Just because a modern award or enterprise agreement has been drafted with your specific industry in mind doesn’t always mean that it reflects the operational realities of your individual business or the unique needs of employees.

In recognition of this, The Fair Work Act 2009 (Cth) requires that enterprise agreements and modern awards contain a flexibility clause which effectively allow employer and employee to modify certain entitlements to suit their needs.

The flexibility clause will ordinarily provide which Award/Agreement conditions can be varied by mutual agreement (through an individual flexibility agreement) between the employer and employee.

Conditions That Can Be Varied By Agreement

Standard conditions that can be subject to a flexibility agreement include:

  • Arrangement for when work is performed;
  • Overtime and penalty rates;
  • Allowances; and/or
  • Leave loading.

Those terms included in the relevant flexibility clause can be varied to suit your business or to suit individual employees by using an Individual Flexibility Agreement (‘IFA’) which is an agreement between the employer and an individual employee. For example, if the award or agreement states that ordinary hours must be worked between 7 am and 7 pm, but your business needs shifts to commence at 5 am, you can mutually agree with your employees (on an individual basis) that the ordinary working hours are worked between 5 am and 5 pm instead.

Better Off Overall Test

Significantly, to ensure an IFA is validly made, employers need to ensure that the employee is “better off overall” under the proposed IFA. To ensure that, employers need to conduct a careful and meticulous comparison of what the relevant employee would receive under the IFA compared with the pre-IFA entitlements. This process is crucial and it may be necessary for employers to seek workplace consultancy advice or legal advice to ensure the IFA satisfies this threshold.

The key considerations with an IFA are to make sure the agreement is mutual, is clear and in writing and that the employee is better off under the varied conditions than under the award or agreement minimum terms.

Draft IFA templates are available to employers who are subscribers with EI. Alternatively, you may wish to seek specific legal advice on any potential liabilities in this area.