The appropriate test to determine whether a modern award applies to an employee does not hinge on the job title, but on the actual nature of the work performed for the major and substantial part of the time or the “principal purpose” approach adopted on the question of award application.  

The word “manager” in a job title does not automatically grant an employee award/agreement-free status. Words such as manager, consultant, or facilitator may not accurately reflect the duties actually being performed.

Industrial tribunals have usually determined that award coverage does not hinge on the job title, but the major and substantial function of the employee’s duties or their principal purpose. 

Some occupations are more likely to be prone to questions regarding award coverage, particularly in clerical, retail, and sale-related occupations where the employee may be on the fringe of managerial functions, especially where such work is part of a career path that may ultimately result in promotion to a management position.   

Management duties 

In describing management duties, industrial tribunals have referred to “the unfettered discretion that is the hallmark of the independent manager”. The role of recruiting and dismissing employees is one determinant of the existence of management responsibility. However, a manager who is subject to supervision by a higher authority within the company to recruit or terminate employees on an incidental basis may not be exercising management responsibility, but acting as a functionary of higher management. 

For example, an employee described as a “field sales manager” was deemed by an industrial tribunal to be covered by the relevant clerical award because the employee had no authority to bind the company to any contracts, no authority to hire and dismiss staff, no authority to set sales targets, or otherwise participate in the policy direction of sales and marketing procedures of the company. This was despite the employee being categorised by the employer as a member of “middle management”.  

In determining modern award application, industrial courts and tribunals have usually adopted the “principal purpose” approach.  

That test is also important in determining an employee’s right to have an application of unfair dismissal heard before the Fair Work Commission. If the employee is covered by a modern award, regardless of the level of annual remuneration, there is jurisdiction to hear such an application. 

Statutory entitlements 

National Employment Standards 

The minimum entitlements provided under the National Employment Standards apply to award/agreement-free employees employed by a national system employer. The Standards allow an employer and an award/agreement-free employee to agree to certain changes to the Standards, including averaging hours of work and cashing out annual leave. The Standards apply regardless of the amount of annual salary. A reference to “base rate of pay” means the employee’s ordinary wage excluding incentive-based payments and bonuses, overtime, monetary allowances, penalties, and loadings. 

Contracting outside the National Employment Standards 

Section 129 of the Fair Work Act 2009 states that Regulations may permit employers and award/agreement-free employees to agree on matters which may be contrary to the National Employment Standards, however, the Fair Work Regulations 2009 do not provide any such permission.

This means that an employer and an award/agreement-free employee cannot contract outside the minimum conditions of employment prescribed under the Standards. Any condition in a contract of employment that is less beneficial to the employee than the Standards is invalid, with the employer liable to a penalty for breach of the Fair Work Act. 

National minimum wage 

The Fair Work Commission sets the national minimum wage and the national casual loading for award/agreement-free employees via its Annual Wage Review. Any adjustment to the minimum wage starts from the first pay period to commence on or after 1 July each year. The national wage rates varied by the Annual Wage Review that are relevant to award/agreement-free employees include: 

  • national adult minimum wage 
  • default casual loading 
  • special national minimum wages for award/agreement-free junior employees 
  • special national minimum wages for award/agreement-free employees to whom training arrangements apply. 

Adult apprentices should not receive less than the national adult minimum wage. 

Annual leave  

Amount of annual leave 

A full-time or part-time employee, but not a casual employee, is entitled to four weeks’ paid annual leave for each year of service with the employer. A shift worker is entitled to five weeks’ paid annual leave for each year of service. An award/agreement-free employee qualifies for the shift worker annual leave entitlement if: 

  • the employee is employed in an enterprise in which shifts are continuously rostered 24 hours a day for 7 days of a week
  • is regularly rostered to work those shifts, and
  • regularly works Sundays and public holidays. 

Entitlement to paid annual leave accrues progressively during the year of service according to the employee’s ordinary hours of work, and accumulates from year to year. 

Cashing out annual leave 

 Under s94 of the Fair Work Act, an employer and an award/agreement-free employee may agree to the employee cashing out a particular amount of the employee’s accrued annual leave. The employee must have a minimum credit of four weeks' annual leave after the cashing out has occurred. Each agreement to cash out must be a separate agreement in writing. 

Taking annual leave 

An employer may require an award/agreement-free employee to take annual leave but only if the request is reasonable. A requirement to take annual leave may be reasonable if, for example: 

  • the employee has accrued an excessive amount of paid annual leave, or 
  • the business is being shut down for a period, eg between Christmas and New Year. 

Other matters regarding annual leave that may be agreed to between the employer and an award/agreement-free employee include: 

  • that paid annual leave may be taken in advance of accrual 
  • that paid annual leave must be taken within a fixed period of time after it has accrued 
  • the form of application for paid annual leave 
  • that a specified period of notice must be given before taking paid annual leave. 

Extended annual leave on equivalent pay 

Regulation 2.03 of the Fair Work Regulations 2009 states that for s129(a) of the Fair Work Act, an employer and an award/agreement-free employee may agree to the provision of extra paid annual leave in exchange for foregoing an equivalent amount of pay. Section 129(a) states that the Regulations may permit employers, and award/agreement-free employees to agree on matters that would or might otherwise be contrary to the National Employment Standards. 

 This means the employer may agree to the employee’s request for extended paid annual leave on half-pay because of his or her award/agreement-free status, however, the employer is not required to agree to the employee’s request for extended annual leave.

Personal/carer’s leave (including compassionate leave) 

Amount of personal/carer’s leave 

A full-time or part-time award/agreement-free employee is entitled to a minimum of 10 days per year of paid personal/carer’s leave. An award/agreement-free casual employee is entitled to up to two days per year unpaid carer’s leave. 

Amount of paid compassionate leave 

 A full-time or part-time employee is entitled to two days of paid compassionate leave per permissible occasion. A permissible occasion is the death, or life-threatening illness or injury, of an immediate family member, or household member, of the employee. An employee’s entitlement to paid personal/carer’s leave accrues progressively during a year of service according to ordinary hours of work and accumulates from year to year. An award/agreement-free casual employee is entitled to up to two days unpaid compassionate leave per permissible occasion.  

No cashing out 

There is no provision in the Fair Work Act that allows cashing out of any amount of paid personal/carer’s leave. Any such arrangements are therefore invalid.  

Maximum weekly hours 

Section 20 of the Fair Work Act states that the ordinary hours of work for an award/agreement-free employee are the hours agreed by the employee and their employer. If there is no agreement about ordinary hours of work for an award/agreement-free employee, the ordinary hours of work per week are: 

  • for a full-time employee – 38 hours, or 
  • for an employee who is not a full-time employee – the lesser of 38 hours, and the employee’s usual weekly hours of work, if the agreed weekly hours are less than the usual weekly hours. 

Section 64 of the Fair Work Act provides that an employer and an award/agreement-free employee may agree in writing to an averaging arrangement under which hours of work over a specified period of not more than 26 weeks are averaged. 

The average weekly hours over the specified period must not exceed: 

  • for a full-time employee – 38 hours, or 
  • for an employee who is not a full-time employee – the lesser of 38 hours, and the employee’s ordinary hours of work. 

The averaging arrangement will be relevant in determining whether the additional hours are reasonable. 

Regulation 1.1 of the Fair Work Regulations 2009 provides the formula for the determination of hours that are taken to be the usual weekly hours of work of an award/agreement-free employee who is not a full-time employee and does not have usual weekly hours of work. To work out the usual weekly hours of work for an employee who has been employed by the employer for at least four weeks, identify the total number of hours that the employee has worked during the previous four completed weeks, and divide the result by four. 

Unpaid parental leave 

An eligible award/agreement-free employee (including a long-term casual employee) is entitled to up to 12 months' unpaid maternity, paternity or adoption leave after 12 months' service with the employer and, in addition, an employee and the employer may agree to an extension of unpaid parental leave for a further 12 months (a total of 24 months unpaid leave). 

Redundancy pay 

The National Employment Standards provide a scale of redundancy pay to a full-time or part-time employee who is award/agreement-free and whose employer employs 15 employees or more (total head count).  

The Standards recognise an employee’s service with the employer prior to 1 January 2010 (when the Standards commenced), provided the terms of an employee’s contract of employment included an entitlement to redundancy pay (note: some did not). 

Where an employee’s contract of employment does not include an entitlement to redundancy pay, service for the purposes of the redundancy pay entitlement under the Standards for an award/agreement-free employee commenced from 1 January 2010. 

Public holidays 

 The list of public holidays specified under the National Employment Standards applies to an award/agreement-free employee where the holiday falls on the employee’s normal rostered day.

The following days are specified:  

  • 1 January (New Year’s Day) 
  • 26 January (Australia Day) 
  • Good Friday 
  • Easter Monday 
  • 25 April (Anzac Day) 
  • the Queen’s Birthday holiday (as celebrated by the relevant state or territory) 
  • 25 December (Christmas Day) 
  • 26 December (Boxing Day) 
  • any other day, or part-day, declared by a state or a territory government as a holiday for the state, territory or a region, or a law of a state or a territory. This includes any day which is in substitution of any of the days. 

An employer and an award/agreement-free employee may agree on the substitution of a day or a part-day that would otherwise be a public holiday. 

An award/agreement-free employee is paid at their base rate of pay for any holiday that falls on a normal work day. An award/agreement-free employee may reasonably refuse to work on a public holiday. 

Minimum period of notice of termination by the employer 

The appropriate minimum periods of notice of termination (or payment in lieu of notice) under the National Employment Standards must be given by the employer to an award/agreement-free employee based on the following scale: 

  • One year or less of continuous service – 1 week's notice 
  • More than one year and up to 3 years continuous service –  2 weeks’ notice 
  • More than 3 years and up to 5 years continuous service – 3 weeks’ notice 
  • More than 5 years continuous service – 4 weeks’ notice 
  • An employee aged over 45 years who has completed at least 2 years continuous service with the employer is entitled to an additional week’s notice (or payment in lieu). 

Community service leave (including jury service) 

An award/agreement-free employee is entitled to take unpaid leave to engage in designated community service activities such as volunteer emergency management activities.

In addition, a full-time or part-time employee who takes leave to attend for jury service is entitled to “make-up pay” for a period of up to 10 days. The make-up pay represents the difference between the amount an employee receives for attending jury duty and the base rate of pay for his or her ordinary hours. 

Flexible working arrangements 

The National Employment Standards grant an award/agreement-free employee, who is a parent or has responsibility for the care of a child, the right to request a flexible working arrangement from their employer until their child reaches school age (or is under 18 years if the child has a disability). An employer may only refuse on reasonable business grounds. 

Fair Work Information Statement 

The National Employment Standards provide that all new employees must receive a Fair Work Information Statement – a copy can be obtained from the Fair Work Commission website www.fwc.gov.au  – from their employer as soon as practicable after commencing employment. It contains information regarding the Standards, the effect of the Standards' entitlements on transfer of business, agreement making, individual flexibility arrangements, the right to freedom of association, termination of employment, right of entry of officials of registered organisations, the role of the Fair Work Ombudsman and the Fair Work Commission. 

Miscellaneous Award 2020 

The commencement of the modern award system introduced a new award, the Miscellaneous Award. It is NOT intended to cover award/agreement-free employees, or those employees not traditionally covered by an award. The latter includes managerial employees and professional employees such as accountants and financiers, marketing, legal, human resources, public relations, and information technology specialists. 

Superannuation Guarantee 

Under Superannuation Guarantee legislation an employer is required to contribute 10% (increased to that amount from 1 July 2021) of an employee’s ordinary time earnings to the employee’s nominated fund, or the relevant default fund. However, the legislation prescribes a maximum amount upon which the 10% employer contribution is calculated. 

Unfair dismissal – high-income threshold 

 An award/agreement-free employee who has been terminated by their employer may be entitled to apply to the Fair Work Commission claiming unfair dismissal. An eligible employee is one whose annual rate of earnings is less than the high-income threshold. The high-income threshold is indexed on 1 July each year based on a specific formula that is set out in s332 of the Fair Work Act.