ARTICLE · 20 OCTOBER 2015

Get ready, Offset, Go: Modern Award Absorption Clauses to go

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Although the Absorption Clause stays at present, it is clear that this situation is likely to change in the near future.

AustraliaEmployment and HR

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Since their commencement on 1 January 2010, all Modern Awards have had a standard clause 2.2 which allows employers to absorb monetary obligations imposed by the Modern Award into over award payments (Absorption Clause).

This clause has allowed employers, who pay employees above the minimum award rates, to offset the over award payments against Modern Award obligations and successfully defend claims for additional Modern Award entitlements (including overtime, penalty rates and allowances) by establishing that the over award payments made to the employees meet or exceed the Modern Award obligations.

This is an extremely convenient clause for employers, as it clearly identifies the interaction between payments made above the minimum award rates (Over Award Payments) and monetary obligations imposed under a Modern Award.

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