Drafting an Individual Flexibility Arrangement (IFA)
IFAs allow an employer and employee to vary specific matters under the flexibility term of a modern award or enterprise agreement. The employee must be better off overall than they would be under the award or EA, and strict documentation and termination rights apply.
This is an 8-step workflow for drafting an Individual Flexibility Arrangement that varies the effect of a modern award or enterprise agreement for a specific employee while passing the Better Off Overall Test.
Before you start
- Applicable modern award or enterprise agreement identified
- Employee's current terms of employment (including pay, hours, rosters)
- Flexibility term from the award or EA to identify permitted variations
- Proposed variation and business rationale
The workflow
Confirm the flexibility term
Locate the flexibility term in the award or EA. Confirm the variation proposed falls within the matters that term permits (typically arrangements for when work is performed, overtime rates, penalty rates, allowances, leave loading).
Perform the Better Off Overall Test
Calculate the employee's entitlements under the award/EA and under the proposed IFA. The employee must be better off overall in dollar and non-dollar terms.
Document the BOOT calculation
Record the BOOT calculation in writing and retain as part of the employee's file. Regulators and the Fair Work Commission can require this evidence on later challenge.
Draft the IFA
Draft the IFA in writing, setting out the matters varied, the variation, how the employee is better off overall, and the commencement date. Reference the award or EA by name and clause.
Include the termination notice
Include the termination provision — either party can terminate the IFA by giving written notice (13 weeks under the standard flexibility term).
Confirm genuine agreement
Ensure the employee genuinely agrees — not as a condition of employment. Provide time to consider and the option to seek advice. Do not use a pro-forma on day one of employment.
Execute and provide a copy
Both parties sign the IFA. Provide a copy to the employee within 14 days of execution. Retain the original in the employee's file.
Review on variation triggers
Review the IFA on any material change (pay rise, award variation, role change) to confirm it still passes the BOOT. Reissue if necessary.
What you will have at the end
A compliant IFA giving the employer and employee flexibility that still passes the Better Off Overall Test and is capable of withstanding a Fair Work inspector review.
Common issues
- Attempting to use an IFA to contract out of NES entitlements (not permitted)
- BOOT comparisons that only consider base pay and miss penalty/overtime differentials
- Using IFAs as standard employment contracts for new hires, undermining genuine agreement
- Forgetting the 13-week termination notice, creating a false sense of permanence
- No record of the BOOT calculation, leaving no audit trail
Run this workflow on a real matter
Quillio drafts IFAs with the BOOT calculation built in and flags variations that fall outside the flexibility term of the applicable award or EA. See /practice-areas/employment-lawyers.
This workflow is a general guide. IFAs cannot vary the National Employment Standards and cannot be used to disadvantage employees. Review the specific flexibility term in the governing instrument.
Try this workflow with Quillio.
Quillio can run this workflow on a real matter, with citations to current AU authority on every step. The free trial requires no credit card.
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