Most employers know they have obligations under the Fair Work Act. But knowing the Act exists and understanding exactly what applies to each employee are two very different things.
Australia’s workplace relations system is made up of several layers. The Fair Work Act, National Employment Standards (NES), Modern Awards, enterprise agreements and individual employment contracts can all play a role in determining an employee’s pay, conditions and entitlements.
For business owners and managers, the challenge is making sure those pieces fit together and that the employment practices you have in place today remain compliant as legislation, awards and minimum rates change.
So, how confident are you that you have the Fair Work fundamentals right?
Start with the National Employment Standards
The National Employment Standards, or NES, set minimum employment entitlements for employees in the national workplace relations system.
They cover fundamental employment conditions including maximum weekly hours, flexible working arrangements, casual employment, parental leave, annual leave, personal and carer’s leave, family and domestic violence leave, public holidays, superannuation contributions, notice of termination and redundancy, among other requirements.
These are minimum standards. An Award, enterprise agreement or employment contract cannot simply remove them or provide an employee with less than their applicable NES entitlement.
That makes the NES one of the first places employers should look when reviewing their employment practices.
It is also worth remembering the information requirements that sit alongside them. For example, employers must provide new employees with the Fair Work Information Statement when they commence employment, with additional information statement requirements applying to casual and fixed-term employees.
Know which Modern Award applies
One of the areas where employers can become unstuck is Award coverage.
Modern Awards are legal instruments that set minimum pay rates and employment conditions for particular industries and occupations. They can contain rules dealing with matters such as:
Minimum rates of pay
Employee classifications
Penalty rates and allowances
Hours of work and rostering
Breaks
Overtime
Consultation and dispute resolution.
It isn't always safe to assume that an employee is Award-free because they are salaried, work in a professional role or have an employment contract.
Likewise, identifying the right Award is only part of the exercise. Employers also need to establish the correct classification within that Award, based on factors such as the work the employee performs, their responsibilities, skills and experience.
Getting either of these things wrong can flow directly through to pay and other entitlements.
Understand where enterprise agreements fit
Some workplaces are covered by an enterprise agreement rather than a Modern Award.
Enterprise agreements set minimum employment conditions for employees covered by the agreement and are approved by the Fair Work Commission. They operate alongside the NES and can contain conditions tailored to a particular business or group of businesses.
Employers operating under an enterprise agreement need to understand who the agreement covers and ensure current workplace practices remain consistent with its terms.
This is particularly important when employment arrangements have evolved over time, roles have changed or managers have inherited practices that have simply become 'the way we've always done things'.
An employment contract doesn't override minimum entitlements
A well-drafted employment contract is an important part of the employment relationship, but it doesn't operate in isolation.
An employment contract cannot provide an employee with less than their applicable minimum entitlements under the NES, an Award or enterprise agreement.
That means a clause in a contract does not necessarily make an arrangement compliant.
For example, paying an employee an annual salary doesn't automatically remove the need to consider Award entitlements such as overtime, penalty rates or allowances where an Award applies. Employers need to understand what the employee would otherwise be entitled to receive and ensure their arrangements comply with the relevant requirements.
This is one reason employment contracts should be reviewed periodically rather than filed away after an employee starts.
Are you paying your employees correctly?
Pay compliance is an area every employer should regularly review.
From 1 July 2026, minimum Award wages increased by 4.75%. The National Minimum Wage also increased to $26.44 per hour or $1,004.90 per 38 hour week for employees to whom that rate applies.
But applying the annual wage increase is only one part of getting pay right.
Employers should also be asking:
Is the correct Award being applied?
Is each employee classified correctly?
Are current minimum rates being used?
Are applicable overtime and penalty rates being recognised?
Are employees receiving the allowances they are entitled to?
If employees are paid a salary, has the arrangement been properly assessed against their underlying entitlements?
Are time, wage and employment records being maintained correctly?
Fair Work requires employers to retain employee time and wage records for seven years, and good records can also be invaluable if questions about pay or entitlements arise later.
Don't rely on 'we've always done it this way'
Many compliance problems don't arise because an employer deliberately sets out to do the wrong thing.
They arise because a classification hasn't been revisited after a role changes. An Award has been interpreted incorrectly. A contract written years ago hasn't been updated. A payroll setting has simply carried forward. Or a manager assumes an arrangement is compliant because nobody has questioned it.
Those small gaps can become significant over time.
A useful Fair Work health check should consider:
NES: Are employees receiving their minimum entitlements?
Award coverage: Do you know which Award, if any, applies to each employee?
Classification: Are employees classified according to the work they actually perform?
Pay: Are current rates, penalties, overtime and allowances being applied correctly?
Agreements: Does an enterprise agreement apply, and are you complying with it?
Contracts: Do employment contracts reflect current roles, arrangements and legal requirements?
Records: Are the required employee and payroll records being maintained?
Good compliance starts with knowing what applies
The Fair Work system can be complex, particularly for businesses employing people across different roles, classifications and working arrangements.
The important thing is not to wait for an employee complaint, payroll discrepancy or workplace dispute before reviewing your arrangements.
Understanding what applies to your workforce and periodically checking that your employment practices still meet those obligations, gives you a much stronger foundation for managing people confidently and fairly.
Not sure whether your Fair Work arrangements are up to date?
Total HRM can help you review your Award coverage, classifications, employment contracts, pay practices and broader HR compliance to identify gaps before they become bigger problems.
This article provides general information only and should not be relied upon as legal advice.