In addition to the National Employment Standards, most employees in Australia will be covered by either an Industry Award or enterprise agreement that imposes additional conditions on the terms of employment which are industry or employer specific.

As Industry Awards and enterprise agreements apply to groups of employees, they do often do not take into consideration the unique requirements of an employee or a specific business.

To overcome these constraints, the Fair Work Act 2009 (Cth) requires both Industry Awards and enterprise agreements to contain provisions which allow for Individual Flexibility Arrangements between employers and employees.

What are Individual Flexibility Arrangements?

Individual Flexibility Arrangements are formal agreements between an employer and an employee that modify the terms of an employee’s Award or enterprise agreement to fit the genuine needs of the business or the employee.

An Individual Flexibility Arrangement must still include the minimum entitlements of the National Employment Standards while also ensuring that the employee is “better off overall” than under the standard terms of their Award or enterprise agreement. Individual Flexibility Arrangements cannot be used to reduce or remove employee entitlements. 

Which terms of employment can Individual Flexibility Arrangements modify?

Industry Awards can have the following terms of employment modified by Individual Flexibility Arrangements:

• arrangements for when work is performed, such as working hours;
• overtime rates;
• penalty rates;
• allowances;
• leave loading.

Enterprise agreements include a flexibility clause which states which terms of employment of the respective enterprise agreement can be modified by an Individual Flexibility Arrangement.

Employers and employees generally have different motives for wanting Individual Flexibility Arrangements. Employers are more likely to want to simplify their accounting processes, while employees often require flexibility around working hours.

Let’s look at an example from each perspective.

Example 1 – Employer

ABC Co’s employees are covered by an Industry Award and are often required to work more than the maximum 38 hours of ordinary time work each week. Rather than go to the extra time and expense of having a bookkeeper calculate each employee’s overtime rate entitlements, ABC Co enters Individual Flexibility Arrangements with each of the affected employees and pays them a higher base rate for all hours worked that is greater than the required minimum rate under their Award.

As long as the employees’ overall pay at the increased base rate is higher than what their pay would be at the Award minimum rate plus the relevant overtime rates for the same number of hours worked, the employees are considered “better off overall” and the Individual Flexibility Arrangement is valid.

Example 2 – Employee

Michael’s industry is covered by an Award where the ordinary hours of work are 9:00 am to 5:00 pm Monday through Friday. Michael has family obligations on Tuesdays and Thursdays that require him to leave work early. Michael requests, and his employer agrees, to enter an Individual Flexibility Arrangement that allows Michael to begin work at 8:00 am and leave work at 4:00 pm on Tuesdays and Thursdays.

How are Individual Flexibility Arrangements entered and terminated?

Individual Flexibility Arrangements can be entered anytime after an employee has commenced employment and either the employer of the employee may make the request to the other party. The agreement must be genuine and not made under coercion or duress, meaning that, in the case of an employer-initiated request, an employer cannot threaten the employee with termination or other penalties should the employee reject the offer.

Individual Flexibility Arrangements can be ended at any time by mutual agreement. If only one party wishes to end the agreement, they must give the other party notice of 13 weeks’ notice for Awards, or a maximum of 28 days for enterprise agreements.

From an employer’s perspective, there are strict procedural requirements that must be followed when documenting both the proposal (if from the employer to the employee) and the Individual Flexibility Arrangement itself. Employers can be fined if procedures are not properly followed and a dispute arises between the parties due to an improperly documented Individual Flexibility Arrangement.

Whether you are an employer or an employee in need of flexibility with your working conditions, our experienced employment law team at Stone Group Lawyers can assist with navigating the complexities of Individual Flexibility Arrangements. Give one of our employment lawyers a call today on (07) 5635 0180.