Professionals earning salaries up to $150,000 will be subject to a barrage of red tape next year as part of efforts to ensure they are not paid below the award minimum, despite the improbability of that happening.
The Australian Mines and Metals Association and Australian Industry Group have written to the Morrison government to stop new time-keeping and record requirements for workers on annualised salaries on the basis it would create a bureaucratic nightmare.
But unions argue recent high-profile underpayment cases have exposed “the myth” that professionals paid $100,000 salaries do not get underpaid, especially when working excessive hours.
The Fair Work Commission is set to introduce new rules from March 2020 that would mandate employers record salaried workers’ hours and unpaid breaks when they are covered by an award.
Businesses will have to conduct annual pay reconciliations to ensure workers are not underpaid and must advise them of the maximum hours they can work without attracting overtime or penalty rates.
The new requirements cover a wide range of professions, from administrative workers under the clerks award, graduate lawyers and paralegals under the legal award, and finance workers under the banking, finance and insurance award.
Mining and hydrocarbons, manufacturing, telecommunications, health, restaurant and hospitality sectors are also covered.
AMMA chief executive Steve Knott said the new time-keeping requirements created a “theatre of the absurd” for the resources sector where the average pay was $139,000 a year compared to the highest award level of less than $60,000 a year.
“There is simply no conceivable way that an employee taking home $139,000 per annum could have had their allowances, penalties and overtime arranged in a way to bring their base salary under the award-stipulated $60,000,” he said.
He accused the commission of seeking to restore “dinosaur-era practices” given the mining industry had not relied on a time-based payroll system for more than two decades.
“They are asking us to get in the DeLorean and head back to 1988. Trying to find a solution to a problem that doesn’t exist.”
The Fair Work Act allows employers to exempt award-covered employees from the award if they earn above the high-income threshold of $148,700. However, the exemption is not automatic and requires employee agreement and guarantees of annual earnings.
AMMA is considering appealing the Fair Work ruling on grounds it fails to take into account the burden on business.
It is also lobbying with AiGroup to change the law so awards simply require “appropriate safeguards” for salaried employees rather than specific obligations.
AiGroup chief executive Innes Willox said the new award clauses were “highly prescriptive and will remove many of the benefits of annualised salary clauses for employers and employees”.
The new requirements would also “have a very wide impact”, he said, due to coverage of the clerks award which would apply to most industries.
‘Myth’ professionals underpaid
Annualised salaries have received fresh scrutiny since Masterchef George Calombaris’ restaurant empire underpaid workers $7.8 million primarily because it failed to ensure their salaries kept above the award.
Last month, defence manufacturer Thales backpaid engineers, earning an average salary of $120,000, as well as professionals, middle managers and administrative staff because it failed to check their salaries were above awards and enterprise agreements.
Super Retail Group also revealed this year that it had underpaid its managers by $32 million in overtime and meal allowances.
Professionals Australia chief executive Chris Walton said it was a “myth” that salaried professionals were unlikely to be underpaid.
“The hours are so extreme a professional can end up having an hourly rate lower than the minimum award rate,” he said.
“If many professionals and managers calculated their hourly rates they would be shocked to find they might be better stacking the shelves in the supermarket.”
He said his union, which includes engineers, scientists and pharmacists, was dealing with 20 cases of professional underpayments at any given time.
He claimed it was “very common” for engineers on $120,000 to work 60-hour weeks and so end up underpaid overtime and penalty rates.
“That may surprise many people but the reality is it appears all workers are being affected by this widespread epidemic of wage theft.”
A recent survey by the union of 1400 professionals found the average award-covered professional worked 45 hours a week and one out of two senior professionals worked 50 or more hours.
Senior engineers who had overtime or time in lieu built into their salary earned actual hourly rates of $70.64 an hour compared to $84.67 an hour for those compensated for additional hours.
About 28 per cent of junior salaried professionals were paid below the award on an hourly basis.
‘Exempt highly paid employees’
Workplace consultant and former Fair Work Commission senior deputy president, Peter Richards, argued those earning $150,000 or more did not need protection from wage theft.
“The higher you get up the remuneration ladder, the more you’re getting paid for scarce skills and your position in the market is very strong,” he said.
“You then have to ask why you have a regulatory system that is based on low-paid workers and collective organisations for people who have very strong independent positions in the market.”
He suggested good employers should be exempted from red tape when it came to highly paid employees.
“These are serious transaction costs,” he said. “One way forward might be to ‘license’ flexible arrangements for businesses with good compliance histories and sound remuneration practices so they have access to more open, flexible employment models. Hardly an efficient way forward but it might push the system in a productive direction.”
Deloitte partner and former Fair Work Ombudsman Natalie James said many businesses were “not doing their due diligence around extra hours”.
“The annualised salary issue is catching a lot of businesses out,” she said. There will be more of these – I have no doubt”.