Current at: 18 January 2010
How to use Individual Flexibility Agreements
Federal system employers covered by modern awards or enterprise agreements now have access to Individual Flexibility Agreements (IFAs) that allow for variations to the instrument to meet the individual needs of employers and employees provided the employee covered by the IFA is “better off overall”.
How can I make an IFA?
An employee or an employer can initiate a request for an IFA however to come into effect, the employee and employer must genuinely agree to an IFA. An employer cannot ask a prospective employee to agree to an IFA as a condition of employment.
An IFA must:
- be in writing, name the parties to the agreement and be signed by the employer and the individual employee (and, if the employee is under 18 years of age, the employee’s parent or guardian);
- state each term of the award that the employer and the individual employee have agreed to vary;
- detail how the term has been varied;
- state the date the agreement commences to operate; and
- detail how the agreement results in the employee being “better off overall”.
Considering whether an employee is better off overall on the IFA compared to the modern award or enterprise agreement the IFA varies will usually involve a comparison of the employee’s financial benefits under the IFA with the benefits under the award or enterprise agreement. The employee’s personal circumstances and any non-financial benefits may also be considered.
Although Fair Work Australia does not need to formally approve the IFA, employers need to ensure that the IFA meets all of the above requirements. If the employer does not do this, the employee may be able to take action for compensation and penalties apply.
Once an IFA is made the employer must give a copy to the employee and should also retain a copy.
What terms of a modern award can I vary in an IFA?
Flexibility terms within modern awards allow IFAs to vary:
- Arrangements for when work is performed (such as working hours);
- overtime rates;
- penalty rates;
- allowances; and
- leave loading.
What terms of an enterprise agreement can I vary in an IFA?
An IFA made under an enterprise agreement can only vary the matters set out in the flexibility term of the agreement which will be determined when the agreement is made. However it is important to note that an IFA cannot contain unlawful terms, such as terms that may be discriminatory.
How is an IFA terminated?
An IFA can generally be terminated by agreement or by either party giving the required notice. Modern award require 28 days notice however this may be different in an enterprise agreement (but no more than 28 days). An IFA will also end if a new enterprise agreement begins operating.
EXAMPLES OF FLEXIBILITY UNDER AN IFA
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Arrangements for when work is performed
An employer employs under the Building and Construction General On-site Award 2010 which states that ordinary working hours will be 38 per week, worked between 7am and 6pm, Monday to Friday. The ordinary house are to be worked in a 20 day four week cycle with 8 hours worked for 19 days and with 0.4 of an hour accruing towards the twentieth day, which will be generally taken as a day off on the fourth Monday of the RDO cycle.
The employer normally requires that employees start work at 7am and finish at 3.30pm with a half hour lunch break.
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Flexible start time
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Employee A has a school aged child who needs to be picked up from school at 3.00pm each day. Accordingly, Employee A asks if they can vary the working hours under the award in an IFA so that this is possible.
Accordingly, the employer and Employee A agree in an IFA that Employee A will start work at 6.00am and will finish at 2.30pm each day. The employee may be considered to be 'better off overall' given their personal circumstances.
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RDO Flexibility
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Employee B also has school aged children and would rather take more time off during school holidays than take an RDO every fourth Monday of the RDO cycle.
Accordingly, the employer and Employee B agree in an IFA that Employee B will have the ability to bank RDOs so they may be taken at a time mutually agreed between the employer and Employee B. This will provide Employee B with greater flexibility to take the RDOs during the school holiday period. The employee may be considered to be “better off overall” given their personal circumstances.
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Allowances
An employer employs under the Building and Construction General On-site Award 2010 which provides for a $16.50 daily fares allowance payable for travel within a 50km radial area. For Employee D, who travels to work 5 days per week, this works to be $82.50 per week. Employee D and the employer agree to enter into an IFA which will increase the employee’s hourly rate by $2.50 per hour on the basis that the daily fares allowance will no longer be payable. Based on a 38 hour week, this equates to $95 per week. As this amount is higher than the value of the daily fares allowance, the employee is 'better off '.
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Leave loading
Employee E is engaged under an award which provides that 17.5% annual leave loading is payable on annual leave payments. The employee’s base rate for annual leave calculations is $20 per hour or $760 for a full time week. The monetary value of annual leave loading to Employee E annually is $532.
The employer and Employee E agree to an IFA which will increase the employee’s wage by 50c per hour on the condition that annual leave loading will not be payable. This hourly increase provides an additional benefit of $988 per year. This is higher than the annual monetary benefit of $532 provided by the annual leave loading and so the employee is 'better off overall'.
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Overtime rates
An he employer knows that Employee C works 4 hours overtime per week on a frequent basis. The employee is happy to do so as they enjoy the benefits of the additional pay and given the employee’s personal circumstances at this point in time, both the employer and employee acknowledge that this amount of overtime is 'reasonable'. Accordingly, to save administrative hassle for the employer and to give some benefit to Employee C, the employer asks Employee C if they would be interested in an IFA which would remove overtime penalty rates for working the first 4 hours overtime in exchange for a higher rate of pay. The employee is paid $20 per hour under the award and is entitled to time and a half for the first two hours of overtime past 38 hours and double time for all hours thereafter. Based on 4 hours overtime per week, this amounts to the following weekly wage:
38 hours @ $20 per hour = $760
2 hours @ 1.5 x $20 per hour = $60
2 hours @ 2 x $20 per hour = $80
Total = $900
Averaged over 42 hours this amounts to $21.43 per hour
The employer and Employee C agree that the employee’s hourly rate is to be increased to $21.50 per hour for the first 42 hours of work with double time to be payable on that amount thereafter. This higher amount will be paid to Employee C regardless as to whether they work the full 42 hours or not and is also highter than the total amount they would have received had they been entitled to penalty rates under the award. Employee C is therefore 'better off overall'.
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Click here for a sample IFA
For more information, call an HIA Workplace Adviser on 1300 650 620
DISCLAIMER – the above is intended to provide general information in summary form. The contents do not constitute specific adive and should not be relied upon as such. Formal specific advice should be sought by members with respect to particular matters before taking action.