Innovation in the workplace under the Fair Work Act

James Zeng, Senior Associate

Innovation in the workplace has been linked to increased productivity, profitability and improved workplace outcomes. Innovative workplaces are workplaces that are flexible and successfully adapt to change. Organisations are reminded time and time again that the failure to innovate will result in a decline in productivity and ultimately their demise in a competitive global market due to a failure to adapt and change to meet emerging challenges.

The Fair Work Act 2009 (Cth) (“FW Act”) has been criticised by many for inhibiting innovation and at times described as an impediment to increased productivity.1  However, employers should aware be that there are a number of opportunities for organisations to take advantage of the existing legislative framework and recent amendments to drive innovation in the workplace. This article examines some of the areas of employment law that businesses can explore when looking at driving innovation in the workplace in 2016.


During enterprise bargaining cycles, many organisations merely update their existing enterprise agreement to bring remuneration in line with, or slightly above rates under the applicable modern award. Rather, enterprise bargaining should be seen as an opportunity to insert provisions that help drive innovation in the workplace. Organisations often bargain with unions and employees based on information and statistics on past performance and at times fail to take into consideration the potential for innovation driven productivity improvements.

The FW Act permits enterprise agreements to contain a number of terms pertaining to the relationship between employer and employee including terms relating to wages and allowances, hours of work and shift patterns, as well as clauses that help drive innovation in the workplace. Accordingly, organisations should not limit the contents of their enterprise agreements to the matters contained in the modern award that would have otherwise applied to their workforce but should consider introducing innovative clauses that help promote increased productivity and flexibility.

For example, an organisation might include a clause mandating the multi-skilling of the workforce and thereby improving flexibility and reducing or eliminating the strict demarcation of roles. Organisations can, during bargaining, also take the opportunity to tie additional payments, sometimes referred to as productivity allowances, or pay rises higher than those sought by unions, to productivity achievements by the workforce during the life of the enterprise agreement.


Past research2 has shown that improvements in innovation can occur if organisations improve the skills and knowledge of their workforce. An employee who considers that they have a future in their organisation is more likely to be engaged and drive innovation than a disengaged employee. Whilst very few modern awards provide for study leave, training or study assistance, an organisation can offer skills training for its workforce as part of its suite of employee benefits and in the place of other direct monetary benefits. Organisations have recognised in the past that offering skills training and study assistance are key retention tools and assist in career advancement within the organisation. However, this should not be limited to any particular industry or to one part of an organisation’s workforce (such as professionals) but offered to the whole workforce.

Further, skills training is an additional benefit that might be provided to employees during enterprise bargaining and considered by the Fair Work Commission when it is undertaking the better-off-overall test and deciding whether to approve an enterprise agreement.


Organisations should look at ways of incentivising innovation in the workplace. Whilst tying bonus payments and other additional remuneration to innovation will certainly do this, there are ways to incentivise innovation on a long term basis including through issuing of shares linked to the performance of the organisation. As a result of changes to legislation implemented by the Federal Government in June 2015, incentivising innovation is not limited to merely payment of bonuses, productivity allowances, or providing share interests for employees of listed companies. Now, all types of organisations can adopt share plans as a way of incentivising innovation.

Those changes reversed a number of unpopular provisions in respect of taxation on employee share interests that have been acquired at a discount. The amendment to the existing legislation introduced additional generous tax concessions on employee share interests, where previously employees were subject to complex rules and adverse tax consequences. Favourable tax treatment has made employee share arrangements and plans more attractive as a means of recruiting and retaining key team members and rewarding hard working employees who help drive innovation in the workplace. Start up companies and small and medium business enterprises should be aware and take advantage of additional tax concessions for employees with employee share interests in their organisations.


Innovation in the workplace has been shown to be driven by employees approaching challenges from different angles, and finding more varied solutions. Organisations should look towards recruiting and retaining employees with values that align with the vision of the business but who come from different backgrounds and experiences. Organisations should introduce policies and procedures that encourage diversity and help retain employees from diverse walks of life. This goes beyond merely implementing policies that deal with unlawful discrimination and paid parental leave and extends to implementing policies that deal with gay, lesbian and transgender employees, recruitment policies that avoid discrimination based on “pedigree” (such as university education) and policies that provide flexibility for employees who may need to work from home for a variety of reasons.


Finally, organisations that pay employees above the high-income threshold (currently $136,700 per annum, until at least 1 July 2016) should take advantage of the high income threshold guarantee to allow greater workplace flexibility and avoid certain limitations under the modern awards. A high-income employee who is provided a written guarantee of annual earnings is not covered by a modern award. This allows employers to implement innovative and flexible arrangements including the ability for the employee to determine their own hours of work. Organisations should also take advantage of annualised salary provisions in modern awards for salaried employees where possible.


  • Organisations should take the opportunity to include clauses that drive innovation in the workplace in their enterprise agreement and bargain with a forward thinking outlook. 
  • Organisations should consider implementing policies and procedures that attract and retain employees from a diverse range of backgrounds. 
  • Organisations should take advantage of the high-income guarantee under the FW Act and annualised salary provisions in modern awards, where possible, to drive innovation in the workplace.

1. Towards more productive and equitable workplaces, An evaluation of the Fair Work Legislation [9-27], [72].

2. Workforce Skills and Innovation: An Overview of Major Themes in Literature, OECD [7-9], [30-33].

Five types of employee and how to deal with them

While a well-executed recruitment process can help filter out job candidates who might not be right for an organisation, it is not always possible to tell exactly what “type” of employee a person will be until they’re in the job. Here are five employee “types” you might come across and our top tips for dealing with them.

1. The Underperformer

Keeping in mind that an employee will not have access to the unfair dismissal jurisdiction for the first six or twelve months of his or her employment (depending on the size of the organisation), how to deal with the Underperformer will, in part, depend on how long he or she has been employed.

When confronted with a chronic Underperformer who does not respond to performance management, employers should consider the following questions:

  • “Does the Underperformer really want to be here?”
  • “Is it worthwhile attempting to negotiate a separation?”

2. The Complainer 

The Complainer is never happy, and everybody knows it. Complaints should always be taken seriously and employers should err on the side of caution, bearing in mind that an employee has a workplace right to make a complaint in relation to his or her employment, and to pursue a claim if adverse action is taken against them for exercising that right.

This does not mean, however, that unwarranted complaints should be allowed to affect workplace morale. Employers must assess whether a complaint is legitimate or symptomatic of a behavioural issue that needs to be addressed.

3. The Coaster

While not the poorest performer, the Coaster applies minimum discretionary effort to his or her duties and is not seen as adding value to the organisation. By developing a high-performance culture, an organisation can send the message that coasting is not enough.

One key to a high-performance culture is an effective performance management process. Performance management should be seen as a genuine opportunity, and an effective process will involve communicating shared goals, clearly defining targets and timeframes and ensuring investment on both sides of the table.

4. The Bully

It is important for an organisation to engender a culture of mutual respect and tolerance through behaviour and culture training for all employees, both on commencement of employment and throughout its duration.

An organisation must not turn a blind eye to the Bully’s misconduct. Doing so may expose it, for example, to vicarious liability for harassment or material obligations imposed on it under an order to stop bullying.

5. The Star

Organisations must not allow their best employees to get lost in the mix. An effective talent retention strategy should be developed, based around short-term and long-term monetary and non-monetary incentives, employee recognition and opportunities for career development.


Getting Bang for your Buck: Where should your budget be allocated?

As the end of the financial year approaches and measures are underway to finalise next year’s budgets, HR professionals will be asked to contribute figures, justify figures or independently prepare an HR budget. This webinar explored areas that need to be considered in terms of what costs you should be expecting and whether there are ways to make savings within your area to utilise available funds in more effective ways.

This webinar explored:

  • where the HR budget sits within the organisation and the Board’s and Executives’ expectations of HR costs
  • line items of an HR budget
  • likely financial increases eg National Minimum Wage, EBA or contractual pay review increases
  • what are unexpected costs and how do you account for and justify them
  • how to learn from the previous budget and how those lessons impact on the current/proposed
  • where can HR make savings?
  • where should HR deploy its finances?
  • How do you explain to the Executives and the Board that sometimes short term spending is actually longer term saving?