Key Points
- The wage scandals of 2019 rocked many businesses to the core, but it turns out, that was only the beginning. The Fair Work Commission has been sparked into action and has now turned its attention to changes to modern awards.
- If you thought that by putting your employee on a salary, no matter how generous, you avoid having to comply with awards, that is all about to change.
- On 4 July 2019 The Fair Work Commission handed down a decision, which will impact employers who pay employees annualised salaries covered by a Modern Award. The new changes are due to take effect from the 1st March 2020.
Are you ready for the Modern Award changes that are arriving this March?
2020 signals the start of a new decade; a fresh start for all. But, for many employers it means the beginning of a new, potentially complicated payroll regime, and a new era in award compliance.
Will this affect you?
Employers with employees covered by the Modern Awards listed below will be impacted by the changes:
- Banking and Finance and Insurance Award 2010
- Broadcasting and Recorded Entertainment Award 2010
- Clerks – Private sector Award 2010
- Contact Call Centres Award 2010
- Health Professionals Award 2010
- Horticulture Award 2010
- Hydrocarbons Industry (upstream) Award 2010
- Hospitality industry Award 2010
- Legal services Award 2010
- Local Government Industry Award 2010
- Marine Towage Award 2010
- Manufacturing and Associated Industries and Occupations Award 2010
- Mining Industry Award 2010
- Oil refining and Manufacturing Award 2010
- Pastoral Award 2010
- Pharmacy Industry Award 2010
- Rail Industry Award 2010
- Restaurant Industry Award 2010
- Salt Industry Award 2010
- Telecommunications Services Award 2010
- Water Industry Award 2010
- Wool Storage, Sampling and Testing Award 2010
Because most employers require clerical and administration staff, we believe many employers WILL need to seek immediate legal advice to ensure that they are operating within the law.
What are the Changes?
Existing employees
It is important to note that every award has been changed to some degree.
Key employer requirements common to all the named awards include the need to advise the employee in writing of the following:
- Details of how the employer has calculated the employees annualised wage, including how penalty rates and overtime are calculated and applied;
- The ‘outer limit number’ of ordinary hours an employee is required to work before penalty rates apply;
- The ‘outer limit number’ of overtime hours an employee is required to work before being entitled to an excess payment on the annualised salary;
- Any other excess hours not covered by the annualised wage for which provision of the award would apply.
New Employees
All new employees will need to be onboarded and provided with documentation detailing the calculations and outer limits as noted above.
Time recording
The employer is now required to maintain records of their employee’s hours of work; specifically start, finish and break (paid and unpaid) times. The key change to time recording rules is that
the employee must now sign to acknowledge accuracy of the recordings.
Annual reviews
In addition to the initial written advice, employers are also required to undertake an annual review for each employee.
The annual review is to reconcile the employee’s hours of work for the past 12 months, to ensure that the employee is better off under the annualised salary, compared with benefits paid under the relevant Modern Award.
Take note that any shortfalls are required to be remedied within 14 days.
What about my existing employment contracts?
There are provisions which allow employers and employees to “buy out” the remuneration obligations of the award and, separately, there is a mechanism that allows employers to agree to pay a guaranteed salary under the contract for employees above the high-income threshold (currently at $148,700).
Agreeing to these contracts is not free from legal difficulty and requires a close correlation between the nature of the contractual obligation and the nature of the award obligations.
If you have any employment contracts which fall into this category, we recommend seeking immediate legal advice.
How can you ensure you are compliant?
The first step is for employers to understand which awards apply to their workplace. For the avoidance of doubt, it is highly recommended that you seek professional legal advice.
If you have already identified any of the awards as applying to your workplace, we recommended auditing your documentation, policies and procedures to ensure compliance with the changes as soon as possible.
Finally, if you have employment contacts, either over or under the high-income threshold, which buy out the provisions of an award, we recommend seeking immediate legal advice requesting a review of the clauses to ensure if the principles as defined in
Linkhill Pty Ltd v Director, Office of the Fair Work Building Industry Inspectorate [2015] FCAFC 99; 240 FCR 578 are met.
What happens if I am not compliant by 1 March 2020?
Due to the amount of media attention related to “wage theft” and the tidal wave of articles that were published throughout 2019, the Fair Work Commission is serious in ensuring that employers are meeting their minimum wage requirements.
A failure to comply will be considered a
breach of a modern award and will attract civil penalties under the Fair Work Act 2009 (cth) of up to $63,000 per breach.
What are my next steps as an employer?
The cost of getting this wrong will be considerable. Our best considered advice at this stage would be to clarify which, if any, of these changes will impact your business the most.
Warwick Ryan and his experienced team of employment law specialists at Hicksons Lawyers are ready to help you navigate your way through this complicated time, with the least amount of disruption to your business as possible. Contact us today via email at
[email protected] or alternatively by calling 02 4907 5600.
Post by Christopher McCourt and Warwick Ryan