HR to act on fairness test

by 15 May 2007

COMPLIANCE WITH the Federal Government’s recently introduced fairness test will directly affect HR in the workplace agreement process, national law firms have said.

The Federal Government recently amended WorkChoices to ensure that employees who receive less than $75,000 per year on Australian Workplace Agreements (AWAs) or other workplace agreements will have to be fairly compensated for giving up conditions such as penalty rates, shift allowances, annual leave or overtime.

The change, which took effect on 7 May, means employers who are currently using AWAs will need to review each one to ensure compliance with the new rules.

However, the detailed operation of the test won’t be clear until the government publishes draft legislation, which is expected in June, said Julian Clarke, special counsel for employee relations at Freehills.

“It appears that the test will take into account all relevant benefits when assessing whether protected award conditions have been bought out fairly,” he said.

“This could include higher base pay, but is also likely to include items such as incentive arrangements, perks such as car parking or discounted child care and flexible working arrangements.”

It will be obvious from a simple mathematical calculation as to whether or not agreements pass the test most of the time, according to Clarke.Other times, assessing fairness may be more complicated, particularly where non-monetary benefits such as family flexible policies are taken into account, he said.

However, the fairness test should be more workable than the pre-WorkChoices “no disadvantage test”, Clarke said, because agreements will still operate from lodgement and the newly named Workplace Authority (previously the Office of the Employment Advocate) will offer a pre-lodgement approval process.

Where an employer has an AWA template pre-approved, it should be able to engage new employees on the AWA with some confidence that it will pass the test.

However, this is likely to prolong the bargaining process when it comes to reaching agreements, according to Richard West, head of Minter Ellison’s HR and IR division.

Under the new system, a fairness test by the Workplace Authority will be required. “This may require employers to provide supporting documentation to look at the certain factors such as the industry location, economic circumstances of the business and how it will operate,”West said.


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