Over 15% of Australian employees are paid under a modern award, yet a surprisingly high number of employers aren’t compliant, but think they are. Part of the reason for this is that awards can be complex and interpretations aren’t always straight forward so it can be difficult for employers to know if they are paying employees correctly under the award. In the past year, non-compliant businesses have had significant negative media attention as a result of underpaying staff.
This has led to to the introduction of the new Fair Work Amendment (Protecting Vulnerable Workers) law. The new law places hefty financial penalties on businesses that purposely breach their obligations to employees or who ‘should’ve known better.’ Modern awards can be tricky, and businesses can easily fall for one of these common mistakes:
Many employers think that because they pay a base rate that is above the award rate, they are exempt from paying other components of the award. Many employers say “we pay above award so we don’t need to pay allowances or overtime” but this is actually false. Paying above award simply means that you are paying a higher base rate but you still need to comply with all the other conditions of the modern award.
When speaking to employers, I’ve often heard them say that “that doesn’t apply to us” when talking about an allowance or certain overtime conditions. They’ll say that they don’t need breaks every 5.5 hours because there’s often quiet periods or they don’t need to pay an allowance because “we make sure they’re looked after”. Even if you think you’re doing the right thing and the employees are better off, unless you have approval from Fair Work, you’re likely in breach of the modern award and could be fined.
The modern award for many industries include age or anniversary based rate progressions. It gets even more complicated because the rate for a probation period may be different to the non-probation rate which may change after 3 or 6 months and then again after the employee’s birthday or anniversary date. Tracking these changes can be difficult and is often a manual process, making it easy to forget. Forgetting to update rates can be costly as you need to spend time calculating back pay on earnings and super, as well as actually paying the owed wages.
One of the most subtle ways employers run into trouble is through time recording. Often employers will only record total hours worked and won’t keep track of actual shift start and stop times and overtime start and stop times. Start and stop times have a huge bearing on what an employee can be paid. Incorrectly recording start and stop times can be particularly problematic because if an employee makes a claim that they were paid incorrectly based on the hours they worked, employers don’t have the evidence to prove when the employee worked and when they took their breaks.
As we’ve seen with the recent audits by Fair Work on Domino’s, 7/11 and others, Fair Work takes these matters seriously and will heavily fine businesses who are found to be in breach.
The easiest thing you can do if you’re unsure is to get some advice. If you have questions, you can call Fair Work or engage the services of an industry expert who will be able to conduct an audit and give you the guidance you need to ensure you’re compliant.
Once you’ve got advice, look at your processes and systems and ensure they’re able to meet the demands of the award you’re paying under.
Using a modern payroll system like KeyPay can help ensure you’re compliant in the following ways:
If you’d like to simplify your payroll and enjoy the peace of mind that KeyPay’s pre-built awards provide, get in touch via firstname.lastname@example.org. We’d be happy to help get you up and running.