Big changes to annualised wage agreements are looming with employers facing harsh penalties if they fail to comply.
From March 1, the new rules will apply to employers who have workers on annualised wage agreements under 18 different awards.
The changes will also be brought into a further four awards – including the hospitality sector – but a timeframe hasn’t yet been decided by the Fair Work Commission.
The changes spell greater record keeping responsibilities for employers to ensure their workers are being renumerated correctly, after the FWC began zeroing in on underpayments.
HRD heard from Athena Koelmeyer, managing director and principal at Workplace Law, and speaker at the Sage virtual masterclass on annualised agreements.
She outlined some of the key misconceptions around award compliance which could land employers in hot water come March 1.
Employers who think they do not have employees covered by awards
Koelmeyer said the 121 Modern Awards were designed specifically to cover the vast majority of Australia’s workforce.
“This misconception is something I hear reasonably regularly,” she said. “It’s very unlikely that any Australian employers do not have award coverage within their workplace.”
While these March 1 changes relate to 16 specific award categories, the range of industries is vast.
Including banking, finance, insurance to mining and manufacturing, these awards will apply to a large chunk of Australia’s workers.
The roles covered by a certain award can also vary widely.
For example the Clerks Award includes employment roles which may not typically be assumed as a clerking position – like jobs within marketing and payroll.
So, the first thing employers need to do is look at their employees and assess who will be affected by these award changes.
Employers relying on the Better Off Overall Test (BOOT)
Koelmeyer said another common misconception is that if an employer applies the BOOT test to employees and passes, they won’t be falling foul of modern award regulations.
“The BOOT is a test that is administered by the FWC when looking at enterprise agreements,” she said.
“It’s not a sufficient defence to non-compliance with the awards. It simply doesn’t work like that.”
While an employer may believe they are paying an employee an adequate amount for their role, over time they may become out of touch with the pay increases that employee’s award stipulates and find themselves facing an underpayment claim.
Added incentives do not constitute remuneration
When it comes to calculating annualised agreements, the FWO’s framework is black and white.
Added “handshake” incentives like free tickets to events or gifts cannot be used to determine an employee’s salary.
Again, Koelmeyer said these incentives are not a defence against underpayments and they won’t stack up in front of the FWC.
The factors that employers can use to determine an annualised wage include:
- minimum wages
- overtime and penalty rates
- leave loading
One of the biggest changes come March 1 is the amount of record keeping the employer must comply with to prove their annualised wage is correct.
The annual wage agreement provided to employees must include:
- The annual wage that will be paid
- Which award entitlements are included in the annual wage
- How the annual wage has been calculated, including any assumptions used in the calculation
- The maximum (or ‘outer limit’) number of penalty hours and overtime hours the employee can work in a pay period or roster cycle without extra payment
But employers must also keep a record of an employee’s start and finish times, as well as unpaid breaks taken, and this record has to be signed by the worker at the end of each pay cycle.
These documents are vital for the annual reconciliation which must take place every 12 months, or when the arrangement or employment ends.
Koelmeyer said the new rules essentially require employers to keep two sets of books – one data set to capture the amount paid under an annualised wage agreement and another to show the amount required under the modern award.
This would enable employers to spot gaps between the two and fix the renumeration accordingly.
If employers don’t prepare for the changes now, they risk accumulating underpayments which will cost them a headache in the long run.