Frequently Asked Questions

I know my new role is covered by an award / Enterprise Agreement. What is the status of this employment contract and why does my new employer want me to sign it?

It is very common for employers to ask their new employees to sign a ‘common law’ employment contract, even where some of the terms of the employment relationship may also be covered by an award or an enterprise agreement. The common law employment agreement provides a written record of terms and conditions of employment agreed with your employer but cannot be used by the employer to ‘contract out’ of coverage by an enterprise agreement, an award or legislation which governs the employment such as the National Employment Standards contained in the Fair Work Act 2009 (‘FW Act’). Once made the terms of the agreement can only be varied if both you and your employer agree.

Some awards and enterprise agreements do provide for employees to enter into an agreement with their employer to vary some provisions of the award and / or enterprise agreement they are covered by. If this is the case there are usually restrictions contained in the enterprise agreement or award regarding what provisions may be varied and there will usually be a requirement that you cannot enter into an arrangement unless it means you will be “better off overall” in relation to the award or enterprise agreement.

My employment contract states that my employment will be subject to the completion of a probationary period. What does that mean?

A probationary period is effectively a separate ‘fixed term’ employment contract that precedes your permanent employment relationship.

The purpose of the probationary period is to allow the employer an opportunity to ascertain your suitability to perform the role before committing to offering you an ongoing, permanent employment agreement.

Probationary periods of employment do not automatically apply to every employment contract. It will only apply if such a term has been expressly agreed to by both parties, which will usually mean your employer inserted a clause in your employment agreement stating your employment will be subject to a probationary period and you agreed to work a probationary period by signing the employment contract.

As with all terms of the employment agreement you are free to negotiate the removal of a probationary period clause from the agreement prior to signing it, or to request that the period be shortened. The success or otherwise of your negotiations will usually depend upon the amount of bargaining power you enjoy at the time of the negotiation.

You should be aware that if you work past the end date of the probationary period without being notified by your employer that he / she has chosen not to offer you permanent and ongoing employment, then this will generally mean your employment relationship has become permanent and ongoing automatically.

Please note that under the FW Actemployees are excluded from making an unfair dismissal application until they have completed either a 12 month qualifying period for small employers, or a 6 month qualifying period for large employers (over 15 employees).  This qualifying period is distinct from the probationary period, however both periods run concurrently from the first day of employment.

Usually employment contracts that have been provided by the employer provide that the contract can be terminated for any reason by the employer, by the employer notifying you of its intention to terminate your employment a certain period of time in advance of the termination, or by paying you the salary you would have earned during the notice period.

Your employment agreement should also allow you to terminate the agreement with the same period of notice.

Typically the period of notice provided for is one month or four weeks. You should be aware that by signing the employment contract you are agreeing that the notice period stipulated in the contract is reasonable. If you are not covered by an enterprise agreement or award, the notice period stipulated in your employment contract may be the only payment to which you have a legal entitlement payable by your employer in circumstances where your employer terminates your employment contract.

Often employees, (and this applies particularly to senior and / or ‘executive’ employees), are unpleasantly surprised to discover that when their employment is terminated by their employer their only legal claim to a ‘payout’ from the employer is confined to the one month notice period stipulated in their employment contract.

All terms of your proposed employment agreement are negotiable prior to the contract being executed by both parties. You may wish to ask your prospective employer to increase the notice period to two or even three months. Whether or not your employer will agree to this request (or any attempt to negotiate any of the terms of your prospective employment agreement), will depend upon your bargaining power in the situation. Your bargaining power will usually be dependent upon how indispensable a candidate you are.

You should be aware that regardless of what the termination clause says in your common law contract of employment, your employer must not terminate your employment in breach of the FW Act. You may have a claim for unfair dismissal if you believe your employment was terminated without a valid reason or in a manner that was harsh and unfair. Whether you have a claim will depend upon whether you meet the eligibility requirements of the FW Act. Please call Professional Contractors and Consultants Australia’s Workplace Advice and Service Centre on 1300 273 762 for further advice.

My new employment contract has a ‘Restraint’ clause that restricts me from obtaining certain types of employment or work after my proposed employment has ended. Is that enforceable?

Many employment agreements, particularly executive employment agreements, contain provisions whereby the employee agrees not to work for a competitor or client of the employer, within a certain time period after the employment ends and / or within a defined geographical area.

A Restraint clause in an employment contract may be upheld so long as it goes no further than is reasonable to protect a legitimate interest of the employer (for example the interest in keeping trade secrets, genuinely confidential information or customer connections).

Reasonableness is assessed as at the time that the agreement containing the restraint was entered into.

The most common form of action taken by employers to enforce Restraint clauses is to make application to a court seeking orders for an injunction restraining the employee from taking up the new employment in breach of the terms of his / her employment contract with the original employer. If the employer’s application is successful the Court may well make an order that the employee pay the employer’s damages (if these can be established) and the employer’s costs.

This means that before signing your new employment agreement you should consider whether the restraints the employer is attempting to place on you in your prospective employment contract are reasonable, taking into account the role you will be performing and whether it is likely your employer may suffer any actual loss or damage as the result of your taking up employment with a competitor (or whichever restriction applies in the Restraint clause), after your employment ends. If at the time of entering the employment agreement you believe the restraint will be unreasonable, you should consider negotiating a change in the clause before signing the agreement.

My employment contract contains a term that stipulates that my ordinary hours of work will be 38 hours per week but that I may be required to work additional reasonable hours from time to time and that my annual salary has been calculated at an amount to include payment for any such additional hours. Does this mean I will be paid for all hours I work or not?

This clause means that your annual salary amount has been calculated on the basis that you will be paid for working a maximum of 38 hours per week regardless of whether you work more hours to meet a particular deadline. Even if you regularly work more than 38 hours each week just to complete the core requirements of the role you will still receive the same annual salary amount in your pay.

There is no generally accepted legal definition of how many hours are regarded to be ‘reasonable’ additional hours. If you are regularly working such long hours in addition to your ordinary hours that you feel your health is being placed at risk or work/family commitments are adversely impacted, you are of course encouraged to raise this as a workplace health and safety issue with your manager. If the culture in your workplace is such that you feel intimidated about raising the issue, please do not hesitate to contact us to seek advice about the appropriate course of action. Generally speaking however, unless your employment contract specifically states that you will be paid for the hours you work in addition to your ordinary hours, or you have confirmation in writing from your employer that you are requested to work specific additional hours for which you will be paid, you will not have an enforceable claim against your employer for payment for working additional hours.

If your employment is also covered by an award or enterprise agreement, you may have an entitlement to be paid overtime for the work you do in addition to your ordinary hours. Generally speaking, such overtime is required to be approved or requested in advance of the overtime being worked. Your common law employment contract will not extinguish or affect any entitlement to overtime you have as the result of being covered by an award or enterprise agreement.

It has been a while since I signed an employment agreement. How can I tell if my new employment agreement complies with Australian employment laws?

Virtually all Australian employees are covered by the National Employment Standard (NES), a set of minimum employment conditions which must be complied with by employers, regardless of what is stated in the individual employment contract or the employer’s policies. The NES are set out in the Fair Work Act 2009 (Cth) and can be summarised as follows:

1. Maximum of 38 hours of work per week plus reasonable additional hours;
2. Requests for flexible working arrangements by parents and carers to be considered;
3. Four weeks paid annual leave per year, plus an additional week for shift workers;
4. Ten days paid Personal / Carers Leave if employee is sick or to care for sick family member, plus two days unpaid Personal / Carers leave and two days paid Compassionate Leave;
5. Long Service Leave as per applicable award or legislation;
6. Paid days off for public holidays (unless reasonably requested to work);
7. Minimum Notice of termination;
8. Redundancy Pay, dependent upon years of continuous service;
9. Provision of Fair Work Information Statement;
10. Parental Leave.

If the terms set out in your new employment agreement are less generous than those set out in the NES it is a good idea to bring the non-compliance to your new employer’s attention and arrange for the agreement to be amended prior to signing it to avoid issues that may arise later due to you and your employer having different expectations.

It is not necessary for all of the NES conditions to be set out in the employment contract. They will apply in any case so long as the FW Act continues to apply to your employment.

Many Professional Contractors and Consultants Australia members in both the private and public sectors are also covered by awards and agreements. The provisions of any applicable award or enterprise agreement will apply regardless of whether they are mentioned in the common law contract of employment.

I agreed on the annual salary amount I will be paid in my new employment with the recruitment agent over the phone. Is there anything about my remuneration that should be set out in the employment agreement?

 It should be clear from your employment agreement whether superannuation is to be paid over and above the agreed annual salary or whether that salary amount is inclusive of superannuation. Ideally you will have clarified this prior to accepting your verbal offer of employment by asking whether the salary amount offered was “plus super” or “inclusive of super”. Currently employers are required to pay 9% of your ordinary time earnings as compulsory employer superannuation contributions to the superannuation fund of your choice or to the employer’s default fund.

Employment contracts often specify how frequently you will be paid (for example monthly or fortnightly) and if yours does not you should clarify this with your prospective employer. Your employment contract should also stipulate the method of payment (for example direct debit into your bank account or cheque).

If you have agreed on a remuneration ‘package’ with your prospective employer then all elements making up the package should be clearly set out in your employment contract to avoid misunderstandings and conflict once your employment has commenced. For example, if you are to be provided with a company car does the use of the vehicle constitute part of your remuneration package or will it only be made available to you as a ‘tool of trade’ to facilitate the performance of a particular role. Similarly if you are to receive an allowance for a motor vehicle how will payment of the allowance be administered and does your employment contract make it clear whether the annual salary is inclusive of the allowance or whether the allowance is to be paid on top of the agreed salary amount?

You should check before entering into the employment agreement whether the proposed salary amount is the same or better than that provided for in any applicable enterprise agreement or award (if the new role is to be covered by an enterprise agreement or award).

During the interview process I found out that my new employer has a bonus scheme and now I am expecting to get paid a generous bonus at the end of each performance year. Should the bonus be included somewhere in my employment contract?

Employer bonus schemes are often discretionary in nature meaning that if mentioned in an employment contract the relevant clause is worded in such a way that the employee is not able to enforce payment of the bonus as it is to be paid at the employer’s ‘discretion’. If you are of the view your pre-employment interviews and discussions indicated your bonus was not to be paid at the discretion of the employer but was to be an agreed term of your employment contract, you should pay careful attention to the wording of relevant clauses of the contract to ensure the provisions regarding the bonus will be enforceable. Generally this would mean that if the bonus is only payable upon certain performance targets being achieved, the performance targets would have to be clearly set out. Also, it would have to be clear from the contract how the bonus is to be calculated. If the bonus provision contains words to the effect of “payment of the bonus will be entirely at the discretion of the employer”, then the bonus provisions of your employment contract will most likely not be enforceable if your prospective employer decides not to pay a bonus to you for any reason.

Ideally, the terms upon which a bonus scheme operates should be clearly set out. If the bonus is to be calculated in accordance with a particular formula, the formula should be set out in clear terms either in your employment contract, in policy or expressly incorporated in the contract by reference. The information that forms the basis for the bonus formula should be freely available to all participants in the bonus scheme.

In a previous job I had a disagreement with my manager and HR staff about whether a certain employment entitlement was applicable to me. I felt I was in the right but I didn’t feel I was able to pursue the matter however as I didn’t want to appear to be subversive. Is there a clause that can be incorporated into my employment agreement that provides for such disputes to be resolved fairly and without having a negative impact on my employment relationship?

If your employment is covered by an enterprise agreement it is highly likely you will have access to a dispute resolution procedure for resolution of disputes about your employment. Many large employers also make a dispute resolution procedure available to their employees in their Human Resources Policies and Procedures.

If your prospective employer has asked you to sign a common law employment contract which does not contain a dispute resolution procedure, and you don’t have access to one via any other industrial instrument or policy, you may wish to request that a ‘Dispute Resolution Procedure’ clause be incorporated into your employment agreement.

Whether or not your employer will agree to your request to incorporate a dispute resolution procedure into your contract will depend upon your bargaining power in the situation. Your bargaining power will usually be dependent upon how indispensable a candidate you are.

If your employer is agreeable to incorporating a dispute resolution clause into your contract, we recommend you consider a procedure whereby attempts are made to resolve the dispute at the workplace level first, with the ability for the parties to escalate the dispute to an external body for resolution if required.

We have set out a model Dispute Resolution Clause for this purpose below:

1. Where the employee has a grievance in relation to any matter covered by this contract (including redundancy), the employee will first contact the employer or the employee’s supervisor to discuss the matter. At all time, an employer or employee may appoint another person, organisation or association to accompany and/or represent them for the purpose of this clause.
2. Should the grievance not be resolved, or at any time during this process, either party may refer the matter to Fair Work Australia for determination by any method of dispute resolution prescribed by the Fair Work Act that Fair Work Australia considers appropriate to ensure the settlement of the dispute.

My new job is likely to include a lot of travel and it is envisaged that I will have to relocate shortly after taking up my new employment. My employment agreement is silent however on what allowances I will be paid or what my entitlements will be to reimbursement of expenses. I haven’t travelled a lot in my previous employment positions. Should I be confirming how the allowances and reimbursement will be paid before signing my employment contract?

Employers will usually have a number of policies that cover the administration of allowances and reimbursements of expenses. The policies will usually set out in what circumstances you can claim your expenses and the processes to be followed. You should ask your employer for copies of any relevant policies so that you can satisfy yourself that you and your employer are agreed on what allowances and / or expenses will be paid before signing your employment contract. If your employer does not have policies covering the administration of allowances and expense reimbursement, you may wish to refer to clause 16 ‘Allowances’ of the Professional Employees Award 2010 as a guide to what would be regarded as the ‘minimum standard’.