Are you paying your employees a salary? Are they subject to a modern award? It may be time to complete your annual reconciliation or you run the risk of being in breach of the Fair Work Act (which can be costly not only to your business but to you personally!)The 1st of March 2021 is fast approaching, and it brings around the 12-month anniversary of the introduction by the Fair Work Commission (FWC) of the annualised wage provisions changes. By now the mechanism to be compliant with the changes should be implemented and be actively adhered to, reducing the risk to your business.
Check out our earlier article where we run through in detail the changes and how these directly impact you.
In short, if your employees are subject to the below awards and contracted on an annual salary you are required by law to conduct a full review every 12 months after the arrangement starts, when the arrangement ends or when the employment ends.
The following awards are where employers can pay an annual salary without the employee’s agreement.
- Banking, Finance and Insurance Award 2010
- Clerks – Private Sector Award 2010
- Contract Call Centres Award 2010
- Hydrocarbons Industry (Upstream) Award 2010
- Legal Services Award 2010
- Mining Industry Award 2010
- Oil Refining and Manufacturing Award 2010 (clerical employees only)
- Salt Industry Award 2010
- Telecommunications Services Award 2010
- Water Industry Award 2010
- Wool Storage, Sampling and Testing Award 2010
The following awards will require the employee to agree for the employer to pay an annual salary.
- Broadcasting and Recorded Entertainment Award 2010
- Local Government Industry Award 2010
- Manufacturing and Associated Industries and Occupations Award 2010
- Oil Refining and Manufacturing Award 2010 (non-clerical employees)
- Pharmacy Industry Award 2010
- Rail Industry Award 2010
- Horticulture Award
- Pastoral Award 2010
What records should I be keeping with the changes and the reconciliation?
You need to record the annual wage arrangement in writing and give your employees a copy. This 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.
The employer must also record the employee’s:
- starting and finishing times.
- unpaid breaks taken.
You must acknowledge the record of hours they have worked is correct by signing in writing or electronically at the end of every pay period or roster cycle. This record is to assist in the annual reconciliations.
How do I conduct my reconciliation?
Effectively, the overall outcome you are looking for is to ensure that the employee is better off overall on their existing salary as opposed to being subject to their award entitlements which includes the hourly rate, over-time, penalties, and allowances. If an employee's annual wage is less than the award payments that they would have received, you must pay them the difference within 14 days keeping in mind superannuation payments on the shortfall *OTE.
What are the implications for me and my business if I do not get this right?
As these changes in legislation are implemented partnered with the introduction of technology like STP (Single Touch Payroll – now mandatory) the more data these governing bodies have access to. This increases your risk of being ‘caught’ if you are not following the above advice resulting in wage thief. The consequences you may face are serious and include the following.
- If records are not maintained of affected employees’ hours this could lead to fines up to $13,320 per contravention for an individual and $66,600 per contravention for companies.
- Claims by employees for underpayments interest could be applied to short-fall.
- FWC if considered a serious contraventions penalty up to $133,200 per contravention for an individual and $666,000 per contravention for companies.
- Your business brand and reputation are damaged.
Here to help
If you are affected by these changes & are feeling overwhelmed & don’t know where to start, please do not hesitate to reach out to us here at Trekk Advisory. We can provide you tailored advice to ensure you are compliant with the changes & suggest ways to ensure your resources aren’t too heavily impacted moving forward.
- Fair Work Ombudsman (Welcome to the Fair Work Ombudsman website)
HR Audit & Workplace Compliance Risk Checklist
Are you compliant when it comes to all things HR? Let our checklist guide you through the most important functions.