Doing Business in Australia | Employment and industrial relations

8 mins  02.12.2018

The Australian workplace operates subject to a combination of federal, state and territory legislation, industrial instruments (including awards and enterprise agreements) and typically employment contracts.

Key takeouts

Australia has minimum terms of employment
State employment laws affect employers in relation to some issues
Awards are legally enforceable industrial instruments that establish minimum terms and conditions of employment for those employees to whom they apply.


The primary legislation regulating the employment relationship is the Fair Work Act 2009 (FW Act). This legislation sets minimum terms of employment (via the 10 National Employment Standards), provides some specific employee protections, regulates unions and the collective bargaining process, sets out the role of the independent employment tribunal (Fair Work Commission) and deals with a range of other matters.

There are also state employment laws, which affect employers in relation to some issues (for example, long service leave). There are also laws covering superannuation, work health and safety, workers’ compensation, discrimination and equal opportunity and other issues.

National Employment Standards (NES)

The NES set out 10 minimum standards or entitlements in relation to:

  • hours – a minimum 38 hour working week plus reasonable additional hours
  • annual leave – four weeks’ paid leave per year, untaken leave is carried forward and is paid out on termination
  • personal/carer’s leave, which includes sick leave – 10 days’ paid leave per year, untaken leave is carried forward but not paid out on termination
  • parental leave – 12 months’ unpaid leave with a right to request an extension of up to 12 months- (the federal government also has a government-funded parental leave pay scheme);
  • notice of termination and redundancy – up to five weeks’ notice and 16 weeks’ redundancy pay based on age and length of continuous service;
  • long service leave – usually based on state legislation and provides for extended paid leave for long service (three months' leave after 15 years' continuous employment, but pro rata leave can be taken after a lesser number of years' employment);
  • public holidays – eight core public holidays plus some additional state specific holidays
  • community service leave – generally unpaid
  • rights to request flexible work arrangements (can be exercised by certain categories of employees, including permanent employees with at least 12 months' contiunous service and long-term casuals who have a reasonable expectation of continuing employment on a regular and systematic basis); and
  • provision of the Fair Work Information Statement – identifying key features of the FW Act.


Awards are legally enforceable industrial instruments that establish minimum terms and conditions of employment for those employees to whom they apply.

From 1 January 2010, more than 120 new Modern Awards came into operation that replaced in excess of 1600 old awards (although other historical awards continue to apply in some cases). Modern Awards tend to be industry or occupation-specific and quite complex rules apply to their interaction. This can make it difficult to determine which applies.

All Modern Awards contain terms dealing with broadly similar matters, including:

  • minimum wages – including job classification structures
  • arrangements relating to hours of work – including span of hours and rest breaks;
  • type of work performed – such as full time, part time or casual employment;
  • overtime, penalty rates and other monetary entitlements; and
  • consultation and dispute resolution procedures.

Enterprise agreements

Enterprise agreements are enterprise specific agreements negotiated between an employer and its employees (or unions on their behalf ). The FW Act governs all aspects of the negotiation, approval and operation of enterprise agreements.

Enterprise agreements will usually operate to the exclusion of a Modern Award. However, before an agreement can take effect, it must pass a test (called the ‘better off overall test’) to ensure the employees are not disadvantaged when compared against the terms of the applicable Modern Award.

There are complex rules about the permitted content of enterprise agreements, how they are negotiated, and how they may be approved and terminated.

Employment contracts

Subject to legislation and to applicable industrial instruments, employers are able to (and typically do) make written contracts of employment with employees, covering a range of matters.

Policies and practices covering employment and industrial relations issues may also be implemented. It is important for anyone planning to establish or purchase a business in Australia to ascertain the terms of any awards, agreements and employment legislation that may apply to existing or prospective employees. The terms of contracts of employment and relevant policies and practices should also be reviewed or be carefully considered when being drafted.


Broadly speaking, under the federal superannuation guarantee legislation, an employer must make superannuation contributions of at least the prescribed minimum rate of each employee’s earnings in order to avoid incurring a charge called the ‘superannuation guarantee charge’ or ‘SGC’. These contributions must be made quarterly. The minimum prescribed rate is currently 9.5%. The minimum superannuation contribution rates are currently scheduled to remain at 9.5% until 30 June 2021 and then increase by 0.5 percentage points each year until it reaches 12%.

This rate is applied to the employee’s ordinary time earnings (which excludes overtime but which generally includes bonuses, allowances and commissions) up to maximum earnings prescribed by the legislation (called the employee’s ‘maximum earnings base’).

However, certain exceptions apply in respect of some employees, including:

  • non-resident employees paid for work done outside Australia; and
  • resident employees employed by non-resident employers for work done outside Australia.

Employers are required to give their employees a choice of fund into which their contributions are to be paid. If the employee fails to nominate a fund, their contributions are paid into a default fund chosen by the employer.

The federal superannuation guarantee legislation operates alongside and may overlap with any other superannuation entitlements an employee may have under an industrial instrument or their contract.

More information is available in Taxation.

Workplace health and safety

Employers have a duty to ensure the health, safety and welfare of their employees while they are at work. If harm results to an employee through a breach of this duty, the employer may be liable to the employee both in contract and in tort.

There is also federal, state and territory legislation regarding work health and safety. In the event that an employer breaches its obligations under that legislation, it can be prosecuted. It is also possible, in some cases, for officers or senior managers of the employer corporation to be prosecuted.

As from 1 January 2012, new ‘work health and safety’ laws were introduced by most states and territories based on standard safety laws, regulations and codes of practice. As part of this, a corporation’s officers have positive due diligence obligations to ensure that the corporation meets its health and safety obligations.

Workers’ compensation

All employers must have in place a statutory workers’ compensation insurance policy that provides for compensation for employees who are injured in the course of employment. The legislation also imposes a positive duty on an employer to find appropriate alternative employment for a partially incapacitated employee.

Discrimination and equal opportunity

Both federal and state legislation prohibits discrimination (in a range of aspects of employment, including recruitment, promotion and termination) on the basis of certain unlawful grounds, including sex, race, disability, religion and age.

Furthermore, sexual harassment in an employment context is unlawful under federal and state legislation.

The Workplace Gender Equality Act 2012 requires all private sector employers with more than 100 employees to institute workplace programs providing women with equal opportunity in the workplace.

The program requires that employers prepare a profile of the company, outlining the occupational and gender characteristics of the workplace, which is made publicly available.

Redundancy procedures and payment

A redundancy generally arises if the duties of a position are no longer required to be performed. If an employee’s employment is terminated for redundancy, the employee may be entitled to a redundancy payment under the NES, an applicable industrial instrument or, possibly, their employment contract or a binding policy/procedure.

Modern Awards include consultation procedures that apply on a redundancy. Additional notification and consultation obligations (involving unions) can apply where an employer proposes to make 15 or more redundancies.

Unfair dismissals

The primary remedy for successful unfair dismissal claims is reinstatement of the employee to his/her previous position. However, where reinstatement is found to be inappropriate an award of compensation, which is capped at the lesser of six months' pay or the equivalent of half the high income threshold applicable at the time of the dismissal, may be made. The high income threshold is currently A$145,400 and is indexed every year. This means the maximum amount of compensation that can currently be awarded is A$72,700.

Generally, to be eligible to make an unfair dismissal claim, an employee must have been employed for the minimum employment period and either earn less than the high income threshold or be covered by a modern award or enterprise agreement. The minimum employment period is one year for small businesses and six months for all other businesses.

Transfer of undertakings and employees

Unlike in Europe, there is no equivalent to the Transfer of Undertakings Regulations (or TUPE). If a business is sold or outsourced, employees will only transfer if the ‘new employer’ makes an offer of employment that the employee accepts. Where employees transfer in these circumstances, the new employer may become liable for their accrued leave entitlements. In addition, any enterprise agreement covering the employees is also likely to transfer to the new employer.


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