Award rates in Australia explained: payroll guide for employers

As an employer, it’s your responsibility to ensure you pay your staff the minimum rate that they are legally entitled to. In many cases, your employees may operate under a modern award, which lays out their minimum rate of pay as well as other conditions you must adhere to.

Let’s dive into award rates and how they work.

Modern awards

To understand award rates, you first need to come to grips with modern awards.

Modern awards (also known as awards) are industry or occupation-specific minimum employment standards set out by the Fair Work Commission. They cover various aspects of employment, including wages, working hours, leave entitlements, and other conditions.

Modern awards aim to ensure fair and consistent treatment of workers across different industries and occupations. Each award outlines the minimum conditions of employment for their respective industry or occupation, and employers must comply with these standards.

The Fair Work Ombudsman regularly reviews and updates modern awards to reflect changes in the labour market and industry practices.

It’s important to note that not all occupations have awards attached. If this is the case for your staff, as their employer, you instead, must adhere to the national minimum wage and other rules around employment conditions, such as National Employment Standards (NES).

What are award rates?

Award rates are the minimum wages you can pay an employee as dictated by their respective modern award. Rates of pay will differ between awards but are always consistent with the bare minimum you must pay an employee (operating under that award).

Awards specify the minimum amount that an employer must pay an employee for their work, accounting for factors such as experience, skill level, and the nature of the job.

Employers are legally required to pay at least the minimum rate to their employees covered by a modern award. However, some employees may be entitled to higher wages based on enterprise agreements, individual contracts, or other factors. To attract the best employees, many employers will choose to pay their staff more than the minimum award rates.

As such, to ensure compliance with minimum wage standards, Both employers and employees need to be aware of the specific award that applies to their industry or occupation.

What is the difference between the minimum wage and award rates?

Minimum wages are the absolute minimum pay levels an employer must offer their employees.

The national minimum wage in Australia is distinct from award rates, however, if an employee operates under a modern award, these rules supersede the national minimum wage.

For example, as of 1 July 2023, the national minimum wage was $23.23 per hour. However, if your employee operates under a modern award that dictates an award rate of $27.45 per hour, for example, then the award rate will always be the minimum legal rate you can pay that employee.

How do I know which modern award applies to my business?

So how do you know which modern award (if any) applies to your business? The Fair Work Ombudsman provides an online search tool called ‘find my award’ for employers to determine whether modern awards apply to your particular business, based on industry and role.

Simply visit the website, follow the prompts, and discover the award that applies to you and your employees. Keep in mind that you may have employees on different awards, depending on their role type.

It may be that your employee is award-free, in which case minimum wage and other conditions will apply.

Do award rates apply to all employees?

As there are award-free employees, award rates will not necessarily apply to everyone you employ. Award rates only apply to workers in specific industries and roles; from aged care workers to wool storage professionals.

While many employees operate under awards, some do not. Roles without awards, are known as ‘award and agreement free’. In these cases, national minimum wages and National Employment Standards apply.

What industries and jobs do award rates apply to?

Specific minimum pay rates apply to most employees in certain industries and occupations. Various modern award categories cover different industries, including retail, fast food, gardening, hair and beauty, vehicle repair, and a huge range in between.

Awards cover employees whether they’re full-time, part-time, or casual.

There’s a good likelihood your employee is covered, and it’s your responsibility to know which modern awards cover your employees and pay at least those specified rates.

What happens if you don’t pay award rates?

Failure to pay your staff their award rates can result in serious consequences. The Fair Work Ombudsman is responsible for ensuring compliance with workplace laws, including the payment of minimum wage under their award.

As an employer, if you’re found to have failed to remunerate employees the minimum pay they’re entitled to; or have violated other modern award stipulations, you may face penalties, fines, and legal action.

The consequences for non-compliance may include:

• Back payment
• Penalties
• Enforcement
• Publicity orders

In short, you should never knowingly, or through mismanagement, violate the standards set out in modern awards, including minimum wage.

National Employment Standards

The National Employment Standard (NES) is an employment standard that applies to all employees in Australia.

There are 11 distinct entitlements in the NES that include everything from pay to leave entitlements.

The NES is the default set of standards you must adhere to if your employee is award or agreement-free. You cannot create a workplace agreement that includes standards, including pay and leave, that are below the levels laid out by the NES.

However, a modern award will always trump the NES. If your employee works under an award, these are the minimum standards and minimum wage you must comply with.

Consult with an employment expert and the Fair Work Ombudsman website

To ensure you’re complying with fair work standards and awards, you need to do your research. Start by combing through the literature provided by the Fair Work Ombudsman, and use their online tools to look up awards.

You can download the specific awards that apply to your staff as a PDF. Read through these thoroughly to acquaint yourself with not only minimum wages, but the other stipulations that apply such as leave, hours worked, conditions of employment, and workplace standards.

Beyond that, it’s wise to consult with an expert. There are a variety of payroll and business advisors out there who are adept at providing specific advice for your individual business. Since non-compliance can result in legal issues and penalties, there is great value in confirming your pay rate before employing staff and setting up your payroll.