Fair Work Act 2009
s.156 - 4 yearly review of modern awards

4 yearly review of modern awards – payment of wages.

Introduction

[1] This Statement deals with a number of matters concerning ‘payment of wages’ terms in modern awards. The matter is being dealt with as a common issue as part of the 4 yearly review of modern awards. The Statement provides a summary of the matter to date, summarises the provisional views of the Full Bench and advises parties of the next steps in the process.

[2] On 1 December 2016 the Full Bench issued a decision dealing with various ‘payment of wages’ issues in modern awards (the December 2016 decision). The main issues dealt with in the December 2016 decision are:

• timing of payment of wages



• timing of payment on termination of employment



• accrual of wages and other amounts

[3] The December 2016 decision also dealt with issues related to penalties for late payment of wages and annual leave loading. These issues have been determined and variation determinations issued.

[4] A claim was also made by Restaurant and Catering Industrial (RCI) in relation to removing a restriction on the days for payment of wages in respect of the Restaurant Industry Award 2010. This was referred to the Award stage of the review. 1

[5] The Full Bench’s December 2016 decision set out the provisional views and model terms in respect of the issues related to timing of payment of wages 2 and timing of payment on termination of employment3. The Full Bench called for further submissions in relation to these issues, and also called for further submissions to be filed in respect of the issue related to accrual of wages.

[6] Following the December 2016 decision a number of submissions were received from parties (see Attachment A). A summary of these submissions was published on 20 March 2017 (and a revised version of the summary was published on 22 March). A further hearing was held on 23 March 2017, followed by a conference of interested parties on 4 May 2017.

[7] At the 23 March 2017 hearing 4 the Full Bench noted that there appeared to be a measure of agreement between the parties about some important matters of principle. A Statement was issued on 26 April 20175 to identify those areas of agreement and to highlight areas of disagreement. The purpose of the 4 May conference was to provide parties with an opportunity to identify which areas were agreed and those that may require determination.6 At the conference, parties confirmed there is general agreement in a number of areas. These are dealt with in more detail below.

The Issues

Timing of payment of wages

[8] In relation to the issue of timing of payment of wages, the provisional view expressed in the December 2016 decision was that all modern awards should include a term providing for the method and frequency of payment as well as placing a limit on payment in arrears. 7 The Full Bench also considered that there is utility in establishing a model ‘payment of wages and other amounts’ award term as follows:8

X. Payment of wages and other amounts

x.1 Pay periods and pay days

(a) The employer must pay each employee no later than 7 days after the end of each pay period:

(i) the employee’s wages for the pay period; and
(ii) all other amounts that are due to the employee under this award and the NES for the pay period.

(b) An employee’s pay period may be:

(i) one week;
(ii) two weeks; or
(iii) subject to paragraph (e), one month.

(c) The employer must notify each employee in writing of their pay day and pay period.

(d) Subject to paragraph (e), the employer may change an employee’s pay day or pay period after giving 4 weeks’ notice in writing to the employee.

(e) An employer may only change from a one week or two week pay period to a one month pay period by agreement with affected employees. If employees in a particular classification were paid monthly prior to [insert date of commencement of this clause], the employer may continue to pay employees in that classification monthly without further agreement.

(f) Where an employee’s pay period is one month, two weeks must be paid in advance and two weeks in arrears.

x.2 Method of payment

Payments under clause x.1(a) must be made by electronic funds transfer to the account at a bank or financial institution nominated by the employee, or by cash or cheque.

[9] The Full Bench also expressed the provisional view that there would be benefit in either replacing existing provisions for the payment of wages in all modern awards with the model term (once finalised), or alternatively with a version of the model term appropriately adapted to the existing award payment arrangements. 9

[10] Parties were asked to file written submissions in relation to the provisional ‘payment of wages and other amounts’ model term (including its treatment of accrual of payments). The Full Bench noted that submissions should be directed to the concepts in, and wording of, the provisional model term. 10

[11] Submissions were also sought in relation to the provisional view that there would be benefit in either replacing the existing provisions for payment in all modern awards with the model term (once finalised), or alternatively with a version of the model term appropriately adapted to the existing award payment arrangements. 11 It should be noted that throughout the process parties have been advised that they will be given the opportunity to raise award specific issues.12

[12] Based on the written submissions received and the oral submissions made at a hearing held on 23 March 2017 there appeared to be general agreement that a payment of wages model term should specify the following:

(i) the duration of pay periods;
(ii) the time between the end of a pay period and when payment is due;
(iii) payment methods, and
(iv) deal with the public holiday/weekend issue.

Timing of payment on termination of employment

[13] In a Statement 13 published on 14 October 2016, the Full Bench expressed some provisional views in respect of this issue and those provisional views were confirmed in the December 2016 decision.

[14] In the December 2016 decision, the Full Bench confirmed their provisional view that each modern award should provide for the payment of wages and other amounts owing to an employee on termination of employment. Such a term should also prescribe the timeframe within which such termination payments are to be made.  14

[15] The Full Bench also confirmed their provisional view that there is utility in common ‘payment on termination’ provision across all 122 modern awards. It was accepted that each modern award is to be reviewed in its own right and there may be sound reasons for departing from a model term in a particular modern award. 15

[16] The provisional ‘payment on termination of employment’ model term was outlined in the December 2016 decision as follows 16:

Payment on termination of employment

(a) Subject to paragraph (b), the employer must pay an employee no later than 7 days after the employee’s last day of employment:

(i) the employee’s wages for any complete or incomplete pay period up to the end of the employee’s last day of employment; and

(ii) all other amounts that are due to the employee under this award and the NES.

(b) The requirement to pay an employee no later than 7 days after the employee’s last day of employment is subject to s.117(2) of the Act and to any order of the Commission in relation to an application under s.120 of the Act.

Note 1: Section 117(2) of the Act provides that an employer must not terminate an employee’s employment unless the employer has given the employee the required minimum period of notice or “has paid” to the employee payment instead of giving notice.

Note 2: Section 120 of the Act provides that in some circumstances an employer can apply to the Commission to reduce the amount of redundancy pay an employee is entitled to under the NES. In dealing with an application, the Commission could make an order delaying the requirement to make payment until after the Commission makes a decision on the application.

[17] Parties were asked to make written submissions on the provisional model term, including its treatment of accrual of payments. 17 The Full Bench concluded that each modern award should provide for the payment of wages and other amounts owing to an employee on termination of employment. Such a term should also prescribe the timeframe within which such termination payments are to be made.18

[18] We also confirmed our provisional view that there is utility in a common payment on termination provision across all 122 modern awards. It was accepted that each modern award is to be reviewed in its own right and that there may be sound reasons for departing from the model term in a particular modern award. A case by case assessment will be required. 19

Accrual of wages and other amounts

[19] The December 2016 decision outlined an issue in relation to accrual of wages and other amounts, in that award provisions do not expressly deal with accrual of payments. 20 The decision noted that s.323 of the FW Act deals with the method and frequency with which employers must pay ‘amounts payable to the employee in relation to the performance of work’, and appears to have the effect that such amounts must be paid no later than one month after accrual. However section 323 does not specify when ‘amounts payable to the employee in relation to the performance of work’ become payable, that is, when the entitlement to payment accrues.21 The Full Bench noted that the FW Act does not appear to specify when wages accrue.22

[20] The December 2016 decision noted that academic commentary suggested that, absent express provision for accrual in an award, if wages are required to be paid periodically under the award (for example, weekly, fortnightly or monthly) then they will be taken to accrue with at least the same frequency. 23 The Full Bench directed parties to file further written submissions regarding this issue.

[21] Following the December 2016 decision a submission was received by Irving and Stewart 24 proposing the insertion of a new default term into all modern awards dealing with the accrual of wages ‘on a day to day basis’ unless industry circumstances required modification of the default wording, for example, where the circumstances of particular awards mean that wages accrue hourly rather than day today. Irving and Stewart also proposed the following changes to the model clause:

• Clause x.1(a)(i) (at para [34]) be amended to read: ‘the employee’s wages for accrued during the pay period’



• Clause (a)(i) (at para [117]) be amended to read: ‘the employee’s accrued wages for any complete or incomplete pay period …’ 25

[22] As outlined in the 26 April 2017 Statement there appears to be general agreement that awards should prescribe how wages accrue, but this general issue requires further discussion. 26

Next steps

[23] As noted earlier, the purpose of the 4 May conference was to provide parties with an opportunity to identify which are agreed and which remain contentious.

[24] At the conference parties confirmed that there is general agreement as to the following matters:

(i) Clarity is important, so that those covered by an award clearly understand their obligations. Parties also generally acknowledged that there are benefits of uniformity, but the circumstances of particular awards may mean that not all elements of common approach are appropriate in that particular award.

(ii) As noted in (i) above, while it is generally acknowledged that consistency is desirable, there is also broad support for the proposition that an award by award approach is warranted and that regard should be had to the existing terms of the award, their historical context and the circumstances pertaining to the relevant industry.

(iii) There is broad support for the concepts identified in the two provisional model terms. But there also appears to be some matters of detail about which there is a clear disagreement. These are set out below. Further, as the Full Bench advised at the 23 March hearing, there are a number of issues requiring input from parties who were not present at the hearing; for example, on the question of whether casuals should be dealt with differently there was limited input from hospitality and retail employers and unions (other than the SDA).

[25] It was also confirmed at the conference, that in relation to the timing of payment of wages model term, the term should specify:

(i) the duration of pay periods;
(ii) the time between the end of a pay period and when payment is due;
(iii) payment methods, and
(iv) deal with the public holiday/weekend issue.

[26] It was also agreed that interested parties will have direct discussions relating to the four conceptual issues that are identified above in paragraph [25] (timing of payment of wages). These discussions are also to be directed at the accrual point outlined above at paragraphs [19] and [21]. At the conference parties requested a time period of 7 weeks to confer with their affiliates and then forward a position to the opposing side.

[27] The matter will be listed for mention before the President at 10am on Wednesday 5 July 2017.

PRESIDENT

ATTACHMENT A

List of submissions received since December 2016 decision

 1   [2016] FWCFB 8463 at [51]-[52]

 2   [2016] FWCFB 8463 at [34]

 3   [2016] FWCFB 8463 at [117]

 4   Transcript, 23 March 2017

 5   [2017] FWCFB 2290

 6   Transcript, 4 May 2017

 7   [2016] FWCFB 8463 at [33]

 8   [2016] FWCFB 8463 at [33] - [34]

 9   [2016] FWCFB 8463 at [47]

 10   [2016] FWCFB 8463 at [48]

 11   [2016] FWCFB 8463at [49]

 12   [2016] FWCFB 8463at [50]

 13   [2016] FWCFB 7455

 14   [2016] FWCFB 8463 at [86]

 15   [2016] FWCFB 8463 at [87]

 16   [2016] FWCFB 8463 at [117]

 17   [2016] FWCFB 8463 at [119]

 18   [2016] FWCFB 8463 at [120]

 19   [2016] FWCFB 8463 at [121]

 20   [2016] FWCFB 8463 at [29]

 21   [2016] FWCFB 8463 at [123]

 22   [2016] FWCFB 8463 at [125]

 23   [2016] FWCFB 8463 at [126]

 24   Irving and Stewart submission, 15 December 2016

 25   Irving and Stewart submission, 15 December 2016 at p.1

 26   [2017] FWCFB 2290 at [16]

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