A major Fair Work Commission decision is set to increase award wages and update classifications across five female-dominated industries. How can HR prepare for award updates and stay ahead of compliance risks?

In a landmark ruling, the Fair Work Commission (FWC) has found that five industrial awards covering female-dominated industries do not provide equal pay for work of comparable value.

In light of this finding, the FWC has proposed significant increases to minimum award rates and changes to classification structures to better reflect the true value of the work performed in these sectors.

This decision is expected to help close the gender pay gap by lifting award rates across a range of occupations, including early childhood educators, pharmacists, psychologists and other health workers.

See a full breakdown of the affected awards and changes below.

The review was triggered by changes to the Fair Work Act introduced by the government in 2022, which require the FWC to explicitly consider gender equality when setting award rates of pay.

“This ruling is more significant than some people potentially realise,” says Lisa Mannering CPHR, Employment Lawyer and HR Consultant at Langtree Legal and member of AHRI’s ER/IR Advisory Panel.

“Because of the recent changes and the way the awards system has adapted through time, this is the first opportunity that the Commission in its current form has had to actually look at this issue of its own doing, particularly now that gender equality is one of the objects of the Fair Work Act.”

Understanding the changes

These reforms aim to address historical patterns of gender-based undervaluation that have long been embedded in Australia’s industrial relations system, says Mannering. 

The roots of this issue stretch back more than a century, when Australia’s wage-setting framework first took shape.

“A common misconception is that the gender pay gap is something that appears in wage rates between men and women in particular industries,” she says. “But when we look back at where this issue has come from, it’s not to do with individual awards having differences in male and female rates, but the actual work that’s covered by the award.”

Historically, wages were set on the basis that men needed to provide for a family, while female-dominated work was seen as supplementary, she explains, leading to systemic undervaluation of these roles.

The FWC’s new obligation to actively consider gender equality when setting award rates has created a new legal framework that enables these longstanding imbalances to finally be addressed. 

Before the 2022 reforms, to prove gender-based undervaluation, it was necessary to show that the work performed in female-dominated roles was less well-paid than comparable work performed in male-dominated roles. This reliance on a male comparator made it difficult to address undervaluation in sectors like care and education, where there were often not enough male equivalents to draw a fair comparison.

Now that the FWC is able to assess the value of work on its own merits without the need for a male comparator, it’s likely that further awards in female-dominated industries will be subject to review and potential reform in the coming few years, says Mannering.

The Commission prioritised these five awards because of their high concentration of women and their continued reliance on award minimums, making them a key driver of the gender pay gap.

“These occupations employ around 1.1 million workers – that’s nine per cent of the workforce,” she says.

“When we look back at where this issue has come from, it’s not to do with individual awards having differences in male and female rates, but the actual work that’s covered by the award.” – Lisa Mannering CPHR, Employment Lawyer and HR Consultant, Langtree Legal

How will these changes impact employers?

For employers directly impacted by these reforms, the changes are an opportunity to review pay practices and ensure classification structures, contracts and payroll systems are up to date and aligned with award requirements.

The impact will vary depending on the business, says Mannering. For smaller businesses, like those offering aged care or disability services, the focus will be on how to manage rising wage costs within existing budgets and funding and make any necessary operational adjustments.

“On the other end of the spectrum, for national businesses who may have enterprise bargaining agreements in place, these substantial wage increases and reclassifications might mean those agreements are no longer aligned with the award,” she says. “In that case, they’ll need to make adjustments to the pay rates to ensure they’re paying at least the award rate, and consider all of the award changes in the next round of bargaining.” 

Employers in affected industries should also keep in mind that the changes aren’t taking effect all at once. Some, like the Pharmacy Industry Award increase, are already confirmed and will roll out in stages. Others are provisional and may shift further following consultation. This means it’s essential to track implementation timelines closely, says Mannering.

“Diarise the key dates, schedule reviews ahead of time, and make sure you’ve obtained any approvals you need from senior management,” she says. “You also want to ensure payroll is across the changes so updates happen from the correct start date.”

Challenges may also arise in cases where not every employee within a business is affected by an award update or pay increase, which could lead to disputes over fairness. 

“In that case, being transparent and explaining the basis for the changes is really important,” says Mannering. “Explain that this is a historical issue, and that these changes are probably just the start of [the reform] we’re going to see.”

Preparing for changes to an award

Regardless of industry, most employers will face similar steps when dealing with award updates. Firstly, it’s important to establish whether the update involves wage rate increases, reclassifications or both.

“With wage rates, it’s generally more straightforward,” says Mannering. “You can look at the award, see what the new rate should be, and adjust accordingly. For employers who pay all-inclusive rates, meaning a single rate that covers base pay, loadings, penalties, allowances and overtime, it may mean there’s now less of a buffer to cover all those entitlements.”

However, preparing for changes to employee classification tends to be more complex.

“Generally, it’s up to an employer to look through the award to determine the primary duties that the employee does, and then which classification the employee best fits into based on that work,” says Mannering. 

Getting these classifications wrong or failing to implement them could expose employers to multiple forms of legal risk.

“It could result in penalties or breaches of the award… then there’s obviously potential for breach of contract claims or underpayment claims as well,” says Mannering.

If the misclassification appears to be linked to discrimination or a denial of a workplace right, this could also be grounds for a general protections claim, she adds.

To avoid disputes like this arising, Mannering recommends reviewing position descriptions regularly, ensuring job titles and duties align with the correct classification and keeping clear records of how classification decisions are made. 

HR can act as a trusted partner to business leaders in rolling out these changes and balancing compliance with operational and financial priorities.

“Being able to go to the business leader with confidence and explain why these changes are happening, and understanding the financial impacts to the business, is going to provide a more well-rounded view of how it can be managed,” she says.

All information, content and materials available on this site are for general informational purposes only. The contents of this article do not constitute legal advice and should not be relied upon as such.

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