Modern awards are legally binding instruments that set minimum pay rates and conditions for specific industries and occupations in Australia’s national workplace relations system. Made by the Fair Work Commission under Part 2-3 of the Fair Work Act 2009, modern awards sit above the National Employment Standards (NES) as the minimum floor for covered employees. There are over 100 modern awards covering industries from hospitality to professional services, and each sets out the minimum pay rates, overtime, penalty rates, allowances, leave entitlements, and notice periods for the employees it covers. An employer who is covered by a modern award must comply with its terms — paying below the award minimum, failing to pay penalty rates, or not providing the leave entitlements in the award is a breach that attracts FWO enforcement.

This guide covers how modern awards work, how to identify the applicable award, the leave provisions in awards, and the relationship between awards, the NES, and enterprise agreements.

Key takeaways

  • Modern awards are made by the Fair Work Commission under Part 2-3 of the Fair Work Act 2009.
  • There are over 100 modern awards — each covering a specific industry or occupation.
  • Awards set minimum pay rates, conditions, and leave entitlements above the NES floor.
  • The employer must identify the applicable modern award for each employee and pay at least the minimum rate in the award classification.
  • Awards commonly provide annual leave loading (17.5%), additional personal leave, and specific provisions for shift workers, part-time employees, and casuals.
  • Enterprise agreements sit above the award — they must pass the Better Off Overall Test (BOOT).

How to identify the applicable award

The Fair Work Commission maintains the Award Finder — a tool that helps employers identify the modern award that covers their employees. The key question is: what is the employee’s primary task? The award is determined by the employee’s classification under the award, not by the employer’s industry alone.

Examples:

Industry Common modern award
Hospitality Hospitality Industry (General) Award 2020
Retail General Retail Industry Award 2020
Professional services Clerks—Private Sector Award 2020
Construction Building and Construction General On-site Award 2020
Manufacturing Manufacturing and Associated Industries and Occupations Award 2020
Health services Health Professionals and Support Services Award 2020
Fast food Fast Food Industry Award 2020

The employer should check the award classification structure to determine which level the employee falls into based on their duties, qualifications, and experience.

Award classification and pay rates

Each modern award includes a classification structure that maps employee duties and qualifications to pay levels. The employer must pay at least the minimum rate for the classification the employee falls into.

Example: Under the Clerks—Private Sector Award 2020, a Level 3 clerical employee with intermediate skills earns a minimum weekly rate (as at 1 July 2025). The rate is updated each year following the Fair Work Commission’s Annual Wage Review.

The employer must:

  1. Identify the correct classification — based on the employee’s actual duties, not the job title.
  2. Pay at least the minimum rate — the weekly or hourly rate for that classification.
  3. Apply penalty rates — for overtime, weekends, public holidays, and shift work as specified in the award.

Leave entitlements in modern awards

Modern awards provide leave entitlements that meet or exceed the NES. Common award leave provisions include:

Annual leave

The NES provides 4 weeks (or 5 weeks for shift workers). Modern awards often add:

  • Annual leave loading of 17.5% — paid when leave is taken, in addition to the base rate.
  • Accrual of annual leave for casuals — some awards provide annual leave for long-term casuals.

Personal/carer’s leave

The NES provides 10 days per year. Modern awards generally match the NES, but some awards provide additional provisions for shift workers or employees in specific industries.

Compassionate leave

The NES provides 2 days per occasion. Awards generally match the NES.

Long service leave

Long service leave is governed by state legislation, but modern awards preserve the employee’s entitlement to long service leave under the applicable state law.

Other leave provisions

Some awards include:

  • Jury duty leave — paid or unpaid depending on the award.
  • Blood donor leave — paid leave for blood donation.
  • Family and domestic violence leave — 10 days per year (matching the NES).
  • Exam leave — paid leave for employees studying for qualifications relevant to their work.

Annual leave loading

Many modern awards provide an annual leave loading of 17.5% — paid on top of the base rate when the employee takes annual leave. The loading is designed to compensate for the loss of penalty rates and overtime that the employee would have earned if they had been working.

The loading is not an NES entitlement — it is an award entitlement. Where the award provides for annual leave loading, the employer must pay it. Where the award does not provide for it, the NES minimum of 4 weeks’ leave applies without loading.

Part-time and casual employees

Modern awards have specific provisions for part-time and casual employees:

Part-time employees

  • Leave accrues on a pro rata basis — a part-time employee working 3 days per week accrues 3/5 of the full-time entitlement.
  • The award must specify how leave is accrued and taken for part-time employees.

Casual employees

  • Casual employees are generally not entitled to annual leave or personal leave — but they receive a casual loading (typically 25%) to compensate for the lack of leave entitlements.
  • After 12 months of regular casual employment, the employee has a right to request conversion to permanent employment.

The BOOT (Better Off Overall Test)

Enterprise agreements must pass the Better Off Overall Test (BOOT) — each employee must be better off overall under the enterprise agreement than under the applicable modern award. The Fair Work Commission assesses the BOOT by comparing the entitlements under the agreement with the entitlements under the award, including pay rates, leave, overtime, and penalties.

If the agreement does not pass the BOOT, the Commission will not approve it.

Common pitfalls

1. Not identifying the correct award

An employer who applies the wrong award classification — or pays below the minimum rate — is in breach of the Fair Work Act. The employer must check the award classification for each employee.

2. Not paying annual leave loading

Where the award provides for annual leave loading, the employer must pay it. Failing to do so is an underpayment.

3. Misclassifying part-time employees as casuals

A part-time employee who works regular, systematic hours is entitled to the NES and award entitlements — including leave. Misclassifying them as casuals to avoid leave obligations is a breach.

4. Not updating pay rates after the Annual Wage Review

The Fair Work Commission reviews minimum wages each year. The employer must update pay rates to reflect the new minimum from the effective date (usually 1 July).

Putting it into practice

Five steps to manage modern award compliance:

  1. Identify the applicable award for each employee — use the Fair Work Commission’s Award Finder.
  2. Map each employee to the correct classification — based on actual duties, not job titles.
  3. Audit pay rates annually — update to the new minimum rates after the Annual Wage Review.
  4. Track leave entitlements — ensure annual leave, personal leave, and other leave are provided as the award requires.
  5. Monitor casual conversion — track casual employment duration and trigger the conversion process at 12 months.
You can take advantage of the free 14 days trial and explore Leave Balance.

A leave management system that maps employees to award classifications, tracks leave accrual by award, and updates pay rates after the Annual Wage Review makes modern award compliance manageable.

Sources

This article is general information, not legal advice. Modern award compliance is complex and depends on the specific award and classification — consult the Fair Work Ombudsman or an employment lawyer for specific situations.