By King & Wood Mallesons

How are employment terms and conditions regulated in Australia?

The terms of employment of workers in Australia are primarily regulated by legislation and also, for certain classes of workers, by industrial awards or workplace agreements. The common law of employment also has an important role.

Sources of employment terms and conditions

Australian employees’ salary and conditions are determined by the following sources:

Federal legislation

The Fair Work Act 2009 (Cth) (FWA) is the key piece of legislation governing workplace relations in Australia. It applies to the vast majority of Australian employers, including all trading corporations. It includes rules relating to:

  • unfair dismissal;
  • protections from “adverse action”;
  • industrial instruments (industrial awards and enterprise agreements);
  • collective bargaining;
  • industrial action;
  • industrial unions;
  • transmission of business;
  • sham contracting; and
  • the Federal industrial tribunal known as the Fair Work Commission.

The FWA contains minimum entitlements relating to:

  • wages;
  • annual leave;
  • personal and carer’s leave;
  • parental leave;
  • maximum hours of work;
  • public holidays;
  • notice of termination of employment;
  • severance pay where employment is terminated due to redundancy;
  • community service leave;
  • enhanced parental leave;
  • a Fair Work Information Statement; and
  • for some parents or carers – a right to request flexible working arrangements.

Each of the matters mentioned above forms part of the “National Employment Standards” in the FWA (other than wages, which are dealt with separately).

Industrial awards and workplace agreements

Awards are industrial instruments which have been created by an industrial tribunal. Under the Federal system there are around 120 awards which cover certain employees working in particular industries (e.g. the Banking, Finance and Insurance Award), or particular occupations (e.g. the Clerks – Private Sector Award). They specify minimum terms and conditions of employment for certain classes of workers. An employer cannot generally contract out of those minimum conditions of employment, which usually include:

  • minimum rates of pay, including overtime and penalty rates;
  • hours of work;
  • types of leave; and
  • the regulation of termination of employment (e.g. notice and redundancy pay entitlements).

Awards may be supplemented or overridden by collectively negotiated enterprise bargaining agreements. These agreements enable employers to set appropriate terms and conditions of employment tailored to their particular enterprise. The FWA permits employers to negotiate collective enterprise bargaining agreements and requires parties to bargain in good faith when negotiating such agreements.

Common law

All employees, regardless of whether or not they are covered by an award or enterprise agreement, will have a common law contract of employment (whether written or unwritten). For employees not covered by awards, the contract of employment is the principal source of obligations between the employer and the employee. A contract of employment can and often does provide for benefits in excess of the minimum standards required by labour laws.

Compulsory superannuation

Under Federal legislation, employers are required to make compulsory superannuation contributions to complying superannuation funds on behalf of their employees. The minimum contribution rate is 9.5% of the employee’s salary or wages (capped to a maximum contribution in respect of high earning employees) and may increase gradually over the years.

Workers’ compensation

State and Territory laws also regulate the obligations of an employer to provide workers’ compensation payments to employees suffering from work-related injuries or diseases.

Depending on the system applicable in the relevant State, employers are either required to contribute a levy to the State or to keep and maintain insurance cover for the full amount of the employer’s statutory liability.

Work health and safety

State and Territory laws impose strict obligations on employers to ensure the health, safety and welfare of employees and other people in the workplace or affected by the employer’s undertaking. A breach of these obligations means that the employer and its managers and directors are exposed to prosecutions and significant monetary penalties.

Health and safety laws have been harmonised in recent years so that the legislation is essentially the same in each State and Territory except for Victoria and Western Australia which have not adopted the harmonised laws.

The laws impose a positive obligation on officers (i.e. directors and senior managers) of a business to exercise due diligence to ensure the business is complying with its obligations under the health and safety legislation.

Equal employment opportunity

Federal and State laws also:

  • prohibit discrimination against employees and job applicants on certain grounds including race, sex, pregnancy, age, sexual preference, politics, religion, trade union membership or disability;
  • make provision for equal opportunity and affirmative action in respect of the employment of women, and impose reporting requirements on workforce gender ratios (but do not impose quota requirements); and
  • prohibit sexual harassment and vilification in the workplace and render employers vicariously liable for the unlawful conduct of employees.

Industrial disputes and union coverage

Labour laws provide for limited conciliation and arbitration of industrial disputes by the Fair Work Commission. Industrial action which is protected by law is permissible in certain limited circumstances in support of bargaining for a new enterprise agreement. Employee membership of trade unions is not compulsory but is very common in particular industries.

Australia’s Fair Work Ombudsman: