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2016-2017
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
Fair Work Amendment (Protecting Take Home Pay) Bill 2017
EXPLANATORY MEMORANDUM
and
STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS
Circulated by authority of
Hon Bill Shorten MP
Fair Work Amendment (Protecting Take Home Pay) Bill 2017
OUTLINE
The Fair Work Amendment (Protecting Take Home Pay) Bill 2017 will ensure that modern
awards can not be varied to reduce the take home pay of an employee. This includes any
reduction in take home pay as a result of a reduction in penalty rates or the hours to which
penalty rates apply. It will also prevent decision AM2014/305 of the Fair Work Commission
from taking effect. The Bill preserves the independence of the Fair Work Commission but
appropriately guides the exercise of its discretion to ensure wages are not cut.
FINANCIAL IMPACT
The Bill will have no financial impact.
NOTES ON CLAUSES
Clause 1 - Short title
This clause provides for the Act, when enacted, to be cited as the Fair Work Amendment
(Protecting Take Home Pay) Act 2017.
Clause 2 - Commencement
This clause provides for the commencement of the whole of the Act on the day after the
Act receives the Royal Assent.
Clause 3 - Schedules
This clause provides that the legislation that is specified in a Schedule to the Act is
amended or repealed as set out in the applicable items in the Schedule concerned, and
any other item in a Schedule to the Act has effect according to its terms.
Schedule 1
The Fair Work Commission's power to vary modern awards is found in section 157 of the
Fair Work Act 2009 (Fair Work Act). See generally Part 2.3 of Chapter 2 of the Fair Work
Act in relation to modern awards.
Item 1 and 2 - Section 12
Item 1 amends the definitions of reduction in take-home pay and take-home pay in the
Fair Work Act by reference to the new section 135A(4).
Item 2 - Section 135A
inserts a new subsection 135A in Div 2 of Part 2-3 which requires that, in exercising its
powers under this Part, the Fair Work Commission cannot vary a modern award such that
an employee's, or prospective employee's, take-home pay is reduced.
The effect of the amendment is to prevent a variation of a modern award that would, or
would be likely to, reduce the take home pay of any employee. This includes any reduction
as a result of changes to penalty rates or to the hours to which penalty rates apply.
It does not require individual employees to provide evidence to the Fair Work Commission
of actual loss of take-home pay.
Subsection 135A(3) provides that any determination of the Fair Work Commission made
on or after 22 February 2017 that would result, or would be likely to result, in a cut to take-
home pay under the Award, is of no effect.
At the date of the introduction of the Bill, no determination has been issued arising from
decision AM2014/305 in the Commission. The effect of this amendment is to invalidate
any determination which may be issued by the Fair Work Commission, arising from
decision AM2014/305 in the Commission, prior to the enactment of the Bill.
Subsection 135A(4) defines take-home pay as the pay an employee actually receives, or
would receive if increases in the modern award minimum wage were included in the
employee's pay:
(a) including wages and incentive-based payments, and additional amounts
such as allowances and overtime; but
(b) disregarding the effect of any deductions that are made as permitted by
section 324 of the Fair Work Act.
This amendment ensures that modern awards are a safety net for the take-home pay of
employees currently under the award and of prospective employees under the award.
For the avoidance of doubt, the definition of take-home pay makes it clear that all
employees under modern awards are to receive the full benefit in their take home pay of
any increase to the modern award minimum wage. For example, the Fair Work
Commission may not vary a modern award so as to phase in a cut to penalty rates by
offsetting that cut against any annual increases in the modern award minimum wage.
STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Fair Work Amendment (Protecting Take Home Pay) Bill 2017
This bill is compatible with the human rights and freedoms recognised or declared in the
international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny)
Act 2011.
Overview of the bill
The Fair Work Amendment (Protecting Take Home Pay) Bill 2017 will ensure that modern
awards can not be varied to reduce penalty rates or the hours to which penalty rates apply
if the variation is likely to result in a reduction in the take home pay of an employee. It will
also prevent decision AM2014/305 of the Fair Work Commission from taking effect.
Human rights implications
The bill is not detrimental to any applicable rights or freedoms.
The bill positively engages with the Article 7 of the ICESCR. Article 7 requires that State
Parties recognise the right of everyone to the enjoyment of just and favourable conditions
of work which ensure, in particular, remuneration that provides all workers with fair wages,
a decent living and rest, leisure and reasonable limitation of working hours and periodic
holidays with pay, as well as remuneration for public holidays.
Under the Fair Work Act, the Fair Work Commission must ensure that modern awards,
together with the National Employment Standards, provide a fair and relevant safety net of
terms and conditions. In making or varying modern awards, the Fair Work Commission
must take into account the modern awards objective (see subsection 134(1) of the Fair
Work Act).
Item 1 of Schedule 1 to the Bill amends the Fair Work Act to include a new requirement
that variation of modern awards can not reduce penalty rates or the hours to which penalty
rates apply if this would result in a reduction in the take home pay of an employee. This
amendment promotes the right to fair wages and in particular recognises the need, as
provided for in the modern awards objective, to fairly compensate employees who work
long, irregular, unsocial hours, or hours that could reasonably be expected to impact their
work/life balance and enjoyment of life outside of work.
Conclusion
This bill is compatible with human rights because it advances the protection of human
rights.
Hon Bill Shorten MP