Changes to Individual Flexibility Arrangements

In a recent decision of the Fair Work Commission, the standard flexibility term in modern awards has been varied which impacts the use and operation of Individual Flexibility Arrangements (IFAs).

We usually recommend that our clients enter into IFAs with their award covered employees to vary the application of certain terms and conditions under a modern award (such as overtime rates, penalty rates and leave loading). An IFA allows employers to pay employees an annualised salary/flat hourly rate in satisfaction of specific award entitlements, provided the employee remains better off.

The key changes to IFAs include:

1. The notice period to terminate an IFA has been increased from 4 weeks to 13 weeks, by either party in writing. The termination of an IFA does not end the employment – only the operation of the IFA. If an employee elects to terminate the IFA, the employee’s pay and conditions may be changed to the minimum award rates and conditions
2. The intent of the model flexibility term was for employers and employees to enter into the IFA after employment had commenced. Therefore, the model term now requires that IFAs must only be entered into after the individual employee has commenced employment with the employer

These amendments apply to all IFAs entered into after 4 December 2013. Further, the amendments do not apply retrospectively to IFAs entered into prior to this date.

We encourage employers to review and update their template IFAs and employment contracts to ensure that they are complying with these changes. In particular, signing an IFA cannot be a condition of offering employment.

If you have any questions about these changes or require assistance with updating your IFAs and employment contracts, please contact HR Legal on the details below.

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This article was produced by HR Legal. It is intended to provide general information only in summary format on legal issues. It does not constitute legal advice, and should not be relied on as such.