Modern Awards in Australia: What They Are, Who’s Covered, and What ‘Award Free’ Really Means

Confident you’re paying your staff correctly? That you know when overtime applies or what records you need to hold if you pay an annual salary rather than an hourly rate? What if you feel your employees aren’t covered by an Award? Or if there are alternatives to Awards? For many business owners, understanding Modern Awards is akin to navigating your way through a mine field: one wrong step and boom!: disputes with employees, explaining yourself to the Fair Work Ombudsman or arguably more painful and time consuming: responding to an employee’s claim lodged through a workplace lawyer.

In this article, we’ll explain what Awards are and cover some “need to knows”…including what “award-free” actually means. For the short time investment reading this piece we guarantee you’ll walk away knowing at least one new thing about Awards…and who knows how much time, expense and drama you can save with that information?

Key Takeaways:

• Awards set minimum rates of pay and entitlements: Modern Awards are legal documents that define terms and conditions for an industry or occupation.
• It’s about the job: an award applies based on an employee’s duties, not just a position title or your business type.
• Awards vs. Agreements: an employee cannot be covered by both a Modern Award and an Enterprise Agreement at the same time.
• “Award-free” doesn’t mean “rule-free”: even when an Award doesn’t apply (and this is not common), employees are still protected by the National Employment Standards and the terms within their employment contract.
• Getting tailored advice is smart: the simplest way to ensure compliance for your business is with professional, tailored support from a HR expert.

What Are Modern Awards In Australia?

A Modern Award is a legal document that outlines the wages and conditions of employment for employees within a particular industry or occupation. The word “modern” refers to the introduction of these Awards under the Fair Work Act 2009 as part of a national system to replace thousands of existing federal and state Awards with a single set of consolidated, up-to-date awards for each industry and occupation.

Awards are created and maintained by the Fair Work Commission; Australia’s national workplace relations tribunal. Awards include information such as:

• Minimum wage rates, including penalty rates for evenings, weekends, and public holidays
• Overtime and allowances
• Hours of work and breaks
• Types of leave (e.g., annual leave, sick leave, family and domestic violence leave)
• Notice periods for ending employment and redundancy situations
• Consultation obligations before significant workplace change occurs
• Terms and conditions when offering annualised wage arrangements (if applicable)

How Do I Know Which Award Applies To My Business?

This is where it can get tricky, even for those with experience. With over 120 Modern Awards in Australia, one common mistake is assuming an Award applies based only on your business type. In reality, it’s more about the employee’s duties: the principal purpose of the role. And even a small business can have employees covered by multiple Awards.

Example? A small medical day procedure centre employing two doctors, two medical receptionists and nurse.

While doctors can often be Independent Contractors, they can also be employees. A doctor in a day procedure centre has coverage under the Medical Practitioners Award, Medical Receptionists are typically covered under the Health Professionals and Support Services Award and Nurses can have coverage under the Nurses Award. Five employees covered by three Awards: all with different hourly rates, overtime, penalty rates, allowances and loadings. Hope you’ve got a good payroll person!

One simple starting point to determining what applies is through the Fair Work Ombudsman’s online Find My Award portal. Using this tool helps you classify your employees correctly and avoid costly mistakes.

What’s the Difference Between a Modern Award and an Enterprise Agreement?

This is a point of confusion for many business owners. Enterprise Agreements (a type of registered agreement approved by the Fair Work Commission) are often similar to awards, but they cover a single business or group of related businesses, rather than an industry or occupation. The term “Enterprise Agreement” and “Collective Agreement” are often used interchangeably.

Here’s our take on some key differences between Awards and Enterprise Agreements:

An Enterprise Agreement replaces the Modern Award for the employees it covers. The Fair Work Commission assesses the Agreement to ensure it meets legal requirements and that employees are better off overall under the Agreement compared to the relevant Modern Award.

While an Enterprise Agreement can offer benefits such as flexible conditions tailored to the organisation and simplification of terms of employment (especially if an organisation hires employees under multiple different awards), make no mistake: making an enterprise agreement is a complex and time-consuming process that requires thorough preparation, strict adherence to legal timeframes, and careful negotiation with employees and potentially, unions. Added challenge? Renegotiating an Enterprise Agreement often needs to occur at least every 4 years;

Our personal opinion? For a small business, working within the Award system – as challenging as this can often be – is often simpler than going down the Enterprise Agreement path.

Who Is Not Covered by a Modern Award?

Not all employees are covered by an Award or registered agreement. These are known as ‘Award-free’ employees.

• Award-free roles can include:
• Senior managers and executives (and there is specific criteria around what defines an Award-free manager so having the title “manager” doesn’t automatically equate to being Award free)
• A small number of professional roles such as qualified accountants, lawyers (but not those working in legal support roles), HR, certain IT professionals and a few others.
• Some highly paid employees who exceed the high income threshold (currently $183,100 per annum), depending on their role and specific content within Employment Contract

It’s important to understand that “Award-free” doesn’t mean “rule-free”: these employees are still entitled to the protections and entitlements outlined in the National Employment Standards (NES), which comprise the current 12 minimum standards applicable to all employees covered in the national workplace relations system.

Our advice if you think you may have Award-free employees? Do your research. If you misclassify an employee as Award-free when they’re really not, you’re exposed to penalties for non-compliance as well as potentially having to backpay the employee their entitlements under the applicable Award.

Can I Pay Award-covered Employees an Annual Salary?

Awards have traditionally been set out to pay employees by the hour: a minimum hourly rate for ordinary hours, overtime, public holidays, loadings and allowances. And because of the myriad of combinations of days, hours and times employees can work, it can be challenging keeping track of things to ensure people are paid correctly. Enter the annual salary.

An annual salary (also known as an annualised wage arrangement) is a pre-agreed, fixed weekly, fortnightly or monthly payment made to an employee over a 12-month period that covers their minimum award wage, allowances, and potential overtime and penalty rates.

There’s several common reasons to the preference for an annualised salary option:

• it can be easier to process payroll when each employee receives a set weekly or fortnightly amount
• wages costs become more predictable
• predictable take home amount for employees

And while annualised wage arrangements can seem advantageous to both employer and employee they’re also one of the most common areas where businesses get caught out. Even for large businesses with dedicated HR and Payroll departments that you’d assume would know better. Case in point?  A fine of $10.34 million ordered against the Commonwealth Bank for their systemic underpayment of 7400 employees on individual agreements.

Bottom line? While annualised wage arrangements are not unlawful, the annualised wage must follow the rules contained in the relevant award or agreement. Read more about this here. And take advice from someone who knows what they’re talking about.

Are there Modern Awards that apply specifically to Queensland?

While Queensland has its own state industrial relations system for public sector employees, Modern Awards are national and apply across Australia. So if you’re a business owner in Queensland with private sector employees, the same Modern Awards apply to you as they do to any business in New South Wales, Victoria or South Australia.

The key is recognising that some state-based laws may still apply to certain employee entitlements. Queensland for example has specific rules for long-service leave.

Our tip? Make use of the Fair Work Ombudsman website for general information or call the Fair Work Infoline on 13 13 94 and speak to one of their representatives for guidance.

How to Stay Compliant (Without Drowning in Paperwork)

When it comes to Awards, one common mistake from business owners is assuming only one Award applies to their business. While there’s logic in this assumption, it can lead to misclassification, underpayments, and significant legal and financial risks down the line.

Whether you’re one hundred per cent confident in your knowledge, kind of sure or completely in the dark about Awards, finding a HR partner you can trust offers clear benefits:

• You’ll get guidance on which Award (or Awards!) applies to your business: and smart business decisions result from the right information
• You build compliant employment documents and user-friendly HR systems from the start.
• You can focus on growing your business, knowing your HR obligations are up to date, under control and working for you…not against you.

Bare Bones Consulting focuses on providing employers clear, practical HR advice that works in your real world.  With over 20 years of experience across a diverse range industries, we understand that every workplace is different. It’s our primary driver to offering HR support tailored to your needs…not someone else’s.

Whether you need help interpreting an Award, drafting compliant contracts of employment and policies, or resolving a complex employee issue, we’ll guide you step by step in plain language. Unlike many HR providers, we don’t lock you into subscriptions or overwhelm you with jargon – just straightforward, value-for-money HR advice when you need it.

Conclusion

Knowing which Modern Awards apply to your business is critical to running a compliant organisation…and making smart decisions. If you’re unsure which Award applies, when you can pay an annual salary, or simply want to rest easy knowing your employment documents are up to scratch, Bare Bones Consulting is just a call away.

We specialise in simple, concise advice without the jargon, lock-in contracts or hidden costs: just practical HR support tailored to your business. And you always get to speak with the Director of the business when you call…not some random representative with questionable experience.

Reach out today on 0401 279 065 and let’s make sure your workplace is compliant, protected and set up for success. Makes sense, right?