There are three main ways in which an employer can pay a fixed sum of remuneration to an employee rather than applying an award, which may quite dramatically alter an employee’s remuneration from pay period to pay period, depending upon overtime, shift allowances and so forth.
The first and most obvious way is to adopt a common law contract approach and just pay a sum which will exceed what the employee may earn when his wages and all of the provisions of the modern award are catered for by his pattern of work. This will mean that the award is met in all respects. This is often referred to as an over award payment.
The second method is to negotiate an enterprise agreement with the employer’s staff which will cater for the nuances of that workplace. An enterprise agreement will be registered if when tested against the modern award, the conditions of employment are better off overall for the employees covered by the proposed agreement. This is most often called the BOOT test by industrial relations practitioners.
Thirdly, an employer and employee (or group of employees but as individuals) may enter into an individual flexibility agreement (IFA) where certain conditions specified by the Fair Work Act, may be varied to foster personal preferences for flexible work practices and often improved productivity. IFAs can also vary enterprise agreement provisions. Once again, the test is whether the employee who enters into an IFA is better off overall than if the award or enterprise agreement is literally applied, although unlike the process for the registration of an enterprise agreement, this is not scrutinized by the Fair Work Commission unless IFA somehow comes under review by a legal process.