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Why an enterprise agreement below minimum wage could harm workers and businesses

In Australia, the national minimum wage is currently $19.84 per hour for full-time adult employees, or $753.80 per week, before tax. This rate is reviewed annually by the Fair Work Commission, based on various factors such as economic conditions, social needs, and living costs. However, some employers and employees may negotiate an enterprise agreement that sets different terms and conditions of employment, especially for certain industries or occupations that require specific skills or flexibility.

While enterprise agreements can offer benefits for both employers and employees, such as higher pay, more leave, or better training, they should not violate the minimum standards under the Fair Work Act 2009, or any applicable awards or regulations. This means that an enterprise agreement cannot legally pay workers less than the minimum wage, or compensate them with non-monetary benefits that do not exceed the monetary value of the minimum wage. In other words, if an enterprise agreement offers a lower wage than the minimum wage, the agreement is invalid and unenforceable.

However, some reports and cases suggest that some employers and employees may agree to a lower rate than the minimum wage in an enterprise agreement, either intentionally or unintentionally. For example, a recent case in the Federal Circuit Court of Australia found that a company that operated a Japanese restaurant in Melbourne had underpaid five workers more than $70,000 over two years, by paying them a flat rate of $17 to $18 per hour, which was below the minimum wage. The company had allegedly relied on a sham enterprise agreement that was not properly approved or registered by the Fair Work Commission, and did not meet the minimum standards.

Another example is the hospitality industry, which has been criticized for using outdated or unfair enterprise agreements that disadvantage workers, such as low-paid casuals, migrants, or students. A report by the McKell Institute in 2018 found that up to 42% of the enterprise agreements in the hospitality industry paid below the minimum wage, or had no or inadequate penalty rates, overtime rates, or leave entitlements. This not only harms the affected workers, who may struggle to make ends meet or secure their rights, but also creates unfair competition among businesses, as those who cut corners on labor costs may undercut those who comply with the law and pay their workers fairly.

Therefore, an enterprise agreement below the minimum wage is not only illegal and unethical, but also counterproductive for both workers and businesses. It erodes trust, productivity, and innovation, as well as contributes to social inequality and economic inefficiency. Employers who try to avoid paying the minimum wage by exploiting or misleading their workers may face hefty penalties, fines, or reputational damage, as well as legal action from their employees or unions. Workers who accept a low-paid enterprise agreement may lose their legal entitlements, such as overtime rates, penalty rates, or superannuation, and may also risk their safety, health, or career prospects.

In conclusion, an enterprise agreement should be a fair and lawful document that reflects the mutual interests and needs of both employers and employees, and enhances the quality and sustainability of work. Any agreement that falls below the minimum standards of the Fair Work Act or relevant awards or regulations should be reviewed, revised, or rejected by both parties, and reported to the authorities if necessary. By doing so, we can ensure that Australia`s workplaces are safe, respectful, and prosperous for all.


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