As an employer, how do you know if you are correctly managing multiple awards? 


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As an employer, how do you know if you are correctly managing multiple awards? 

  • Do you need to manage multiple awards for employee pay and entitlements in your workplace?
  • Have you noticed the increased instances of where employers are underpaying employees?
  • Are you confused and not sure if you are paying your employees correctly?

You’re not alone!

It seems that we are getting more and more enquiries from businesses who are finding it more and more difficult to manage the multiple awards and are concerned that they may not be getting it right, and frankly, there are good reasons for those concerns!

Widespread media reports on the outcome of cases such as the 7-Eleven underpayments have created an awareness of these workplace compliance issues, but it seems to us that it is now dawning on businesses that they, too, could be in the same position.  Not necessarily because of deliberate underpayment or false records, but through the devilish detail of compliance.

And we’re not talking small change here – in 2018 casual workers with Energy Australia shared in $5 million backpay, while in 2016 Chemist Warehouse was forced to pack-pay $3.5 million to workers.  Research by Tsheets by Quickbooks[1]  reveals that Fair Work violations are costing Australian employers a staggering average of $27 million per annum in back pay.

So what makes life so difficult that compliance becomes an issue?

There have been a number of changes in our business structures and we think these have contributed to these difficulties.

Firstly, employment in business today is much more complex than a couple of decades ago.  Changes to Fair Work legislation over the past few years has simplified employment conditions in many areas, but at the same time, we are still dealing with over 120 Modern Awards and legislation that has more than 850 sections and amendments.

Businesses are complex in their structures – you might be running a business with a number of different roles or functions, which means that your employees might not all come under the same Modern Award.  So you will need to work out which Awards specifically apply to which employees and roles.

Complex wage awards can also make it difficult for employers to ensure they are paying workers correctly.  Even the Fair Work Ombudsman, Sandra Parker, admits the awards are a challenge for business to understand.  “There is no question that managing multiple awards can be  complicated ….. there is no question that small businesses struggle with ensuring that their workers are being paid correctly. ” 2

Secondly, staff has changed their roles and there is a widespread acceptance of flexibility in the workplace through full-time or part-time or casual working arrangements.  There has been more focus on the entitlements for casual employees – you now have short term casual employees and long term casual employees, with different entitlements.  Combined with increased working hours extending over weekends and public holidays, this has made the calculation of employee pay and entitlements more complex than it has ever been in the past.

Take annual leave, for example – some of the Modern Awards we have recently reviewed specify that annual leave is based on standard rates.  That sounds simple enough, but in fact, there is often no definition of “standard rates,” and it is interpreted to mean what the employee generally earns.  If that employee works a mix of shifts and overtime, this can certainly move the standard hours away from the “normal” 9 to 5, Monday to Friday rates that would previously have influenced leave calculations.  Allowances are another key feature of awards that need to be properly understood and applied – often these are linked to positions or shifts and can vary depending on things like the number of consecutive shifts.  This can make it very difficult for payroll software to apply the correct rates and allowances automatically and may require manual checking of transactions – that in itself has a risk of human error, so it’s not always an optimal solution either.

Another influence is whistleblowing – there has been a shift in employee culture, from turning a blind eye to underpayment of employees and the like, to major increases in the number of complaints made by employees to the Fair Work Ombudsman.  Fair Work even has an online Anonymous Report tool to assist the lodgement of complaints, and at February 2018 the regulator had received more than 20,000 tip-offs.

Although the company has an obligation to pay its employees, the corporate veil between the company and its directors and managers is being torn apart.  If the above is not enough of a warning, consider the implications of underpayment of staff for business owners.  It has been pretty well understood that the Fair Work Act provides for fines to be made personally against company directors and managers where they have been involved in the corporate employer’s underpayment or sham contracting activity.  In fact, under Section 550 of the Fair Work Act, prosecution can include any person in the organisation or third party believed to be involved in the contravention – this can be the company’s director, HR manager, accountant or a supplier!  Recent court decisions 3 confirm that accessories to these underpayments can also be liable to compensate the claimants – so it’s no longer just about fines and penalties but also some serious financial liability.

Clearly, personal liability of directors and officers is increasingly the objective of the Fair Work Ombudsman.  The FWO’s 2017-2018 annual report indicates that the FWO has continued to pursue its objective of targeting individuals involved in underpayment claims.

Let’s not forget the Australian Taxation Office and Revenue NSW, who may also come after both the company and its directors for unpaid taxes.  Combined with the personal liability for underpaying employees, the risk and responsibilities of running a business are continuing to climb.

The federal government has also given “in principle” support for 22 recommendations made by the Migrant Workers’ Taskforce report, which could introduce jail time for employers flouting workplace laws.

Awareness of the issues of workplace compliance is crucial:

because it also means that you can’t hide behind the cover of “didn’t know I was doing wrong” – the publicity alone ensures that there is now a reasonable expectation that all employers need to ensure they are fully complying with the law.  Now is the time to assess your business (or that of your clients) and ask:

  • Is the business in a high-risk area – e.g. does it have numerous employees at different levels of employment?
  • Do I really understand the multiple award(s) that apply to those employees?
  • Have I applied the award correctly and am I paying my employees correctly in all instances?
  • If there is something wrong, what might be the implications?

dVT Group are already assisting a number of clients with review of their payroll transactions over the past few years.  Together with employment law specialists, we are assisting with interpretation of awards and how they apply to businesses, recalculating pays, and highlighting variances.

Should you, or one of your clients, need help with managing workplace compliance, contact Suelen McCallum or Riad Tayeh on 02 9633 3333, email mail@dvtgroup.com.au or complete our online contact form to find out more about how we can help.

 

[1] https://www.tsheets.com.au/penalty-cuts/ [21 May 2019]

[2] FWO Sandra Parker, reported in Sydney Morning Herald [16 November 2018]

[3] Fair Work Ombudsman v Priority Matters Pty Ltd & Anor (No 4) [2019] FCCA 56