MBA recently have had an increasing number of queries in relation to individual flexibility arrangements (IFAs). IFAs can be used to provide alternative work arrangements to suit the needs of both employer and the employee. Implementing IFAs can benefit your business greatly, including reducing employee turnover rates, improving overall job satisfaction, and simplifying certain administrative processes. An IFA is a written agreement made with an individual employee to change the effect of certain terms in the employees’ award or enterprise bargaining agreement (EBA). If you wish to pay your employees a flat hourly rate to include certain allowances or penalty rates, you will need to have an IFA with the employee.
What can you use an IFA for?
You can use an IFA to vary the following terms:
It is important to know that an IFA can only vary the effect of the above terms in the award, it cannot remove the employee’s entitlements under the award/EBA.
What are the requirements for making an IFA?
If you are considering implementing IFAs at your workplace, make sure the IFAs:
What is genuinely agreed to?
Genuinely agreed to means that the employee understands what entitlements have been varied by the IFA and agrees to the variations. Before signing an IFA, the employee should be given time to review the agreement and be provided with an explanation of the terms where required.
An employee cannot be pressured into accepting an IFA, and cannot be treated adversely if they refuse to accept an IFA. An employer may not ask a prospective employee to sign an IFA as a condition of an offer of employment. Not only in such conduct specifically prohibited by the Fair Work Act 2009 (s341(3)), but it is also doubtful that the IFA could ever be said as a “genuine agreement” between the employer and employee.
What is Better Off Overall Test (BOOT)?
An IFA must cause the employee being better off overall than the employee would have been if no IFA had been agreed to. This involves calculating the employee’s financial and (sometimes non-financial) entitlements under the IFA and comparing them to the applicable award/EBA to assess whether the employee is better off than they would be if there was no IFA.
If you are using IFAs and considering implementing IFAs at your workplace, make sure that you understand and meet the requirements of IFAs. Failure to meet the requirements in forming an IFA may lead to the employer facing penalties.
Do you need assistance in reviewing your current IFAs or making a new IFA, or have questions about IFAs? Contact our Workplace Relations and Legal Team on 02 6175 5900.