Creative compliance – classification structures

This is one of our creative compliance blogs where we explore options for being a little innovative within the constructs of the Fair Work system.

The Challenge

One of the difficulties that employers and employees can have with modern awards is understanding the classification and wage structures ie where a particular employee’s job fits and what the minimum rate of pay for that job is.

Why is this difficult?

Sadly, it is because classification structures in many awards simply don’t describe the work that people do. Some make no reference to tasks performed, some have some generic content around level of supervision or degree of independence which isn’t very helpful and some have stated qualification levels which, in some cases, are not actually relevant. 

How can that be the case?

Back in the early 1990s, employer associations and unions negotiated new so-called “skills based classification structures”. Ostensibly, this was about aligning job classifications and wage rates with industry training and qualification levels.

However, what actually happened was:

– Industry training people built the training curriculum and qualifications frameworks;

– Industrial relations people separately negotiated structures for each industry against a set of job benchmarks framed as a % of a tradesperson’s rate in the context of the particular awards relevant to the particular industry or occupation and the wage structures that already existed in those awards;

– Some industries simply set award classification levels by reference to the qualifications framework for the particular industry or occupation with little or no definition of tasks performed;

– Others set award classifications by aligning existing award wage levels for particular jobs (eg for a trades assistant or a forklift driver) with the closest benchmark % of the tradesperson’s rate, largely ignoring the qualifications framework in the negotiation process but including references after setting the wage levels; and

– While there were guidelines and the Australian Industrial Relations Commission nominally oversaw the process and had to approve the award classification structures, each industry pretty well did its own thing.

Some awards kept schedules of the pre-existing classification levels as references which were helpful.

Note: Ridgeline HR Practice Leader, Peter Maguire was a member of the Australian Textile Employers Industrial Relations Council and participated on the working party that developed the structure for the textile industry.

Then, with the advent of the Fair Work system, modern awards were created and there has been an ongoing modern award review process going on in the Fair Work Commission for the past 9 years.

With some awards, those reference schedules have been removed in these processes.

Of course, there is the other problem – that the way work is performed and the skills and knowledge required to perform that work effectively today can be very different to what it was when those so called skills-based classification structures were created 30 years ago.

Shouldn’t the Fair Work Commission fix it?

What is clear is that the award modernisation process really hasn’t been effective in modernising awards. It has largely been a rationalisation process to reduce the thousands of awards that operated federally and in States and Territories to a more manageable number. The Fair Work Commission has been effective in getting that number down to a bit over 120.

It has also been effective in standardising some provisions across awards to provide consistency but classification structures have largely been left alone and that is likely to remain the case.

What can you do about it?

If you are paying your people significantly above award, you have the opportunity of creating your own classification structure – something that you and your people see as being fair and that makes sense for your business.

You can do something entirely different to the award structure as long as people would all be paid more under your structure than they would be under the award structure.

What is important in implementing something of this sort is:

1. There are clear descriptors for each level which clearly differentiate between one level and the next

2. Your people are educated and consulted about the structure and are accepting of it as a fair way to recognise peoples’ skills and contributions

3. You have a process for people to seek reclassification based on their skills and abilities as they relate to your classification structure

4. Your classifications and remuneration satisfy the “Better Off Overall” principle i.e. they are above the award minimum rates for the corresponding award classifications

5. If other monetary award conditions (eg allowances or penalty payments or loadings) are to be factored into overall wage rates within your structure as well, your structure should include detail on what is included in the rates and how the calculations have been made

6. You update the rates every time there are award wage increases – generally these happen on 1 July each year via the federal minimum wage review conducted by the Fair Work Commission

7. You ensure that your contracts of employment and remuneration policies and procedures are aligned with your classification structure and processes.

You might also consider developing your own enterprise agreement and having that approved by your employees and the Fair Work Commission which makes it legally binding on all parties. It also serves as evidence that your pay and conditions are both fair and above award.

Conclusion

We do have strict compliance requirements under employment laws and modern awards but that doesn’t mean that you cannot be  creative and compliant.

If you want to explore opportunities to get creatively compliant, book in for your free first consultation by calling us on 0438 533 311 or emailing us at enquiries@ridgelinehr.com.au.