The system of workforce regulation in Australia is comprehensive and detailed compared to some other countries. Often organisations commencing business in Australia are surprised by this and underestimate the time and cost of starting up.
We have outlined below some particular areas of workforce regulation that operate in Australia and may be unfamiliar to organisations that have not operated here before:
1: State & Federal systems
Australia has workforce regulation at both State and Federal levels. Employers that are ‘constitutional corporations’ (trading, financial and foreign corporations) will generally be covered by Federal workplace legislation. The principal legislation at a Federal level is the Fair Work Act 2009 (Cth) (the Fair Work Act).
The following matters are dealt with by State based legislation which is not consistent between the States:
- Workers compensation – a compulsory insurance scheme
- Occupational health & safety
- Long service leave – an employee entitlement to additional paid leave after a certain length of service, and
- Equal opportunity & discrimination.
2: Common law and deemed employment
The label given to a workforce contract in Australia will not always determine the true nature of the relationship. This will be relevant in determining the rights and entitlements of the parties to the relationship, for example, whether they are entitled to minimum pay and other benefits. In particular:
- Parties to a work contract may decide and name it is a relationship of principal and contractor. But, on examination of certain features of the relationship, for example whether the principal controls the way the contractor does their work, a court or tribunal may find that the true nature of the relationship is employment under the common law. In this case the principal/employer will be bound to treat the worker as an employee.
- Similarly, naming an employment relationship ‘casual’ will not be determinative of the relationship.
- Further, legislation dealing with taxation, superannuation/pensions, occupational health & safety and workers compensation insurance deems certain workers (who may not be employees under the general or common law) employees for the purpose of that legislation.
3: Minimum wages and other entitlements
In Australia minimum wages are set annually by the Fair Work Commission, Australia’s national workplace relations tribunal.
The 2013/2014 national minimum wages is $622.20 per week for a 38 hour week, or $16.37 per hour. Casual employees are entitled to a 24% loading. Minimum wages are also set for employees with a disability, junior employees, apprentices and trainees.
Other minimum terms of employment are contained in the National Employment Standards in the Fair Work Act. They cover the following matters:
- Maximum hours of work per week
- Paid annual leave
- Paid and unpaid personal/Carer’s leave
- Public holidays
- Flexible working arrangements
- Community service leave
- The provision of a Fair Work Information Statement (statutory form detailing entitlements) to all employees,
- Notice of termination of employment, and
- Redundancy pay.
Employers cannot negotiate out of or agree not to be bound by the NES or minimum wage orders.
In addition, modern ‘awards’, mostly industry based, contain other compulsory terms of employment.
4: Compulsory superannuation/pension scheme
Under Federal legislation employers in Australia must contribute a minimum of 9.25% (increasing to 12% by 2020) of an employee’s ordinary time earnings to an approved superannuation fund. Usually, the fund must be nominated by the employee.
5: How to terminate
In Australia the concept of ‘at will’ employment is not recognised. Instead, an employer is required to provide a statutory period of notice (between 1 and 5 weeks) or payment in lieu of notice to terminate the employment. Individual employment contracts may also place additional obligations or require a longer notice period in respect of cessation of employment. Employees are bound also to provide notice of the resignation or retirement to their employer. In addition to notice of termination, in certain circumstances employees will be entitled to redundancy pay on cessation of their employment.
As well as notice of termination of employment (or pay in lieu) and redundancy pay, employees and other workers in Australia have access to various jurisdictions that enable them to challenge the termination of their employment by their employer (or any constructive termination), for example, on the basis that it was not substantively or procedurally fair or because it was for an unlawful reason such as the person’s gender or race. These jurisdictions should be considered before proceeding with particular employment terminations.
6: Transfer of business
If you buy a business in Australia you may automatically get its workforce so whether this is desirable should be considered prior to completion of any acquisition of an Australian based business.
Broadly, a business may be acquired either by acquisition of the company or company group that conducts the business or by acquisition of the assets and liabilities of the business. In the first case the employment relationship of the employees of the company/companies that are acquired is not changed by the transaction and they will therefore remain employed and the employer company will continue to be obliged to comply with its statutory and contractual obligations to the employees.
However, if the assets and liabilities of a business are acquired then the employees will only automatically (that is, without a formal employment contracting process) transfer if the employment with the old employer ends and new employment begins within 3 months, the employee performs substantially the same work for the old and new employers and there is a connection between the old and new employers. The ‘connection’ requirement is satisfied by:
- A transfer of some assets from old to new employer
- An outsourcing or insourcing of work between the old and new employer
- A transfer of assets between associated entities.
On transfer of employment in certain circumstances the new employer will be required to recognise the accrued service related entitlements the employee had with the old employer and certain industrial instruments.
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