An employment contract provides the terms and conditions which govern the relationship of employment between the employer and the employee. An employment contract can be in writing, in oral or can be inferred from the conduct of the parties. However, it is always advisable to have a written document which records an employee’s terms and conditions in writing and serves as a useful instrument at times of dispute.

An award is defined as the minimum terms of employment in an industry or occupation such as wages, penalty rates, leave entitlements, working conditions and other aspects of the employment relationship.

A written contract of employment may provide for wages and conditions of employment which are over and above the prevalent award system in a particular industry or organisation. The terms and conditions in the employment contracts can be changed and updated at any time. A contractual arrangement can provide the employer and employee the due flexibility needed for business operations.

Modern Awards System

The national workplace relations system encompasses most of the businesses in Australia and employers and employees governed by it mandatorily need to comply with modern awards that apply nationally for industries and occupations. The Australian Industrial Relations Commission (AIRC) consolidated most of the existing awards into industry or occupation based categories to reduce the confusion surrounding proper minimum employment entitlements. Most industries are subject to the modern award system from 1 January 2010 onwards.

In employment law the modern awards system provides for industry or occupation based minimum employment standards which are applicable in addition to the National Employment Standards (NES). NES provides for a safety net of 10 minimum conditions for all employees coming under the national workplace relations system. However, only a few specific conditions of NES apply to casual employees.

Modern awards have replaced the old Federal and State awards. Since 1 January 2011, modern awards have also replaced Division 2B State awards.

Employment Contracts and Awards – the Interrelation

It should be borne in mind by every employer that mere signing of an employment contract does not mean that the employee will not be governed by the minimum conditions provided in the relevant award and the NES. A contract cannot take away the rights of employee which are a part of their minimum legal entitlements. Thus, these standards will continue to apply and override any employment contract in place which provides lesser entitlements than the applicable award or NES.

In case, an employment contract provides 5 days of sick leave per year, the employee will still be entitled to get his or her due 10 days of personal leave, including sick leave, as provided in the NES. If it is found that the applicable award provides for a much more beneficial entitlement for the employee the award system will be applicable instead of NES.

Executive Employment

The situation is slightly different for employees who are managers or high-income earners. They may not be covered by the modern award applicable to the industry they work with. Such employees who do not get modern award entitlements are those who have agreed to a written guarantee of annual earnings which is more than $123,300.

Feel free to contact our team of experts at Owen Hodge Lawyers for details.

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