Individual flexibility arrangements


Context
An IFA is a written agreement used by an employer and employee to change the effect of certain clauses in their award or registered agreement. It is used to make alternative arrangements that suit the needs of the employer and employee.

An IFA can’t be used to reduce or remove an employee’s entitlements.

An employer has to make sure that the employee is better off overall with the IFA than without it compared to their award or registered agreement at the time the IFA was made. To do this they should look at the financial and non-financial benefits for the employee, as well as the employee’s personal circumstances.

Position
Currently an employer cannot enter into an Individual Flexibility Agreement (IFA) prior to an employee being employed by the business or as a condition of employment. This is despite an employer being required to ensure that an employee is better off overall than if there was no IFA.

Further, either party can terminate an IFA with 28 days’ notice under section 203(6). This means that a single employee can disrupt the flexibility introduced by giving notice to end their involvement. This has led to many businesses not bothering to use IFAs. Why go to the trouble of negotiating the terms of an IFA when they can be so easily overturned?

A better system would be if IFAs could be terminated only by agreement between the employer and employee, or failing agreement, by an application to the FWC. The FWC decision would have to take into account the impact on the employer’s business of terminating an IFA.

Recommendations

  • IFAs should be available prior to the commencement of employment and that IFAs can only be terminated by agreement or by an application to the FWC.

18 June 2015