we recommend that they sit separately.

There are a number of scenarios that require policies by law (such as Workplace Surveillance and Whistle-blower Laws).

In other instances, it is simply best practice to have certain policies in place to clearly define what appropriate behaviour looks like in the workplace, as well as to provide guidance to employees.

Policies should clearly outline who the policy applies to, and should clearly outline what will happen if the policy is not adhered to. You should ensure you avoid using promissory wording such as ‘will’ and ‘won’t’, and instead use words such as ‘may’.

While there are many components that can come into play, it is important to ensure you clearly understand your obligations in regard to these, and how they affect the employment relationship.

If you ever have any questions, or require assistance in this area, please reach out to us on 1300 092 887.


Photo by Mari Helin.

Author: wattsnext Group
The wattsnext Group blog is a compilation of ideas and expertise from the entire team, past and present with a few added gems from guest authors from time to time. With this collaborative approach, we can provide you with a broader perspective and high-level expertise across the small business landscape.

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