In all the pre-election hype, the news that the Fair Work Commission (the Commission) had awarded large increases in rates of pay for apprentices was missed by many employers.
The Commission also decided to introduce ‘adult apprentice’ rates in to many awards which don’t currently contain them.
What’s changed?
Pay rates for apprentices have traditionally been expressed as a percentage of the benchmark C10 classification in the manufacturing award.
The current structure for rates of pay for a four year apprenticeship in most awards is as follows:
1st year apprenticeship = 42% of C10 rate
2nd year apprenticeship = 55% of C10 rate
3rd year apprenticeship = 75% of C10 rate
4th year apprenticeship = 88% of C10 rate
The Commission noted that when the apprentice rate structure was developed, it was typical for an apprentice to start their training at the age of between 14 and 16 years old. Many apprentices now begin their training after having completed year 12, and are 17 or older when they commence their apprenticeship.
In recognition of this change, the Commission has introduced a new structure that provides for higher rates of pay for apprentices with year 12 level education.
The apprentice pay rate structure will now be as follows, with the higher rates for apprentices with a year 12 education in brackets:
New rates of pay for apprentices under 21 years
1st year apprenticeship = 50% (55%) of C10 rate
2nd year apprenticeship = 60% (65%) of C10 rate
3rd year apprenticeship = 75% of C10 rate
4th year apprenticeship = 88% of C10 rate
Adult apprentices
The Commission has also introduced new minimum rates for adult apprentices, and also introduced these rates into a number of awards that did not previously contain them.
The Commission noted in its decision that almost half of new apprentices are now aged 21 or over.
First year adult apprentices will now be entitled to a minimum of 80% of the C10 rate. In their second year an adult apprentice will be entitled to the national minimum wage or the lowest adult classification in the relevant modern award, whichever is greater.
An employee who has worked full time for at least six months, or part time or casually for at least 12 months, for their employer prior to starting an adult apprenticeship with that same employer will not suffer any reduction in their minimum rate of pay.
When do the changes come into operation?
The changes take effect from 1 January 2014; however the increases are also subject to a short transitional period. The changes are also only applicable to apprentices who begin their apprenticeship after 1 January 2014.
The transitional arrangements will apply to the new apprentice rates, as well as to the adult apprentice rates in awards that already contain them. If an award does not already contain adult apprentice rates, these rates will be introduced from 1 January 2014 in full.
Contact the Employment and Workplace Relations team at Kligers for details on the phasing in arrangements.
Full details of the increases will be published by the Commission when it makes the determinations providing for the increases in rates in individual awards.
How does this affect the rates in my enterprise agreement?
If you employ apprentices and have a registered enterprise agreement in place, the rules governing the interaction between modern awards and enterprise agreement may be relevant.
If the minimum rate in a modern award is higher than the minimum rate in an enterprise agreement, the modern award rate applies.
This means that if your enterprise agreement includes rates of pay for apprentices that, after 1 January 2014, fall below the new rates in the relevant modern award, the modern award rates will apply.
What are the consequences for non-compliance with this obligation?
It is important to ensure that you are paying all of your employees, including apprentices, at least the minimum rates contained in the applicable modern award.
As set out above, even if you have an enterprise agreement in place, you need to ensure that you are paying at least the minimum award rates to all employees.
Now is the time to review the rates paid to your employees, including apprentices, and seek advice if you’re unsure of what minimums might apply to your business.
Failure to pay these minimum rates can expose your business to underpayment claims, prosecution by the Fair Work Ombudsman, and possible penalties. The penalties for breach of the Act or an applicable modern award are up to $10,200 for an individual and $51,000 per breach for a body corporate.
More information
For more information, please contact a member of our Employment and Workplace Relations team on (03) 8600 8888.
Note: This update is a guide only and is not intended to constitute legal advice.