An individual agreement can take the form of a common law contract of employment. An individual employee negotiating an individual agreement is often at a disadvantage. Typically employees have less bargaining power than employers. Often they also have fewer resources, including knowledge of what they may be entitled to under other industrial instruments, such as awards or certified agreements or prevailing conditions with other employers. Following is a list of possible items for inclusion in negotiations for individual agreements.

1. Award/NES conditions

An employee should not agree to a term in an individual agreement that seeks to exclude or modify NES or award conditions without first obtaining advice (see: "National Employment Standards"). A term contained in a common law employment contract that purports to exclude or remove NES award conditions is not effective unless expressly authorised by a section of theFW Act. It is, however, recommended that advice be sought.

2. Overtime rates

Where overtime may be required to be worked, the rate or rates of pay applicable to the overtime hours should be specified.

3. Penalty rates

Some consideration should be given to an additional loading if the hours worked are outside ordinary business hours.

4. Flexi-time or time in lieu

As an alternative to overtime or penalty rates of pay, the parties may agree to some form of compensation for extra time worked beyond the agreed hours based on flexi-time or time in lieu.

5. Salary review

Another aspect which should not be overlooked is some form of salary or wage review, unless it is agreed that the salary should be fixed for the term of the agreement. Note that, in the case of ITEAs, once in force an ITEA can only be varied by means of the procedure set out in the WRA.

However, if the ITEA itself contains a procedure for review and adjustment, there is no need to resort to the variation procedure in the Act.

A scale of pay based on, for example, years of service, experience or acquired qualifications could be inserted in an agreement or award to avoid the need for variation. The risk in linking pay increases to improving economic conditions, such as a change in the consumer price index (CPI), is that the economic condition specified may not improve at a desirable rate.

6. Accident make-up pay

Changes to the workers compensation system (WorkCover) have substantially reduced the benefits payable to the majority of injured workers. Consideration should therefore be given to agreement on make-up pay in the event that the employee is injured and placed on WorkCover. "Make-up pay" is an amount making up all or some of the difference between the WorkCover payment and the normal time earnings. Typical provisions under pre-1996 awards provided for make-up pay to be payable in the first 26 weeks of absence from work because of injury sustained at work.

7. Allowances

It is not uncommon for an employee to incur expenses in the course of their employment, and under the old award system these expenses would be compensated for by way of an allowance. So, for example:

  • a meal allowance might be payable where the employee was required to work extensive overtime;
  • a tool allowance might be payable where the employee used their own equipment on the job, to compensate for the costs of its maintenance and replacement;
  • a uniform or protective clothing allowance might be payable where the employee was required to purchase and/or maintain these items;
  • a travel allowance might be payable to compensate for costs incurred when the employee was required to travel while carrying out duties on behalf of the employer; and
  • a vehicle allowance might be payable to compensate for vehicle wear and tear where the employee used their own vehicle while carrying out duties on behalf of the employer,
  • and so on. An employee who is likely to incur expenses of a similar nature in the course of their employment should not take reimbursement for granted, but should negotiate for specific payment to be included in the agreement.

Allowances can be dealt with in two ways: firstly as a fixed amount per day, week or event, and secondly by agreeing to reimburse for the actually expenses incurred.

8. Non-standard terms

There is scope to include terms in contracts that are non-standard. For instance, an employer may encourage its employees to ride bicycles to work, in which case a term of the agreement may be that the employer provides showers. Provided there is a connection between the content of the term and the employment relationship (and is not otherwise prohibited content) it may be included.

9. Leave

Any form of leave an employee may think desirable must be bargained for with the employer, unless it is a form of leave provided for under the NES or a form of leave that may be, and is, included in an applicable award.

There are many forms of leave, the significance and relevance of any particular form varies with the nature of the employment and the circumstances of the employee. For instance, an employee may be a member of the CFA and live in a fire prone area, in which case some form of fire-fighting leave may be necessary. Many employees are part-time tertiary students, in which case study leave may be necessary. Some examples follow:

  • blood donor leave;
  • fire-fighting leave;
  • leave for those who are Australian Defence Force reservists;
  • study leave;
  • unpaid leave;
  • leave to participate in union elections or decision-making bodies;
  • leave whilst serving as an elected union official;
  • additional annual leave;
  • jury service leave;
  • additional personal or compassionate leave, including the extension of the circumstances in which such leave may be taken; and
  • additional parental leave, including any part of parental leave that is to be paid.

As for jury service, unless specifically exempted, a person called for jury duty is compelled to attend, notwithstanding that the trial may run for many weeks or months. The allowance paid for attendance for jury duty ranges from $36 per day (for the first six days) to $72 (after the first six days) to $144 per day (where the trial exceeds 12 months). An employer cannot dismiss an employee called for jury duty. An employee dismissed for that reason should seek advice immediately. The Juries Act 2000 (Vic) requires the employer to make up any difference between the allowance and the employee's normal pay.

10. Ordinary hours

The NES in the FW Act contains a maximum hours or work standard. However, the maximum under the standard is capable of manipulation. Accordingly, employees would be advised to reach agreement on the number of hours to be worked each week, and identify when the hours are to be worked. With some industries moving to round-the-clock production, the employee should not make assumptions about the hours in which they will be called upon to work. Hours could be included in the agreement by reference to a roster or some other arrangement. Note the comments about penalty rates above.

11. Meal breaks and rest breaks

The WRA provides that an employer must not require an employee to work for more than five hours continuously without an interval of 30 minutes. Such a provision is not part of the NES or FW Act but is contained in modern awards. Such a provision can be incorporated into workplace agreements (collective or individual) to have certain application. Note that the parties may agree to a longer interval without a break.

While occupational health and safety legislation or regulations may apply to some classifications of work to provide for breaks from repetitive work, consideration should be given to the inclusion of rest breaks in the employment agreement.

12. Termination of the agreement

Issues of termination and redundancy are the most frequent sources of dispute, and should be carefully considered (see further: "Termination of employment").

13. Required termination period

The period of notice each party is required to give to the other to end the agreement or contract should be specified. In the absence of any specified period, the common law requires "reasonable notice", but this can be difficult to interpret in any given case. To avoid expensive legal battles, the parties should specify the period of notice required. The agreement should further confirm that normal wages are payable in lieu of notice.

In negotiating a period of notice issues such as the seniority and remuneration of the employee, the relocation or other personal commitments required by an employee to the new position (amongst other things) may indicate that a longer period of notice should be sought by the employee.

Note: The minimum notice periods in the NES (see: "National Employment Standards") now have a wide application to employees in the national system. As the period of notice specified in the NES is a minimum period, the parties are able to agree to include a contractual term for a greater period of notice.

14. Grounds for instant dismissal

Many employers seek to include in the contract a catalogue of events as "misconduct" warranting dismissal. That approach is generally not beneficial either to the employer, who may miss something off the list, or to the employee, who may be intimidated or resentful.

At common law, an employer may dismiss an employee without notice or wages in lieu of notice where the conduct of the employee is serious and justifies summary dismissal.

Examples of conduct justifying summary dismissal are: serious misconduct, incompetence, neglect of duty, wilful refusal to obey lawful and reasonable commands of the employer. Misconduct is active conduct of a serious nature that indicates that an employee rejects the contract of employment, for example, by repeated drunkenness, persistent absenteeism or dishonesty. The breaches must usually be substantial or persistent.

15. Redundancy

A redundancy arises where the duties performed by the employee are no longer required to be performed or are no longer required to be performed by that employee. The NES in the FW Act (see: "National Employment Standards") now provides for an employer to make a redundancy payment when an employee in the national system is terminated due to redundancy. Consideration should be given to whether a specific redundancy clause should be included which provides a more beneficial entitlement to the employee.

Prior to the commencement of the NES (on 1 January 2010) there was no general legal requirement that an employer pay a redundancy payment. An employer was only required to make such a payment if a specific obligation existed, usually in an award, collective agreement or contract.

16. Trade secrets and restraint of trade

Employers sometimes seek to include clauses in the contract to protect trade secrets, and to limit the use by an employee of skills and knowledge acquired during the period of employment. The enforceability of such clauses will depend very much on their terms and the circumstances of employment.

During the employment, the employee has a duty of fidelity to the employer and the employee would likely breach that duty if s/he provided vital trade secrets to a competitor, or carried on a business competing with their employer.

Clauses which limit where a person may work, or which impose a time limit during which the ex-employee may not carry on a similar business, or which limit the use to which certain information can be put (restraint of trade clauses) are considered unenforceable unless they go no further than is reasonably necessary to protect the employer's interests.

17. Dispute and grievance procedure

As indicated earlier (see: "What an agreement should contain", above), the FW Act makes it mandatory to include in a workplace agreement a procedure to settle or prevent disputes or grievances that arise during the life of the agreement.

An agreement may enshrine rights of representation for employees, subject to some qualifications. The agreement may entitle a trade union to represent an employee in a dispute or grievance procedure only if such rights are couched in terms of the employee's choice. For example, an agreement cannot contain a term that automatically requires the involvement of a trade union in a dispute or grievance procedure, and the agreement may not lawfully expressly exclude the involvement of a union. It is lawful though for the agreement to say that a union may represent an employee if that is the employee's choice.

18. Employer policy

An increasingly common term in individual agreements is one that expresses a term of the agreement as subject to the employer's policies. For example: "[the employee] will be paid an overtime allowance of $.... subject to [the employer's] policy".

A term cast in such a form provides the employer with an in-built means of changing the content of the term, or perhaps effectively excluding it, without the need to obtain the employee's consent. The words: "subject to policy" operate to qualify the term by reference to an external document or process that is solely within the control and discretion of the employer.

It is highly recommended that employees not agree to terms of this kind.

19. Superannuation

The Superannuation Guarantee Scheme was enacted by the Commonwealth Government in 1992 under the Superannuation Guarantee Charge Act 1992 (Cth) and the Superannuation Guarantee (Administration) Act 1992 (Cth)  The scheme is intended to complement existing award superannuation entitlements which remain in force. Employers must meet the minimum levels of contribution to a superannuation fund as set out in the Superannuation Guarantee legislation.

Employers must contribute a minimum percentage of each employee's base earnings. The percentage rates have increased annually to an upper limit of 9% from the financial year 2002/03. There is a tax penalty for failure by an employer to make the contributions required by the legislation.

There are some exemptions from the scheme, including:

  • employees who earn less than $450 per month;
  • persons who are paid to do work of a domestic nature for not more than 30 hours per week;
  • employees under 18 years of age working 30 hours or less per week; and
  • employees over 70 years of age.

The legislation is administered by the Commissioner of Taxation, and the tax is calculated by the employer's self-assessment. The Commissioner enforces payment under Superannuation Guarantee legislation. Employees do not have a right to commence proceedings for the recovery of unpaid superannuation under Superannuation Guarantee legislation. Employees can make complaints to Australian Tax Office (ATO) about unpaid superannuation, which the ATO should investigate.

In addition to the minimum superannuation requirements referred to above, an employer and employee can agree that the employer pay more superannuation or can agree to a term of the contract that the employer will pay the Superannuation Guarantee legislation amount. There is no reason why such an agreement cannot be included in an individual agreement as a term. However, the additional obligation is not administered by the Commissioner for Taxation. It is enforceable in the same way as any other term of the individual agreement.

Whatever the source of the superannuation obligation, once it is paid by an employer as superannuation into the employee's nominated fund the employer's contributions are not available to the employee until he or she reaches the age of 55, with limited exceptions.

Legislation has come into effect which increases the Superannuation Guarantee percentage progressively from 2013 until it reaches 12% in 2020. The first increase is to 9.25% on 1 July 2013 and the second increase is to 9.5% on 1 July 2014.

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