Individual flexibility arrangements (IFA)

Context

An IFA is a written agreement between an employer and employee. The purpose being 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 cannot 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 estsablished. In order to do so, employers 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 with the 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 it 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 an agreement being reached, by an application to the Fair Work Commission (FWC). FWC would have to take into account the impact the termination of an IFA could have on the employer’s business. 

Recommendations

  • IFAs should be available prior to the commencement of employment
  • IFAs should only be terminated upon employee/employer agreement, or by an application to the FWC.

18 June 2015