March 2018

Flexible Working Arrangements Under The Award

For a business to grow and improve its return on investment, it is often necessary to employ more staff to achieve this growth. The recruitment of such staff in itself is an investment in the business. To maximise the potential benefit of employing additional staff, it can also be of enormous benefit to secure the most flexible working arrangements possible. Often in the past an Industrial Award and its provisions would hamper this, but under the Modern Award system the “Award Flexibility” clause may assist employers to secure increases in flexibility.

Some Members have come to MTA wanting to establish flat hourly rates of pay for work that is performed to simplify the working arrangements for staff payroll administration. MTA has helped them do this by using an 'Award Flexibility Agreement'.  This is provided the total amount paid will meet the minimum Award Rate inclusive of penalties, which is perfectly legal.  Sometimes this has come to light due to a claim for underpayment of wages or a potential underpayment of wages claim.  Setting up employees with 'Award Flexibility Agreements' under the Award can meet the Award requirements and allow for greater flexibility. 

How will this work? An Award and its conditions typically set the limits within which work can be done. The logical reason for this is to protect people from exploitation. Those limits include reference to when and for how long a meal break can occur, minimum wages and limits on when ordinary hours can be worked. However, not all businesses can necessarily work as effectively within the limits of the Award as they might be outside those limits – not all businesses have the same needs.

So how do we work outside the limits of the award legally?

An Award flexibility clause will allow an employer to reach an agreement with their employee on arrangements for when work is performed, overtime rates, penalty rates, allowances and annual leave loading.  Provided the outcome of the proposed arrangement leaves the employee “better off overall” than what the employee would have been paid under the Award and provided the agreement is committed to writing, then the new arrangements will meet the Award requirements.

On a regular basis, I stumble over Member employment arrangements that simply do not meet the Award requirements.  Invariably, the employee may be paid well over the Award but the way the arrangement is structured, will not meet the minimum requirements of the Award. For example, the employer may be paying an employee well over the award each week, and as part of the arrangement, does not pay annual leave loading when the employee goes on annual leave. 

However, it is not clear that the loading is being paid each week, because the annual leave loading is meant to be paid when an employee goes on annual leave, so it appears that the entitlement has not been paid.  An 'Individual Flexibility Agreement' can be used to rectify this situation and properly establish existing arrangements, thereby removing an underpayment risk.

We have examples of Members that have engaged contractors in good faith but then, after a time, there is a claim that the arrangement is really an employer/employee arrangement and then the Member has received substantial back pay claims for wages and leave entitlements.  It is a minefield these days to justify such arrangements with the Courts expecting to see clear business indicators.  Getting such arrangements wrong can be very costly (in one case the back pay claim was more than $300,000). 

When we examine such arrangements, we find invariably, that the arrangement is an employer/employee relationship.  So, the better solution is to set up the Contract of Employment correctly and use an 'Award Flexibility Agreement' to support the arrangement. 

Of course, there are many options where such agreements are useful. Example: an employer wants to commence the operation of an afternoon shift to run as well as the day shift.  The employer already pays his employees well above the Award. Those employees who are willing to take up this afternoon shift option sought to work through their meal break and finish the shift earlier than they would otherwise. The employer assesses the proposal, including the workplace safety issues and agrees with this outcome. An 'Award Flexibility Agreement' would protect the employer from time and a half and double time payments for all time worked after five hours, due to a meal break not being taken; the employees get to finish their shift earlier than if they were required to take a meal break as required under the Award, and the business gets co-operation from its employees to commence an afternoon shift, with the protection of the working arrangements under the Award.

What is very important in this process, is the preparation of properly constructed written agreements. For the arrangements to be legally effective, the agreements need to list all the Award clauses that have been altered – failure to do so will only render the proposed agreement ineffective and the original clauses will continue to apply. Members are encouraged to contact MTA NSW Employment Relations staff for assistance with drafting such agreements.

If you are looking to make changes to the way the business operates, discuss it with an MTA NSW Employment Relations staff member who can assess these arrangements against the Award requirements and who can also identify what can be done to achieve your desired outcome. Alternatively, if your business has in place arrangements which may not be quite in order when aligned to requirements under the award, then this Award Flexibility option may assist in rectifying a potential underpayment situation from a risk management perspective.

If you are uncertain as to whether all your arrangements are in order ring MTA NSW when you have some time and the Employment Relations staff will be able to work through your arrangements and offer advice and strategies, as required. The Employment Relations staff at MTA NSW are experienced in assisting members with these issues and it is all part of the service covered by your membership subscription.

For further information, please contact MTA NSW Employment Relations on:

P: 1300 MTA NSW E: [email protected] W:


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