Modern Awards in Australia: How to Find the Right Award for Your Business

There are more than 120 modern awards in Australia. Determining which one applies to your business and your employees — and then correctly interpreting and applying it — is one of the most common compliance challenges for Australian SMBs.

Get it wrong and you could be underpaying employees by hundreds or thousands of dollars per year, with potential back-pay liability going back 6 years.

What Is a Modern Award?

A modern award is a legal instrument made by the Fair Work Commission that sets minimum employment conditions for employees in a particular industry or occupation. Modern awards operate as a safety net — they set the minimum rates of pay, penalty rates, allowances, overtime rates, and other conditions that you must meet as an employer.

Awards apply on top of the National Employment Standards (NES). So an award cannot reduce below the NES minimum — it can only provide more.

Awards apply unless:

• The employee earns above the high income threshold ($175,000 per year) and is given a guarantee of annual earnings
• The employee is covered by an enterprise agreement that meets the Better Off Overall Test (BOOT)
• The employment is covered by a state award (only applicable in certain situations for state-referral employees)

Finding the Right Award: A Step-by-Step Approach

Step 1: Use the Fair Work Ombudsman's Award Finder

The Fair Work Ombudsman (FWO) provides an online Award Finder tool at fairwork.gov.au. You can search by industry, job type, or business type to identify candidate awards.

However, the Award Finder is a starting point — not a definitive answer. Many industries have multiple awards that could potentially apply, and the correct award depends on the nature of the work, not just the industry label.

Step 2: Check the Award's Coverage Clause

Every modern award includes a "coverage" clause (usually clause 4) that describes which employers and employees are covered. Read this carefully.

For example:

• The Hospitality Industry (General) Award 2020 covers employers in the hospitality industry and their employees employed in a classification under the award
• The Restaurant Industry Award 2020 covers restaurants, cafés, and catering operations — but the distinction between hospitality and restaurant awards is not always obvious
• The Fast Food Industry Award 2010 covers fast food operators, but cafés that serve fast food may fall under a different award

The overlap between awards is a genuine source of confusion. If you are genuinely uncertain, the FWO has a free advisory service, and employment lawyers or HR consultants can provide advice.

Step 3: Match Employees to the Right Classification

Once you have the correct award, you need to correctly classify each employee. Awards typically divide employees into levels (Level 1, Level 2, etc.) based on skills, duties, and experience.

Assigning a new employee to a lower classification than their skills and duties warrant is a form of underpayment — and it is common. The classification must reflect what the employee actually does, not what you would like to pay them.

Step 4: Calculate the Full Rate of Pay

The headline pay rate in an award is only the start. You also need to account for:

• Penalty rates — higher rates for weekends, evenings, public holidays, and shift work
• Overtime — additional payment for hours worked beyond ordinary hours
• Allowances — payments for specific conditions such as working with hazardous materials, laundry, travel, or use of a personal vehicle
• Annual leave loading — typically 17.5% on top of base rate when taking leave
• Superannuation — calculated on ordinary time earnings

Many SMBs configure payroll systems using only the base rate, missing penalty rates and allowances entirely.

The Most Common Awards for Australian SMBs

Retail

The General Retail Industry Award 2020 covers most retail businesses — supermarkets, department stores, specialty retail, hardware stores, pet stores, and many others. Key features include Saturday penalty rates of 125% and Sunday rates of 200% of the ordinary rate.

Hospitality

The Hospitality Industry (General) Award 2020 and Restaurant Industry Award 2020 are the two main awards for hospitality businesses. They have complex penalty rate and overtime structures that differ substantially, which is why hospitality is one of the highest-risk industries for award non-compliance.

Construction

The Building and Construction General On-site Award 2020 applies to on-site construction work. It includes a range of allowances — including a "special rates and allowances" clause — that can significantly add to the base rate.

Health and Aged Care

The Health Professionals and Support Services Award 2020 and Aged Care Award 2010 cover many roles in healthcare and aged care. These awards have complex classification structures and working arrangements.

Professional Services

The Professional Employees Award 2020 covers IT professionals, engineers, scientists, and some other professionals. It has specific provisions around guaranteed annual earnings that many employers in this sector use.

Administration

The Clerks — Private Sector Award 2020 covers clerical and administrative employees across many industries. If your employees perform mainly administrative work and are not covered by an industry-specific award, this is often the applicable award.

When No Award Applies

Some employees are not covered by a modern award. In these cases, the only minimum conditions are those in the NES and the national minimum wage. However, employees who are not covered by an award are often still protected from unfair dismissal and general protections claims.

Not being covered by an award does not mean you can pay whatever you like — you must still meet the national minimum wage, which is currently $24.10 per hour ($915.90 per week) as of the most recent Annual Wage Review.

Award vs Enterprise Agreement

An enterprise agreement takes the place of a modern award when it is approved by the Fair Work Commission and passes the Better Off Overall Test. However, if you do not have an enterprise agreement, the relevant modern award applies.

Some businesses operate under enterprise agreements that were made many years ago and have not been updated to reflect current pay rates. If the enterprise agreement's pay rates have fallen below the current award rates, you must pay the higher award rate regardless.

Penalty Rates: What You Must Pay

Penalty rates are a significant source of underpayment in Australian businesses. Common penalty rate obligations include:

| Day/Time | Typical Rate (varies by award) | | ------------------- | ------------------------------ | | Saturday | 125%–150% of ordinary rate | | Sunday | 150%–200% of ordinary rate | | Public holiday | 225%–250% of ordinary rate | | Evening/night shift | 115%–130% of ordinary rate |

These rates vary significantly between awards — do not assume the same penalty rates apply across different awards.

Annualised Salary Arrangements

Some awards allow employers to pay an annualised salary that covers ordinary hours, overtime, and penalty rates, rather than calculating each component individually. If you use annualised salary arrangements, you must:

1. Record the arrangement in writing
2. Record and reconcile actual hours worked against the award entitlements those hours would attract
3. Conduct an annual reconciliation and back-pay any shortfall

Failing to conduct the annual reconciliation is one of the most common — and expensive — award compliance errors.

The Cost of Getting It Wrong

Award underpayment claims can go back 6 years under the Fair Work Act. This means a small systematic error can compound into a very large liability. The FWO has pursued hospitality, retail, construction, and healthcare businesses for six-figure back-pay amounts based on award misapplication.

From January 2025, intentional wage theft — deliberately underpaying employees — became a criminal offence with penalties of up to 10 years' imprisonment and fines of up to $7.825 million for corporations.

How Reguladar Helps

Reguladar is built to help Australian SMBs stay on top of their award obligations. Rather than manually cross-referencing awards, classification tables, and penalty rate schedules, you get a personalised view of the specific obligations that apply to your business — your industry, your state, your workforce type.

When award rates are updated (as they are each year after the Annual Wage Review), Reguladar flags those changes so you can update your payroll before you fall behind.

Find out if you are applying the right award correctly. Start your free compliance check at Reguladar and get certainty on your minimum pay obligations today.