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Last updated: October 2018

Employment and industrial relations

Introduction

Australia’s industrial relations system is regulated by the Fair Work Act 2009 (Cth). Most employers in Australia are subject to its requirements. This is regardless of whether their employees are employed in accordance with an award set by an industrial body, a collective agreement or an individual employment contract. The Fair Work Act covers basic minimum conditions of employment and also specifies the right to claim against an employer for unfair dismissal. Employers must also comply with legal requirements regarding taxation, superannuation, and work, health and safety.

The Fair Work Act covers basic minimum conditions of employment and also specifies the right to claim against an employer for unfair dismissal

Basic minimum conditions

All employees are entitled to the minimum conditions of the National Employment Standards set out in the Fair Work Act. 

These include:

  • a maximum of 38 ordinary hours per week plus “reasonable additional hours”
  • four weeks of paid annual leave per year (while an employee classified as a shift worker is entitled to five weeks’ paid annual leave per year)
  • 10 days of paid personal/carer’s leave (including sick leave) per year, together with an additional two days of unpaid carer’s leave and a further two days of paid compassionate leave
  • 52 weeks of unpaid parental leave for both parents at the time of birth or adoption of a child, with the option for one parent to request an additional 52 weeks
  • the ability to request flexible working arrangements as parents or carers of children under school age or under 18 with a disability; the employee must have at least 12 months’ continuous service and the request may be refused on reasonable business grounds
  • long service leave based on relevant federal or state law
  • unpaid community service leave of a reasonable period for an employee engaged in an “eligible community service activity” such as jury service or voluntary emergency management
  • severance pay where termination of employment is for redundancy and the employee has at least 12 months’ continuous service.

Basic rates of pay, loadings, penalty rates and other entitlements are set by the national minimum wage and modern awards.

Unfair dismissal

The Fair Work Act gives eligible employees the right to make a claim against their employer for unfair dismissal if a termination can be demonstrated to be harsh, unjust or unreasonable.

Small businesses that employ 15 or fewer employees and comply with a code for dismissals are also exempt from unfair dismissal laws. 

Equally, employees are not protected if they have:
  • not served the “minimum employment period” (12 months for a small business employer or six months otherwise)
  • been engaged on a fixed-term contract or for a specified task
  • been engaged as short-term casual employees
  • been engaged as trainees for a specified time period
  • been engaged as seasonal employees.

Employees are also not protected if their dismissal was due to a “genuine redundancy” or if they earn more than the high-income threshold (which is $142,000 after 1 July 2018) unless they are covered by an award or enterprise agreement. This threshold is adjusted every year on 1 July.

The Fair Work Act also contains provisions in relation to workplace discrimination by an employer who takes adverse action against a current or prospective employee due to attributes such as race, religion, sexual orientation, pregnancy or age.

Work, health and safety

Work, health and safety legislation imposes obligations on all employers to ensure the safety of their employees while at work. Laws have largely been harmonised in most jurisdictions apart from Victoria and Western Australia (although there are a number of state-based differences).

Employee-related taxes

Since 1 July 2000, Australia has used the pay-as-you-go tax withholding system. 

Employers are required to withhold tax from the remuneration paid to employees and to remit the tax to the Australian Taxation Office on a regular basis.

The amount withheld is calculated according to scales prescribed by the Commissioner of Taxation.

Fringe benefits tax is payable by employers on the value of certain benefits provided to employees in connection with employment. These are widely defined to include a range of privileges, services or facilities such as the private use of motor vehicles, interest-free or low interest loans or accommodation.

Payroll tax is a state tax levied monthly by each state on the payroll of employers who pay wages in excess of a prescribed threshold. The rate varies by state.

Generally, states will require employers to register when monthly wage payments reach certain levels.

Superannuation

Federal legislation requires employers to contribute a prescribed minimum level of superannuation for each employee.

This is currently set at 9.5 per cent of an employee’s notional earnings base, namely what they earn in normal working hours.

Employers who provide less are liable to pay a non-deductible charge called the Superannuation Guarantee Charge. There are also limits on the maximum amount of superannuation contributions made for the benefit of an employee that an employer can claim as a tax deduction.

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