An Award Flexibility Agreement (“AFA”) is a special written agreement between an employer and an individual employee which allows certain changes to be made to an applicable Modern Award in order to meet the genuine needs of the employer’s business and that individual employee, while ensuring that the employee is ‘better off overall’ under the new arrangement.
The parts of the Modern Award that can be changed by an employer and an individual employee under an AFA are as follows:
• Arrangements for when work is performed
• Overtime rates
• Penalty rates
• Allowances
• Annual Leave loading
An employee cannot be forced to enter into an AFA, and an employee cannot be treated adversely or discriminated against for refusing to agree to an AFA.
If the employer proposes to enter into an AFA with an employee, the employer must first give the relevant employee a written proposal of the AFA, which may include providing a copy of the proposed AFA. If an employee’s English speaking skills are limited, the employer must take the necessary measures to make sure that the employee understands what is contained in the written proposal.
An AFA must be in writing, name the employer and the relevant employee, and be signed by the employer and the employee. If the employee is under 18 years of age, it must also be signed by the employee’s parent or guardian.
The AFA must:
• identify each term of the Modern Award that the employer and the employee have agreed to change
• detail how each term has been changed
• detail how the AFA results in the employee being ‘better off’ overall when compared to the employee’s minimum working wages and conditions
• state the date that the AFA will start to operate.
Once the employer and the employee have agreed and signed the AFA, the employer is to retain a copy of the AFA and provide the employee with a copy as well.
An AFA may be terminated:
(a) by either the employer or the employee by providing the other party with thirteen (13) weeks’ written notice; or
(b) at any time, by mutual written agreement between the employer and the employee.
If an AFA is terminated, the employee’s minimum wages and conditions will generally revert back to those contained in the Modern Award.
Here is an example of how an AFA can operate
Hypothetically speaking, a Modern Award provides the following minimum wage entitlements for an employee:
• the minimum base rate is $16.00 per hour
• a penalty rate of 125% applies to all work performed on a Saturday
• overtime is paid at 150% for the first 3 hours
• an allowance of $12.00 per week is payable
• annual leave loading of 17.5% is payable
An employee works a total of 40 hours a week, being:
(a) 8 hours on a Saturday
(b) 30 ordinary hours during the week
(c) 2 overtime hours
An employee earning the minimum under the Modern Award would earn a gross amount of $700 for that week, or an average of $17.50 per hour.
An Employer is prepared to pay this employee a flat rate of $20.00 per hour, which is INCLUSIVE of:
• All Saturday penalty rates
• Up to 2 hours of overtime
• All allowances
• Annual Leave Loading (which equates to $425.60 per year for the above employee)
An AFA can be entered into between the Employer and this employee, because the employee is ‘better off’ overall under the AFA when compared to the minimum entitlements under the Modern Award.
Furthermore, an AFA can also be used where an employee is being paid an annual salary (as opposed to a set hourly rate).
Members can access a standard AFA in the Documentation section of their Members Area, and seek assistance from Fair Work Online in customising and implementing such an arrangement into their business as part of their Membership.
