Your enterprise agreement offers above-award wages, but does the Annual Wage Review change what you must pay? Here is what you need to know.
Q. Our company recently negotiated an enterprise agreement with a nominal expiry date in approximately two years. The scale of wage rates prescribed by the agreement exceeds the minimum wage rates in the relevant awards, which underpin the agreement.
Our question relates to the recent decision by the Fair Work Commission regarding the Annual Wage Review. Does the percentage increase apply to the wage rates provided under our enterprise agreement?
A. This will depend on whether the wages rates prescribed by the enterprise agreement are greater than the appropriate minimum wage rate prescribed by the applicable modern award after the Annual Wage Review.
Annual wage review decision
The Annual Wage Review applies to all employees covered by modern awards, enterprise awards, or transitional APCSs, as well as increasing the adult National Minimum Wage and the minimum wage for juniors, apprentices, trainees, and workers with a disability.
However, it does NOT increase wage rates prescribed by an enterprise agreement. The terms of an enterprise agreement may refer to an increase consequent to the Annual Wage Review, but there is no automatic flow-on with respect to wage rates under an enterprise agreement.
Modern award wage vs. enterprise agreement
Problems can occur for the employer where the wage rates negotiated under an enterprise agreement are only slightly higher than the minimum award wages, particularly if the nominal expiry date is (say) four years. The Fair Work Act (s.206(2)) provides that if the agreement wage rate is less than the award rate, at any time, the relevant award rate applies to the agreement-covered employee. Modern award classification rates are the minimum award classification rate that can be paid under an award or an enterprise agreement.
In some cases, this may require increases from the first pay period commencing on or after 1 July in the respective year if the relevant award classification wage rate becomes greater than the relevant rate of pay under the enterprise agreement.
National Employment Standards
The National Employment Standards apply to each employee whatever the terms of the applicable enterprise agreement may state. This means that where an employee is covered by an enterprise agreement that provides terms that are detrimental to the employee compared to the National Employment Standards, the Standards will override the agreement. Minimum wage rates in all types of agreements, both enterprise agreements and transitional agreements – must not be less than the relevant minimum wage rates set out in the applicable modern award. The Fair Work Act (s.55) provides that an enterprise agreement must not exclude the National Employment Standards or any
provision of the Standards.
Bottom line
The appropriate minimum wage rate prescribed by the modern award must not override the rate prescribed by an enterprise agreement. Any term of an enterprise agreement which contravenes a term of the National Employment Standards is invalid.