Employment and employee benefits in Australia: overview

A Q&A guide to employment and employee benefits law in Australia.

The Q&A gives a high level overview of the key practical issues including: employment status; background checks; permissions to work; contractual and implied terms of employment; minimum wages; restrictions on working time; illness and injury; rights of parents and carers; data protection; discrimination and harassment; dismissals; redundancies; taxation; employer and parent company liability; employee representation and consultation; consequence of business transfers; intellectual property; restraint of trade agreements and proposals for reform.

To compare answers across multiple jurisdictions, visit the Employment and Employee Benefits: Country Q&A tool.

The Q&A is part of the global guide to employment and employee benefits law. For a full list of jurisdictional Q&As visit www.practicallaw.com/employment-guide.

Contents

Scope of employment regulation

1. Do the main laws that regulate the employment relationship apply to:
  • Foreign nationals working in your jurisdiction?

  • Nationals of your jurisdiction working abroad?

This chapter only considers the law in relation to private sector employees.

Laws applicable to foreign nationals

Employment laws apply to foreign nationals who are employees based in Australia and whose primary place of work is Australia. It is irrelevant whether the employer is based in Australia or overseas.

See Question 7 in relation to the regulation of the employment relationship. See Question 2 in relation to the statutory employment rights and obligations applicable to such employees and other categories of worker.

If a foreign national is not based in Australia or is not an employee, Australian employment laws dealing with the terms and conditions of employment do not apply during their stay in the country.

Laws applicable to nationals working abroad

The employment laws apply to nationals who are based in Australia and whose primary place of work is in Australia. Such laws do not apply to Australians that are based and work overseas.

 

Employment status

2. Does the law distinguish between different categories of worker? If so, what are the requirements to fall into each category, the material differences in entitlement to statutory employment rights and are there any maximum time periods for which each category of worker can be engaged?

Categories of worker

The law recognises different categories of worker. These include:

  • Employees.

  • Sole-traders.

  • Directors.

  • Officers of a corporation.

  • Independent contractors.

The characterisation of the relationship is a question of fact. Courts and tribunals are not obliged to accept the parties' characterisation of the relationship, and can determine the true nature of the relationship having regard to the circumstances in practice. The key indications in assessing whether a worker is an employee or independent contractor include:

  • The documentation of the arrangements between the parties.

  • Payment arrangements.

  • Tax arrangements.

  • The degree of supervision and control over the work performed.

  • The extent to which materials and equipment necessary to perform the work are provided and by whom.

There are also sham contracting laws that make it unlawful for employment relationships to be characterised as independent contracting.

Entitlement to statutory employment rights

The federal Fair Work Act 2009 (Cth) (Fair Work Act) applies to employees.

The Fair Work Act provides rights and obligations for employees including:

  • The National Employment Standards (NES) that sets minimum terms and conditions for matters such as leave and hours of work.

  • Modern awards (orders of the Fair Work Commission), which set out additional minimum employment entitlements for employees engaged in the industries or occupations covered by the award.

  • A framework for collective bargaining to make enterprise agreements, including obligations to bargain in good faith and to take industrial action to support claims in certain circumstances.

  • Unfair dismissal protections that protect eligible employees from terminations of employment that are hash, unjust or unreasonable.

  • General protections that prohibit adverse action being taken against workplace participants because of prohibited reasons.

Each State and Territory of Australia provides for other employment legislation, including for:

  • Occupational health and safety.

  • Workers' compensation.

  • Equal opportunity.

  • Anti-discrimination.

  • Long service leave.

The Fair Work Act does not apply to other types of workers and there is no equivalent regulation of terms and conditions (with the exception of unfair contracts legislation that applies to a limited range of contracts in some jurisdictions). The application of State and Territory legislation to other relationships varies from state to state.

Time periods

It is possible to engage employees for a fixed duration, but it is not mandatory. There are no laws of general application limiting the duration of a particular type of engagement. However, certain modern awards contain requirements for casual employees to convert to permanent employment after a period of time.

 

Recruitment

3. Are any grants or incentives available for employing people? Does any information/paperwork need to be filed with the authorities when employing people?

Grants or incentives

There are a number of Australian Government schemes and incentive programs, including:

  • Restart Wage Subsidy which is financial assistance for businesses that employ, and retain, people aged 50 years or older and that have been unemployed and receiving income support for six months or more.

  • Disability financial assistance to aid employers in making modifications in the workplace and incentives to hire people with disabilities.

  • Support programs for businesses to employ Indigenous Australians, including the Indigenous Wage Subsidy program and the Indigenous Cadetship Support program.

Filings

Other than apprenticeships, there are no filing requirements for the employment of employees.

Employers have particular obligations to keep records for employees.

 

Background checks

4. Are there any restrictions or prohibitions on carrying out background checks in relation to applicants?

Corporations have obligations regarding the use and disclosure of any personal information collected (see Question 16).

Background checks are generally permissible if:

  • Directly relevant to the role.

  • The applicant consents to the check.

In conducting background checks, it is necessary to ensure that the process does not constitute unlawful discrimination based on any prohibited ground unrelated to the inherent requirements of the role.

 

Permission to work

5. What prior approvals do foreign nationals require to work in your country? What information/paperwork needs to be kept or filed with the authorities when they start work?

Visa

There are a variety of visas available to foreign nationals wanting to work in Australia on a temporary or permanent basis, including the:

  • Temporary work (skilled) visa (subclass 457).

  • Working holiday.

  • Employer nomination scheme (permanent).

  • Business owner visas (permanent).

The subclass 457 visa is the most common employer sponsored visa, available on a temporary basis of up to four years. The process involves a number of steps to ensure that the visa is used to address a genuine skill shortage and requires the employer to demonstrate a commitment to employing local Australian labour.

Procedure for obtaining approval

Applications for the subclass 457 visa is a three stage process:

  • Sponsorship, which is either by:

    • "standard business sponsorship" (the most common means of sponsoring a 457 visa holder);

    • through a labour agreement between employers and the Department of Immigration and Border Protection (DIBP).

  • Nomination, which involves identifying the position to be filled, the person to fill it and the occupation category. Standard business sponsors must undertake labour market testing before submitting a nomination and must demonstrate that attempts to recruit Australians have been unsuccessful. 457 visa holders must receive the "market salary rate" and terms and conditions no less favourable than Australians in the same role and location.

  • Visa application, which involves applying for a 457 visa to the DIBP. The applicants must submit documentation proving their identity (passport and birth certificate), as well as information proving they hold the requisite skills and qualifications and are of good character.

Cost

Costs vary across the different visas, adjusted annually.

From February 2015, the application fee for a 457 visa was A$1,035, plus sponsoring fees of A$750.

Timeframe

The length of validity and renewal procedures varies across the visas. The 457 visa is valid for up to four years.

Sanctions

Sponsors that fail to meet the obligations of the 457 visa scheme are subject to sanctions that may include civil penalties and infringement orders, suspension from the scheme or the termination of an existing arrangement.

Permits

Australia does not have a permit system.

 

Restrictions on managers and directors

6. Are there any restrictions on who can be a manager or company director?

Age restrictions

Company directors must be at least 18 years of age.

Australia does not have a compulsory retirement age and age discrimination is unlawful. It is common for employees to work past the age they can access their superannuation (employer funded pension).

Nationality restrictions

There are no nationality restrictions relating to employing managers or company directors. Such restrictions can amount to unlawful discrimination.

Proprietary companies must have at least one director that is an Australian resident. Public companies must have at least three Australian directors with at least two being Australian residents.

Other

In order to be a company director or officer (generally, persons who participate in making decisions affecting a substantial part of the company's business), a person must be classed as a fit and proper person and must not be disqualified from managing a corporation. Disqualification can arise from:

  • A court order.

  • Conviction for fraud.

  • Bankruptcy.

Current or former company auditors are also restricted from becoming officers of that company. Company constitutions can contain other eligibility conditions.

 

Regulation of the employment relationship

7. How is the employment relationship governed and regulated?

Written employment contract

While the primary means of regulating the employment relationship is the law of contract under Australian law, there is no statutory requirement to enter into a written employment contract. However, it is common practice to record the key terms of engagement in either a letter of appointment or a formal written contract and this is a prudent risk mitigation measure for employers.

The provisions of the employment contract operate subject to statutory employment rights (see Question 2), including the provisions of any applicable awards or enterprise agreements.

The federal Fair Work Act 2009 (Cth) (Fair Work Act) requires all employers to provide new employees with a copy of the Federal Government's Fair Work Information Statement that summarises key provisions of the Act.

Implied terms

Terms can be implied, where necessary, by facts to make a contract effective or by operation of law.

In an employment context, where employment arrangements do not include an express term about a period of notice to terminate the employment, a term of reasonable notice is implied. Terms implied by law include an:

  • Employee's duty of obedience and co-operation.

  • Employer's duty of care to provide a safe working environment.

Collective agreements

Collective agreements (enterprise agreements in Australia) can be made under the Fair Work Act. Trade unions have rights to act as bargaining representatives for their members or employees eligible to be members.

The Fair Work Act imposes obligations on negotiating parties to bargain in good faith and empowers the Fair Work Commission to make orders for bargaining. While there is an obligation to bargain in good faith, there is no obligation to make concessions or reach agreements.

An enterprise agreement can include matters pertaining to the employment relationship or to the relationship between the employer and a trade union. In addition, the Fair Work Act provides content requirements, including mandatory terms and matters which cannot be included in an enterprise agreement.

There are various procedural steps required to make a collective agreement, including explaining the agreement and employee approval. An agreement is made when it is approved by a valid majority (50% plus 1) of the employees covered by the agreement. With new projects or undertakings, it is also possible to make a greenfield agreement with a trade union that has the capacity to cover the relevant work before employees are engaged.

An agreement must also be approved by the Fair Work Commission, which must be satisfied that the agreement meets the statutory requirements, including that the employees covered by the agreement would be better off overall when compared to the provisions of applicable modern awards.

Modern awards do not apply where enterprise agreements apply to employees' employment.

 
8. What are the main points to consider if an employer wants to unilaterally change the terms and conditions of employment?

The key consideration is whether the employer retains any discretion under the relevant employment arrangements to make the proposed change.

Where the terms and conditions of employment are contained in an industrial instrument (modern award or enterprise agreement) or the National Employment Standards, there is limited scope to make unilateral changes. The federal Fair Work Act 2009 (Cth) (Fair Work Act) provides a process for variations that must be followed.

Where the terms and conditions are contained in a contract, an employer cannot unilaterally vary fundamental terms (such as hours or work or salary) without the employee's agreement. However, an employer can unilaterally vary where this is contemplated by the contract itself, for example, where the employer retains discretion to vary matters such as the employee's duties, work location or reporting line.

An employer can also unilaterally vary a benefit in a manner more favourable to the employee than the terms of the contract (unless the contract expressly provides otherwise).

 

Minimum wage

9. Is there a national (or regional) minimum wage?

The national minimum wage order applies to employees not covered by a modern award. From July 2014, the minimum wage for award free employees was (before tax):

  • A$16.87 per hour.

  • A$640.90 per 38 hour week.

Minimum wages for modern award covered employees are contained in modern awards and exceed the national minimum wage.

Minimum wages are generally lower for junior employees, apprentices and those receiving a disability support pension.

 

Restrictions on working time

10. Are there restrictions on working hours? Can an employee opt out on either an individual or collective basis?

Working hours

The National Employment Standards (NES) provides for a maximum working week of 38 hours unless the additional hours are reasonable. It is common for employers and employees to reach agreement about the reasonableness of additional hours, including, for example, that reasonable overtime is required from a role.

Modern awards (and enterprise agreements) typically contain provisions regulating hours of work including:

  • The span of ordinary hours of work.

  • The maximum number of ordinary hours that can be worked on a day or shift.

  • Minimum rest breaks between finishing and starting work.

  • Penalty rates for overtime, shift work, weekend or public holiday work.

There is no capacity to opt out of the provisions of the National Employment Standards (NES) or modern award on an individual basis. However, employers and employees can enter into individual flexibility arrangements or make enterprise agreements that vary working hours, provided that employees are better off overall.

Rest breaks

Modern awards (and enterprise agreements) generally provide for rest breaks and meal breaks, including the:

  • Maximum period of time employees can work without a break.

  • The minimum break to occur between periods of duty or shifts.

Shift workers

Modern awards (and enterprise agreements) usually allow shift work for employees to whom they apply. Shift work provisions provide for shift patterns and typically specify penalty rates for work performed during unsociable hours, for example:

  • 15% penalty for afternoon shifts.

  • 30% for night shifts.

 

Holiday entitlement

11. Is there a minimum paid holiday entitlement?

Minimum holiday entitlement

Under the National Employment Standards (NES), full-time employees are entitled to four weeks of paid annual leave per year. This is pro-rated for part-time employees and increased to five weeks for shift workers (as defined in modern awards). Casual employees are not entitled to annual leave. Annual leave that is not taken each year accrues from year to year and is paid out on termination.

Employers can require employees to take paid annual leave in certain circumstances. Cashing out annual leave is also permitted in particular circumstances.

Public holidays

In addition to paid annual leave, most employees are entitled to take public holidays. There are eight national public holidays and additional state and territory public holidays.

Subject to some limitations, employees can be reasonably required to work on public holidays. Modern awards prescribe penalty rates.

 

Illness and injury of employees

12. What rights do employees have to time off in the case of illness or injury? Are they entitled to sick pay during this time off? Who pays the sick pay and, if the employer, can it recover any of the cost from the government?

Entitlement to time off

The National Employment Standards (NES) provides for "personal leave" that employees can take due to illness or injury. Some enterprise agreements and employer policies provide for additional leave.

Entitlement to paid time off

Under the NES, full-time employees receive ten days of paid personal or carer's leave per year (pro-rated for part-time employees). Casual employees are not entitled to paid time off.

This entitlement accrues from year to year but is not required to be paid out on termination.

Recovery of sick pay from the state

Paid personal or carer's leave is entirely funded by employers.

Employees with work-related injuries may be eligible for payments under their employers' workers' compensation schemes. All employers (whether based in Australia or overseas) must have workers' compensation insurance for their Australian employees.

 

Statutory rights of parents and carers

13. What are the statutory rights of employees who are:
  • Parents (including maternity, paternity, surrogacy, adoption and parental rights, where applicable)?

  • Carers (including those of disabled children and adult dependants)?

The National Employment Standards (NES) provides for unpaid parental leave in relation to the birth or adoption of a child.

Maternity rights

A mother with at least 12 months of continuous service on the date of birth or placement of the child is entitled to up to 12 months of unpaid parental leave provided they are the primary carer of the child. Parental leave can be extended up to a further 12 months, which can only be refused by employers on reasonable business grounds.

Casual employees employed on a regular and systemic basis for at least 12 months are also entitled to unpaid parental leave.

Pregnant employees can also have rights to be provided with a safe job or unpaid special maternity leave in certain circumstances.

Paternity rights

If the father is the primary carer of the child, he is entitled to the same parental leave rights. Both parents are entitled to be absent from work for separate periods of 12 months. If the first primary carer takes unpaid parental leave in excess of the original 12 months, the amount of leave the father can take is reduced by an equivalent amount.

Generally, parental leave must be taken consecutively and both parents cannot take parental leave at the same time. However, both parents can take concurrent leave for a maximum period of eight weeks.

Surrogacy rights

If a surrogate has responsibility for the care of the child, she is entitled to the same maternity rights set out above. However, when this responsibility for the child ends then her entitlement to unpaid leave also ends. The parents of a child conceived via surrogacy are only entitled to parental leave if they adopt the child.

Adoption rights

Employees that adopt a child under 16 years of age are entitled to parental leave. They are also entitled to up to two days of unpaid pre-adoption leave to attend interviews or examinations required for the adoption.

Parental rights

Returning from parental leave

A parent is entitled to return to their pre-parental leave role, or if that role no longer exists, an available position for which they are qualified and suited, which is nearest in status and pay to their original role.

Paid parental leave

Under the Federal Government's paid parental leave scheme, eligible employees are entitled to up to 18 weeks' paid leave at the minimum wage (currently A$640.90 per week).

Dad and partner pay

Under the Federal Government's "dad and partner pay" scheme, eligible working fathers or partners are provided with two weeks of paid leave at the federal minimum wage.

Carers' rights

Up to ten days of paid personal or carer's leave per year is available and can be used to provide care for family members who are ill, injured or affected by an unexpected emergency. An employee who has used all their paid personal or carer's leave is entitled to two days of unpaid carer's leave for each occasion they are required to care for a member of their immediate family or household. This entitlement to unpaid carer's leave is also available to casual employees.

A flexible working arrangement (for example part-time hours), can be requested by employees with at least 12 months of continuous service that come within specified categories, including having responsibility for a child under school age. Employers can only refuse requests for flexible work arrangements on reasonable business grounds.

 

Continuous periods of employment

14. Does a period of continuous employment create any statutory rights for employees? If an employee is transferred to a new entity, does that employee retain their period of continuous employment? If so, on what type of transfer?

Statutory rights created

Various National Employment Standards (NES) entitlements are calculated by reference to continuous service. These include:

  • Personal or carer's leave.

  • Annual leave.

  • Notice of termination.

  • Redundancy pay.

  • Long service leave.

  • Parental leave.

  • Flexible working arrangements.

There is also a qualifying period for access to the unfair dismissal jurisdiction of six months or 12 months for small businesses.

Consequences of a transfer of employee

The federal Fair Work Act 2009 (Cth) (Fair Work Act) requires a new employer to recognise industrial instruments that applied to a former employer in respect of a transferring employee in particular circumstances where there is a connection between the new employer and the former employer. Relevant connections include:

  • Transfers of employees between associated entities.

  • Where there is a transfer of assets.

  • Outsourcing.

  • Insourcing.

Employers must recognise continuous service and the above entitlements on the transfer of employment to an associated entity.

When an employee transfers to a new employer that is not an associated entity, the new employer can elect whether or not to recognise service for the purposes of annual leave and redundancy pay. Unless service is recognised, these benefits must be paid out on termination of employment by the former employer.

 

Fixed term, part-time and agency workers

15. To what extent are temporary and agency workers entitled to the same rights and benefits as permanent employees? To what extent are part-time workers entitled to the same rights and benefits as full-time workers?

Temporary workers

There are various types of temporary engagement that are recognised. These include:

  • Casual employees that are employed for a single engagement that begins and ends with each engagement. This is the most common mechanism for engaging temporary workers.

  • Fixed term employees, where there are consistent work requirements this is a commonly used mechanism with the employment terminating at the end of the term.

  • Non-employees such as contractors or labour-hire workers who are engaged to meet temporary work requirements.

Where such temporary workers are employed, they generally receive the same benefits as other employees in their position. Casual employees are paid an additional 25% loading but receive no leave entitlements.

Trade unions commonly press for terms in enterprise agreements that limit the use of temporary labour.

Agency workers

Agency arrangements, commonly referred to as labour-hire arrangements, are often used to meet fluctuating work demands. Such arrangements are regulated by commercial contract between the principal or host organisation and the agency. Australia does not presently recognise joint employment. The agency or hiring organisation employs the relevant employees and is responsible for all employment obligations. The employees then perform work in the host-organisation.

Both the labour-hire company and the host organisation have obligations in relation to workplace health and safety.

Trade unions commonly press for terms in enterprise agreements that limit the use of labour-hire or agency labour.

Part-time workers

Part-time employees generally receive the same benefits as full-time employees, on a pro-rata basis which is based on their hours of work.

For employees covered by modern awards, the modern award can include additional requirements in relation to the working arrangements of part-time employees and how they are to be documented.

 

Data protection

16. Are there any requirements protecting employee privacy or personal data? If so, what are an employer's obligations?

Employees' data protection rights

Persons, such as employers, that collect personal information have statutory obligations regarding its use, collection and storage, recorded in privacy legislation and the National Privacy Principles.

There are exceptions for employee records (health information or employment related matters) of a current or former employee held by an employer, but not records of prospective employees or contractors.

Some states have introduced legislation regulating the use of surveillance devices in the workplace, including GPS devices.

Employers' data protection obligations

Privacy legislation that requires organisations to give individuals access to the information held about the individual does not apply to employee records. This means that employers are generally not required to give employees access to these records.

 

Discrimination and harassment

17. What protection do employees have from discrimination or harassment, and on what grounds?

Protection from discrimination

Federal, state and territory legislation protects employees and independent contractors from discrimination on the basis of certain attributes.

It is unlawful to either directly or indirectly discriminate against a person in all aspects of employment relationships including recruitment and termination. Claims must generally be made within 12 months of the discrimination occurring.

There is significant overlap between Australian jurisdictions that prohibit discrimination on the basis of particular attributes including:

  • Age.

  • Race.

  • Impairment.

  • Gender.

  • Carer or family responsibilities.

  • Sexuality.

The range of attributes varies from state to state.

Protection from harassment

Harassment of employees and contractors on the basis of a protected attribute is prohibited.

Sexual harassment is also specifically prohibited. Sexual harassment is unwelcome conduct of a sexual nature that could be reasonably expected to offend, humiliate or intimidate a person and includes conduct such as displaying pornography and indecent propositions.

The federal Fair Work Act 2009 (Cth) (Fair Work Act) has been recently amended to empower the Fair Work Commission to make orders to stop bullying at work. This enables employees that believe they have been subjected to repeated unreasonable behaviour at work to seek orders requiring that the conduct cease.

 

Whistleblowers

18. Do whistleblowers have any protection?

There is no whistleblower legislation of general application. Specific areas of public and private activity provide for whistleblower protections. For example, there is protection for employees that disclose breaches of the laws regulating corporations and banking. There is also broad protection for matters involving public sector bodies or officeholders.

To a limited degree, employees are also protected against adverse treatment when making a complaint or inquiry in relation to their employment.

It is common for employers to implement policies intended to protect employees who report misconduct.

 

Termination of employment

19. What rights do employees have when their employment contract is terminated?

Notice periods

Employees must be provided with minimum statutory notice period between one and four weeks.

Employees over 45 years of age that have completed at least two years of service are entitled to an additional week's notice. If permitted by the employment contract, employers can elect to pay out the notice in lieu.

Minimum notice periods do not apply to:

  • Casual employees.

  • Employees employed for a specified period.

  • Task or seasonal employees.

  • Employees whose employment is terminated because of serious misconduct.

Employment contracts often provide for longer notice periods, particularly for executives or senior management.

If there are no express arrangements in relation to notice of termination of employment, a term of reasonable notice may be implied. This involves a court or tribunal considering the facts and circumstances at the time the relevant employment commenced, to determine the period of reasonable notice, having regard to factors such as:

  • The seniority of the position.

  • Length of service.

  • The age of the employee.

  • The likelihood of finding other employment.

Reasonable notice typically ranges from three to 12 months but can be longer.

Severance payments

If employees are not given actual notice of termination, they must be paid in lieu of notice.

Procedural requirements for dismissal

All terminations of employment must be in accordance with the terms of the contract. It is also prudent for employers to comply with any internal policy requirements.

Whether other procedural requirements apply depends on whether the relevant employee has access to the unfair dismissal jurisdiction under the federal Fair Work Act 2009 (Cth) (Fair Work Act).

Eligible employees can apply to the Fair Work Commission to assess whether the dismissal was harsh, unjust or unreasonable. In making this assessment, the Commission must have regard to various procedural requirements, including whether the employee:

  • Had the opportunity to be accompanied by a support person.

  • Was informed about the reason for dismissal and had an opportunity to respond.

The Commission also considers whether the process adopted by the employer was appropriate given the size of the undertaking and availability of human resources management.

 
20. What protection do employees have against dismissal? Are there any specific categories of protected employees?

Protection against dismissal

Termination of employment must be consistent with the terms of any employment contract and the requirements of any enterprise agreement that applies to the relevant employee. Failure to do so can result in claims for breach of contract or breach of agreement.

Statutory protections employees seeking to challenge a decision to terminate their employment include:

  • State or federal anti-discrimination laws or the general protections provisions of the Fair Work Act 2009 (Cth) (Fair Work Act) prohibit termination of employment because of a prohibited reason. All employees are protected against such conduct.

  • The unfair dismissal provisions of the Fair Work Act provides relief if the termination of the employment was harsh, unjust or unreasonable. An unfair dismissal application is only available to eligible employees. This generally includes an employee to be covered by a modern award or enterprise agreement, or to earn less than a high-income threshold, and not otherwise fall into an excluded category. An unfair dismissal application involves a merit review of the decision to terminate the employment, including whether there was a valid reason that warranted dismissal and whether procedural requirements were met.

Potential remedies include reinstatement and compensation. Penalties and other remedial orders can be made for breaches of general protections laws.

Protected employees

Federal and state laws prohibit termination of employment for discriminatory reasons that include:

  • Exercising, or not exercising a workplace right. Workplace rights include:

    • making complaints or inquiries to the employer or an external body;

    • the ability to initiate legal proceedings;

    • rights and benefits under employment and industrial relations legislation or modern awards and enterprise agreements.

  • Protected attributes including:

    • race;

    • sex;

    • disability or impairment;

    • temporary absence due to illness or injury;

    • family or carer's responsibilities (these vary from state to state).

  • Industrial activities.

 

Redundancy/layoff

21. How are redundancies/layoffs defined, and what rules apply on redundancies/layoffs? Are there special rules relating to collective redundancies?

Definition of redundancy/layoff

The federal Fair Work Act 2009 (Cth) (Fair Work Act) provides for redundancy pay obligations if an employee's employment is terminated at the employer's initiative because the employer no longer requires the job done by the employee to be done by anyone, except where this is due to the ordinary and customary turnover of labour.

Industrial instruments (modern awards and enterprise agreements) can include different definitions of redundancy.

Procedural requirements

For employees covered by an industrial instrument (modern award or enterprise agreement), consultation obligations apply where an employer has made a definite decision to implement a significant workplace change.

Additional procedural requirements can be imposed in enterprise agreements or employer policies.

Employers must notify Centrelink (Australia’s social security agency) if 15 or more employees are made redundant.

Redundancy/layoff pay

Redundant employees are entitled to notice of termination. Subject to certain exemptions (for example, casual employees), employees are also entitled to redundancy pay. Where an employee's employment is terminated for reasons of redundancy, they are entitled to redundancy pay of between four and 16 weeks, based on their length of continuous service with the employer.

Some enterprise agreements and employer policies have more generous redundancy pay entitlements.

There are some limited exceptions to the requirement to pay redundancy pay including on a transfer of business to an associated entity.

Collective redundancies

Employers must consult with employees and their representatives if 15 or more redundancies are proposed. Employers are not generally required to select employees on the basis of age (this would be discriminatory) or job tenure. There are no general priority rules in the case of redeployment.

 

Employee representation and consultation

22. Are employees entitled to management representation (such as on the board of directors) or to be consulted about issues that affect them? Is employee consultation or consent required for major transactions (such as acquisitions, disposals or joint ventures)?

Management representation

Employees are not entitled to management representation on the board of directors. Some enterprise agreements provide for consultative committees on issues such as work health and safety.

Consultation

Employers whose employees are not covered by an industrial instrument (modern award or enterprise agreement) must consult with employees and their representatives if 15 or more redundancies are proposed.

If employees are covered by an enterprise agreement or modern award, there are additional consultation obligations that require employers to consult on major workplace changes which are likely to have significant effects on employees (for example, termination or relocation).

Consultation must commence as soon as practicable after a definite decision has been made and the employer is required to provide all relevant information about the changes in writing but is not required to disclose confidential information that would be contrary to its interests. Consultation requires the parties to consider each other's position in good faith and exchange relevant information. Employers must consider matters raised by the employees and their representatives but do not need their consent to implement the changes.

There may be additional specific consultation obligations in enterprise agreements, or employer policies.

There are other specific circumstances where consultation obligations can arise, including changes to working hours or in relation to work health and safety.

Major transactions

There is no specific obligation to consult in relation to major transactions. General obligations apply where the transaction will either result in major workplace change or more than 15 redundancies.

 
23. What remedies are available if an employer fails to comply with its consultation duties? Can employees take action to prevent any proposals going ahead?

Remedies

Where an employer has breached statutory consultation obligations or those contained in an industrial instrument (modern award or enterprise agreement), penalties can apply. Depending on the circumstances, it may be possible for a court or tribunal to make orders delaying or stopping implementation of the changes.

Employee action

Employees or their representatives can bring actions seeking the above remedies. There is no capacity for employees to access industrial action to oppose changes that are made during a period outside of bargaining for an enterprise agreement.

Employees that are made redundant can bring unfair dismissal claims on the basis that a failure to consult means the redundancy is not genuine.

 

Consequences of a business transfer

24. Is there any statutory protection of employees on a business transfer?

Automatic transfer of employees

Employees cannot be unilaterally required to be offered or accept employment with another employer. A transfer of an employee from one employer to another requires the employee's consent.

The federal Fair Work Act 2009 (Cth) (Fair Work Act) requires a new employer to recognise industrial instruments that applied to a former employer in respect of a transferring employee in particular circumstances where there is a connection between the new employer and the former employer. Relevant connections include:

  • Transfers of employees between associated entities.

  • Where there is a transfer of assets.

  • Outsourcing.

  • Insourcing.

Employers must recognise continuous service and the above entitlements on the transfer of employment to an associated entity.

When an employee transfers to a new employer that is not an associated entity, the new employer can elect whether or not to recognise service for the purposes of annual leave and redundancy pay. Unless service is recognised, these benefits are required to be paid out on termination of employment by the former employer.

Protection against dismissal

There is no obligation to make offers of employment or employ employees from a transferring business.

Harmonisation of employment terms

An employer can standardise terms and conditions of employment in relation to both transferring and non-transferring employees where the transfer of business laws do not apply. The new employer can formulate offers on such terms as it considers appropriate and achieve harmonisation quickly.

Where transfer of business laws apply, the new employer is bound by the transferring instrument that regulated the old employer for all transferring employees until the instrument is replaced or terminated. Here harmonisation can be more difficult to achieve. Sometimes, the Fair Work Commission can order that a transferring instrument ceases to apply. A transferring instrument does not apply to non-transferring employees.

 

Employer and parent company liability

25. Are there any circumstances in which:
  • An employer can be liable for the acts of its employees?

  • A parent company can be liable for the acts of a subsidiary company's employees?

Employer liability

The general position is that employers can be vicariously liable for the wrongful acts or omissions of employees in the course of their employment. In some cases, legislation imposes additional, accessorial or secondary liability on employers for the acts of employees.

Parent company liability

Although liability depends on individual circumstances, parent companies are not usually liable for the acts of a subsidiaries' employees.

 

Employer insolvency

26. What rights do employees have on the insolvency of their employer? Is there a state fund which guarantees repayment of certain employment debts?

Employee rights on insolvency

Where an employer is insolvent, employee entitlements:

  • Receive priority treatment.

  • Are ranked above unsecured creditors.

  • Are paid in a required order set out under corporations' legislation.

State guarantee fund

Employees whose employment has ended due to their employer's liquidation or bankruptcy have access to the Fair Entitlement Guarantee scheme that guarantees payment of:

  • Termination benefits and leave entitlements (subject to some exceptions).

  • Unpaid wages (up to 13 weeks and subject to a cap of A$2,451 per week).

The following are not covered:

  • Superannuation.

  • Reimbursements.

  • One-off or irregular payments.

  • Commissions.

  • Bonuses.

 

Health and safety obligations

27. What are an employer's obligations regarding the health and safety of its employees?

All workplace participants have broad duties under state or federal occupational health and safety laws to protect the health and safety of persons (employees, contractors and third parties) in a workplace, including minimising as far as possible, reasonably foreseeable risks to health and safety.

Specific requirements can vary from state to state. In different industries employers must:

  • Undertake processes to identify and mange risks.

  • Implement health and safety committees, including nominated employee representatives.

Employers that fail to comply with statutory duties can be prosecuted and risk significant penalties. Some jurisdictions also impose duties on directors and officers to exercise due diligence to ensure compliance with work health and safety obligations. Directors and officers can be personally held liable for breaches.

 

Taxation of employment income

28. What is the basis of taxation of employment income for:
  • Foreign nationals working in your jurisdiction?

  • Nationals of your jurisdiction working abroad?

Foreign nationals

Income tax

Foreign nationals domiciled in Australia must generally lodge a tax return and pay tax on income earned in Australia under the Pay-As-You-Go tax withholding system (PAYG). Employers must withhold PAYG withholdings and remit them to the Australian Taxation Office on behalf of relevant employees.

Tax rates are based on earnings brackets. The highest marginal rate for the 2014-2015 financial year is 47% plus the Medicare Levy of 2% (a compulsory contribution for state-funded healthcare).

The tax rates (for Australian nationals and foreign nationals) are as follows:

  • For Australian nationals:

    • Earnings of between A$0 to A$18,200: nil.

    • Earnings of between A$18,201 to A$37,000: 19c for each A$1 over A$18,200.

    • Earnings of between A$37,001 to A$80,000: A$3,572 plus 32.5c for each A$1 over A$37,000.

    • Earnings of between A$80,001 to A$180,000: A$17,547 plus 37c for each A$1 over A$80,000.

    • Earnings of A$180,001 and over: A$54,547 plus 45c for each A$1 over A$180,000.

  • For foreign nationals:

    • Earnings of between A$0 to A$80,000: 32.5c for each A$1.

    • Earnings of between A$80,001 to A$180,000: A$26,000 plus 37c for each A$1 over A$80,000.

    • Earnings of A$180,001 and over: A$63,000 plus 45c for each A$1 over A$180,000.

Foreign nationals' rate of income tax is higher and they are generally not required to pay the Medicare Levy.

Fringe benefits tax (FBT)

FBT is an employer paid tax on non-cash benefits (for example, entertainment) provided to employees or their associates. The FBT system applies to Australian residents and foreign nationals.

For the FBT year ending 31 March 2015 the rate is 47% and 49% for the years ending 31 March 2016 and 2017. This rate is applied to the gross up value of the benefit, which is the amount that an employee would have received in their grossed salary if they paid for the benefit themselves in after tax dollars. This is taxed at the highest marginal rate plus the Medicare Levy.

There are certain exemptions available, including for those employees that live away from home. In these cases, the employer can obtain a tax benefit by way of an exemption.

Nationals working abroad

Income tax

Residents working overseas that intend to remain Australian residents must generally lodge an Australian tax return. Subject to limited exceptions, this is required even if tax is paid in the country where the income was earned.

Australians with foreign income earnings can claim a foreign tax offset to avoid double taxation, provided that foreign tax has already been paid and the amount has been included on an Australian tax return.

Fringe benefits tax (FBT)

The FBT scheme generally applies to Australian nationals working abroad subject to the requirements set out above.

 
29. What is the rate of taxation on employment income? Are any social security contributions or similar taxes levied on employers and/or employees?

Rate of taxation on employment income

Income tax rates are based on earnings brackets (see Question 28). Australian tax payers without private health insurance are also subject to the Medicare Levy Surcharge of between 1% and 1.5% based on their earnings for the 2014-2015 financial year.

Social security contributions

Employer superannuation guarantee contributions are generally compulsory. From 1 July 2014, employers must make contributions at the minimum rate of 9.5%.

The minimum rate will increase to 10% from July 2021 and up to 12% by 2025.

In 2011, MySuper was introduced as part of reforms to simplify superannuation. From 1 January 2014, employers must direct contributions to a MySuper product where an employee has declined to, or failed to, nominate a fund. If an employer's existing default fund does not offer a MySuper product, it must move to a fund that does.

 

Bonuses

30. Is it common to reward employees through contractual or discretionary bonuses? Are there restrictions or guidelines on what bonuses can be awarded?

Performance-based discretionary bonus schemes, as well as long-term incentive schemes for executives, are common.

There are no statutory restrictions on bonus arrangements so employers are free to determine the rules of any bonus schemes. Even if the scheme is discretionary, employers generally must not exercise this discretion arbitrarily or capriciously.

Bonus schemes must be drafted with clarity to avoid uncertainty. It is good practice for employers to reserve its right to alter, or potentially withdraw a bonus scheme.

It is also common for employees to participate in employer share schemes that are subject to legislative regulation.

 

Intellectual property (IP)

31. If employees create IP rights in the course of their employment, who owns the rights?

The existence of an employment relationship does not give employers automatic ownership of intellectual property created by employees in the course of their employment.

It is prudent for employment arrangements to assign intellectual property to protect employer's interests and avoid disputes.

Copyright and designs

There is a statutory presumption that, subject to certain exceptions, employers own the copyright in any work created in the course of employment (Copyright Act 1968 (Cth)). The same presumption arises in respect of ownership of designs (Designs Act 2003 (Cth)).

Both presumptions are subject to any agreement to the contrary between the parties, for example, many universities allow academics to retain copyright in their scholarly works.

Trade marks

The owner of a trade mark is generally the business to which it relates (Trademarks Act 1995 (Cth)).

Patents

The terms of an employment contract commonly provide that the intellectual property rights of inventions created by employees are owned by the employer. If there is no such express term, it can be implied, provided the invention is created in the course of the employee's duties.

Moral rights

Moral rights are vested in individual creators of copyright and cannot be transferred. Employers need an employee's consent if the employer's acts or omissions infringe these rights. This consent is typically obtained by inserting an express term in an employment contract.

 

Restraint of trade

32. Is it possible to restrict an employee's activities during employment and after termination? If so, in what circumstances can this be done? Must an employer continue to pay the former employee while they are subject to post-employment restrictive covenants?

Restriction of activities

It is possible to restrict employees' activities during employment and post-termination. During employment, employees are subject to various duties. Employees have universal duties prohibiting them from improperly using their position to gain an advantage, causing detriment to their employer or improperly using information acquired whilst employed.

Express terms requiring exclusive service and the protection of confidential information and intellectual property are frequently included in employment contracts.

Post-employment restrictive covenants

Post-employment restraints are generally presumed to be unenforceable as contrary to public policy, unless an employer establishes the scope is reasonably necessary to protect its legitimate business interests. It is important to confine the restraint to the particular interests the employer is seeking to protect. Where employees have strong connections to the employer's business, post-employment restraints are frequently included in employment contracts, particularly in certain industries (for example, technology) or occupations (for example, executives).

There are four main types of restraints:

  • Non-compete that prohibit employees from working for competitors.

  • Non-solicitation that prevent employees from soliciting customers or clients.

  • Non-dealing that prevent employees accepting work from former clients where the client initiates contact.

  • Non-poaching that prevent poaching other employees of the former employer.

Legislation in New South Wales allows the courts to enforce restraints to the extent they are reasonable.

Making a payment specifically in consideration of a restraint is not mandatory but assists in enforcement.

 

Proposals for reform

33. Are there any proposals to reform employment law in your jurisdiction?

Workplace laws in Australia have undergone significant changes over the past ten years and reform continues.

There are presently a number of bills before the federal parliament. These relate to reforms:

  • Designed to assist the negotiation of greenfield collective agreements.

  • Limiting access to industrial action without bargaining.

  • Requiring parties to consider productivity improvements during enterprise bargaining.

  • On procedural requirements for union right of entry workplaces.

More fundamentally, the current federal government has commissioned a substantial review of workplace relations laws by the federal Productivity Commission. This is a broad ranging review directed at identifying reforms that would improve productivity. The Productivity Commission is presently underway and is due to report later in 2015.

 

Online resources

Australasian Legal Information Institute

W www.austlii.edu.au

Description. Free database of legislative and secondary materials for all Australian jurisdictions.

Australian Government - ComLaw

W http://www.aph.gov.au/Parliamentary_Business/Bills_Legislation

Description. The most complete collection of Federal legislation.

Australian Government - Department of Immigration and Boarder Protection

W www.immi.gov.au

Description. Information regarding all aspects of immigration and border protection.

Australian Government - Australian Taxation Office (ATO)

W www.ato.gov.au

Description. Taxation and superannuation information.

Fair Work Commission

W www.fwc.gov.au

Description. Australia's national workplace relations tribunal.

Fair Work Ombudsman

W www.fairwork.gov.au

Description. Australia's workplace ombudsman.

Parliament of Australia - Bills and Legislation

W http://www.aph.gov.au/Parliamentary_Business/Bills_Legislation

Description. General information about Federal Parliament, including access to legislative and parliamentary materials.



Contributor profiles

Henry Skene, Partner

Seyfarth Shaw

T + 61 3 9631 0701
F + 61 3 9631 0790
E hskene@seyfarth.com
W www.seyfarth.com

Professional qualifications. LLB (Honours); BA; Admitted as a solicitor of the High Court of Australia and Supreme Court of Victoria.

Areas of practice. International labour and employment.

Recent transactions

  • Acts for major employers from a range of industries, including mining and resources, construction and infrastructure projects, retail, manufacturing, professional services and energy.

  • Specialising in workplace relations strategy, advises on all aspects of workplace change strategy and execution, including enterprise bargaining, collective labour disputes and litigation, individual employment arrangements and litigation, and construction and infrastructure management.

  • Acted for major employers in workplace litigation in Federal and State jurisdictions, in many of the largest and most complex matters in the field, including various test cases establishing the boundaries of workplace laws.

  • Regularly appears as an advocate before the Fair Work Commission.

Darren Perry, Partner

Seyfarth Shaw

T + 61 2 8256 0404
F + 61 2 8256 0490
E dperry@seyfarth.com
W www.seyfarth.com

Professional qualifications. BA; LLB (Honours); Admitted as a solicitor of the High Court of Australia and Supreme Court of NSW.

Areas of practice. International labour and employment.

Recent transactions.

  • Acts for leading companies in industries including banking and financial services, stevedoring, manufacturing, oil, pharmaceuticals, professional services, higher education, retail and transport.

  • Represented clients in a number of landmark cases, including the successful defence of a A$100 million class action brought against a major bank.

  • Advises major employers on collective bargaining strategies, responses to industrial action and major workplace change projects.

  • Experienced advocate in all courts and tribunals in which employment and labour-related litigation is conducted.

Melissa Bulat, Senior Associate

Seyfarth Shaw

T + 61 3 9631 0707
F + 61 3 9631 0790
E mbulat@seyfarth.com
W www.seyfarth.com

Professional qualifications. LLB (Honours); BA; Admitted as a solicitor of the High Court of Australia and Supreme Court of Victoria.

Areas of practice. International labour and employment; enterprise bargaining; industrial action; enterprise agreements; general protections and discrimination; outsourcing; transfers of business and redundancy; unfair dismissal and wrongful termination; breach of contract; restraint of trade; Australian Consumer Law

Recent transactions.

  • Acts for clients from a broad range of industries, including telecommunications, banking, gaming and manufacturing.

  • Acted for major employers in employment and industrial litigation in the Federal jurisdiction.

  • Advised on the development of employment policies and workplace training.

  • Acted for major employers in enterprise award modernisation and enterprise bargaining matters.


{ "siteName" : "PLC", "objType" : "PLC_Doc_C", "objID" : "1247399497010", "objName" : "Employment and Employee Benefits Australia", "userID" : "2", "objUrl" : "http://us.practicallaw.com/cs/Satellite/us/resource/3-503-3758?null", "pageType" : "Resource", "academicUserID" : "", "contentAccessed" : "true", "analyticsPermCookie" : "2-605a14e:15b13b9492d:-b6", "analyticsSessionCookie" : "2-605a14e:15b13b9492d:-b5", "statisticSensorPath" : "http://analytics.practicallaw.com/sensor/statistic" }