The Fair Work Commission’s (FWC) 2023-24 Modern Awards Review addresses the need to simplify a system that has long been characterised by its complexity. Modern awards, which govern the minimum terms and conditions of employment in Australia, are critical to maintaining fair practices in the workplace. However, the sheer complexity of these awards has been a significant challenge for employers for many years, especially small and medium-sized enterprises (SMEs). This complexity arises from historical, technical, and operational factors that have evolved over time, making the system hard to navigate and compliance difficult.
In this article, we explore the FWC’s efforts to make modern awards easier to use and understand, the factors contributing to their complexity, and the implications for business owners. On closer examination, it becomes evident that simplifying the awards is not just a matter of legal reform but also involves addressing deep-seated issues within the system.
Understanding the modern awards system
To appreciate the need for simplification, it’s essential to first understand what modern awards are and how they fit into the broader framework of employee entitlements in Australia.
Modern awards are industry-specific instruments that set out the minimum terms and conditions for employment beyond those provided by the National Employment Standards (NES) (which apply to all non-award workers). These conditions cover various aspects such as pay, hours of work, rosters, breaks, allowances, penalty rates, and overtime. Awards cannot provide for conditions less than those contained in the NES.
The award system is inherently complex. There are over 100 different awards and each award is tailored to specific industries or occupations. Employers must ensure that their workforce management procedures and systems align with the specific requirements of any applicable awards, and make regular updates to reflect changes. This process is further complicated because:
- an employer may employ staff in different roles who are subject to different awards; and
- there are nuanced differences between awards, even those that apply to similar industries.
Layers of complexity
Why is the interpretation of industry awards so complex in Australia? The answer, much like the awards themselves, is layered. Several factors contribute to this complexity, each adding a new layer to the already intricate system.
Historical dynamics: the modern awards system is deeply rooted in Australia’s historical industrial relations framework. Over time, these awards have evolved, incorporating various amendments, updates, and interpretations that have added layers of complexity. Each change, while intended to address specific issues, often complicates the system further, creating a labyrinth of rules that employers must navigate.
Technical requirements: modern awards are not just legal documents. They are technical manuals that require precise implementation within a company’s workforce management system.
The conditions outlined in these awards are often interrelated, meaning that a change in one provision can have cascading effects on others. For example, altering the calculation method for overtime can impact how penalty rates or allowances are calculated, necessitating a comprehensive review of the entire award application.
Human interpretation: Awards are typically drafted by legal experts and can be filled with complex, legalistic language that is difficult to interpret without a degree of legal literacy. This complexity can lead to incorrect interpretations and implementations, resulting in non-compliance and the need for costly remediation. While modern awards have made strides towards plain English, they still remain far from simple.
Operational Differences: Operational differences mean that no two businesses are the same, even when they fall under the same award. Things like the way in which shifts are managed or how time in lieu is accrued and paid, mean that one business may apply the same award conditions differently to another business.
This individualisation can lead to further complexity, particularly for larger organisations that must align their business processes with both the award requirements and their operational needs.
Factors at Play
Beyond the structural complexities, both human and technical factors contribute to the challenges businesses face in interpreting and applying modern awards.
Human factors: The interpretation and implementation of award conditions often fall to business owners, or HR and payroll teams, who may lack the legal expertise required to fully understand these documents. Further, the sporadic nature of award updates means that even those who are trained may not be aware of the necessary knowledge to update their systems, leading to mistakes and underpayments. This is where comprehensive documentation and ongoing training are crucial, enabling teams to manage the impacts of these changes on their business effectively.
Technical complexity: Implementing award conditions within a workforce management system is a technically demanding task. The various conditions within an award are often interconnected, meaning that a small change in one area can have significant downstream effects. This task is made even more difficult for SMEs who don’t have automated workforce management systems and update their procedures and records manually.
If systems or procedures are not correctly integrated, it can result in incorrect application of award rules, double handling of information, and ultimately, non-compliance.
The Push for Simplification
Given these challenges, it’s understandable that the FWC has identified the need to simplify the modern awards system. The review has proposed several measures aimed at making the awards more accessible and easier to understand:
Standardising language: one of the primary goals is to standardise the language used across all awards, moving towards plain English and away from the legalistic jargon that currently characterizes many awards. This change would make the awards more user-friendly for both employers and employees.
Consolidating awards: The review has also considered the possibility of consolidating similar awards, reducing the overall number and making it easier for businesses to determine which awards apply to their workforce. This could involve merging awards that cover similar industries or occupations, thereby simplifying the system.
Clarifying provisions: Specific provisions within awards that are commonly misunderstood could be rewritten for clarity. For example, clearer definitions of terms like “ordinary hours of work” or “overtime” could help reduce the scope for misinterpretation and errors in application.
Developing digital tools: The review has highlighted the potential for digital tools and resources to assist businesses in navigating the modern awards system. These tools could provide tailored guidance based on specific business needs, helping to ensure compliance while reducing the administrative burden.
Enhanced education and training: The FWC has also emphasised the need for increased education and training around the modern awards system. This includes creating training modules and online courses that can be accessed by both employers and employees, helping to build a deeper understanding of the system and how it should be applied.
The Business Perspective: Challenges and Opportunities
For business owners, the proposed simplifications offer both challenges and opportunities. On one hand, simplifying the awards could significantly reduce the compliance burden, making it easier to manage payroll and HR processes. On the other hand, the transition to a simplified system will require careful planning and investment in training, technology, and as a matter of best practice, legal advice.
Simplified awards would deliver many benefits, including:
Reduced compliance burden: making it easier for businesses to comply with the law, reducing the risk of costly errors and penalties. This is particularly beneficial for SMEs, which often struggle with the complexity of the current system.
Improved employee relations: better relationships between employers and employees. When both parties understand their rights and obligations, it reduces the likelihood of disputes and fosters a more positive workplace environment.
Operational efficiency: more efficient operations as businesses spend less time on compliance-related tasks and more time focusing on their core activities.
However, the transition to a new system may not be without its challenges. Businesses would need to update their procedures and systems, retrain staff, and potentially revise employment contracts. These initial costs and disruptions could be significant, particularly for larger organisations or SMEs with tight budgets.
Despite the desire to move towards simplification, businesses may still require expert support to navigate the changes. Consulting with HR professionals and legal advisors during the transition period will be crucial to ensure full compliance and to take advantage of the opportunities presented by the new system.
Embracing simplification while acknowledging complexity: where to next?
The FWC’s 2023-24 Modern Awards Review’s focus on making awards easier to use and understand is a crucial step towards reducing the complexity that has long plagued Australia’s industrial relations system. For business owners, this initiative offers a path towards greater clarity, improved compliance, and more efficient operations. However, it is essential to recognize that while the goal is simplification, the inherent complexity of the system — rooted in historical, technical, and operational factors — cannot be entirely eliminated.
The proposals put to the FWC to simplify awards for the purposes of the Review have been approached by the FWC with a broad perspective. It has intentionally refrained from offering detailed opinions as to the simplification of awards. This approach reflects a preference for further examination of these proposals in the future, should the simplification of the award system be pursued.
So in other words, whilst a good idea in theory, it seems like the simplification of the award system might be too great a task for any one government agency, or indeed government as a whole. And so in the meantime, we are left with a system that is complex and difficult to navigate, but of essential importance in protecting employees and maintaining their minimum standards of employment.
By staying informed, engaging with the simplification process, and seeking professional support where necessary, businesses can navigate the existing system and position themselves for long-term success whilst waiting for a more streamlined and accessible workplace relations environment.
