With the introduction of Modern Awards and National Employment Standards (NES), employers are urged to review their existing employment contracts to ensure they comply with the new awards and entitlements. It is essential that an employment contract does not offer terms and conditions that are less generous than the NES and a Modern Award (where the employee is covered by a Modern Award).

An employment contract cannot be utilised to avoid providing entitlements under a Modern Award even if the employee would not be worse off.

For instance, an employment contract cannot package award entitlements such as annual leave loading, allowances and penalty rates into an annual salary.

Instead, an Individual Flexibility Agreement (IFA) must be negotiated between the employer and the individual employee to vary certain award terms.

Businesses therefore need to: 

• review employment contracts to ensure that award-covered employees are correctly classified, that the correct award is referred to in the contract (but does not form part of the contract), and that the employment contract reflects new entitlements, wage rates, penalty rates, allowances and loadings;
• review whether terms and entitlements of award-covered employees are packaged into an annual salary under the old system and whether it would be beneficial to package certain award entitlements into an annual salary under the new system; and
• negotiate an IFA, separate to the employment contract, for each award-covered employee where certain award entitlements are packaged.