1 August, 2019
In the wake of George Calombaris admitting to underpaying staff (to the tune of almost AUD 8 million) it might be time to ask some important questions:
- Do you know which modern awards apply to each of your employees?
- Do you know which classifications your award covered employees fall under?
- Are you complying with all of your award obligations?
One of the biggest challenges for employers who employ individuals in Australia is navigating the complex and confusing modern award landscape. Award analysis and ensuring compliance with awards can be difficult and time-consuming for employers.
In addition, there are serious consequences for failing to comply with award obligations.
The basics
Modern awards are legal documents which set minimum pay rates and terms of employment. Awards apply to employers and employees depending on the relevant industry and the type of job worked by the employee.
Awards are made by the Fair Work Commission (FWC) and have legal effect under the Fair Work Act 2009 (Cth).
Awards deal with various important terms of employment including:
- minimum rates of pay;
- annual leave (and other types of leave);
- hours of work;
- penalty rates;
- overtime arrangements; and
- allowances.
There are currently 122 different modern awards in force. Awards can cover employees in a business of any size. They can also cover management roles. An employee's salary and job title has very little to do with award coverage.
Whether an employee is award-covered and the level of the employee's minimum entitlements under a relevant award may depend on the employee's specific duties and responsibilities, their qualifications and experience, their level of training and the industry in which they work. This means that it is common for employees within the same business to be covered by different awards. It also means that employees covered by the same award may have very different entitlements under that award.
Just to add to the fun, the terms of modern awards frequently change This means that it is essential that employers regularly review whether they are complying with their award obligations.
Consequences of failing to comply with award obligations
It is a common misconception that if an employer pays an employee above award rates the award doesn't apply. Another common misconception is that if an employer pays above award rates those rates "offset" other award entitlements. Unfortunately, it is not as simple as that.
If an employer does not specifically call out in the employment contract which modern award applies to the employee and which specific entitlements under that award the employer's "over award" payments are intended to satisfy – the arrangement probably won't work. That means an employer must conduct an award analysis.
And remember – even a comprehensive set off clause that does work will not satisfy non-financial entitlements or obligations under a modern award (for example consultation obligations). These must still be complied with.
Failing to comply with award obligations can result in serious consequences for employers, including:
- claims by employees for back-pay;
- prosecution by the Fair Work Ombudsman (FWO) which, in the case of a serious contravention by a company, could result in fines of up to AUD 630,000 per breach; and
- "on the spot" fines by the FWO.
An individual manager can also be held personally liable as an accessory to a contravention if they had knowledge about, or was knowingly involved in, the failure to comply with award obligations. The FWO has recently prosecuted and fined directors, human resources professionals and (external) accountants.
How we can help
Almost all businesses in Australia will employ at least some award-covered employees.
Do you employ a receptionist? A data entry clerk? An administration assistant? If so, that person is likely to be covered by the Clerks – Private Sector Award 2010. Are you an IT business? Then your employees may be covered under the Professional Employees Award 2010. The list goes on!
It is vital that employers undertake an award analysis to understand which employees are award-covered so that their entitlements can be understood and complied with.
We can provide a comprehensive review of your workforce to ensure that you are not at risk.
All we need to get started are the relevant employment contracts, position descriptions and a brief discussion with you about your workforce.
Please don't hesitate to get in touch with us to get this process started.
For further information, please contact:
Sean Selleck, Partner, Baker & McKenzie
sean.selleck@bakermckenzie.com
