Over the past few years, we have seen many changes to the terms of employment that aren’t limited to wage rates. Even national and multi-national organisations have made payroll errors and applied incorrect award interpretations, leading to multi-million-dollar underpayment claims.

When it comes to compliance, businesses often don’t know where to start. Get on track by reading our fundamental five tips for effective workplace relations and HR management.

#1: Get award coverage and classification right

Modern awards are industry or occupation based and apply to employers and employees performing the work covered by the award.

The awards contain a suite of minimum entitlements and conditions that an employer must comply with. Given there are more than 120 awards, the first step when employing an employee or reviewing their engagement is to understand which award applies.

It is not unusual for a workforce to be covered by different awards depending on the work performed, meaning many companies need to navigate more than one award.

This can present unique challenges.

Each award has a coverage clause which sets out who is covered by it. This is the starting point to understand whether it is the correct award for your business and/or employees.

Each award will contain classifications that dictate the minimum rates of pay an employee must receive. Each classification is subject to criteria outlining the skills, knowledge, training, supervision and other factors needed to work at that level.

Throughout their employment, a worker may perform different duties, gain new qualifications or be promoted. This may force the role to be reclassified, leading to a higher minimum rate of pay.

The Victorian Chamber recommends businesses regularly review position descriptions and conduct audits so they can be confident workers are correctly classified.

#2: Know the award or enterprise agreement terms and conditions

Once a relevant award(s) is identified, businesses need to take the time to understand it.

Awards can also be confusing. They are hard to navigate and can often be interpreted in different ways. Companies often get caught out because they have applied the incorrect provisions or simply haven’t checked.

While the Fair Work Commission can deal with disputes about award interpretation, it’s best to take time to understand the award and get it right in the first place.

The Victorian Chamber works with businesses of all sizes. Issues regularly include:

• ‘Span’ of hours – Each award will have a set span of ‘ordinary’ hours an employee may work. There may be some room, by agreement, to move that slightly, but generally if an employee works outside the span of hours they are going to be entitled to overtime
• Part-time ‘regular pattern’ of work – Many part-time employees will work to a set pattern of ordinary hours or roster period. If a business wants to change that arrangement, it needs to follow a process that includes informing the employee about the change and allowing them to respond to the proposal. Before the business can make a change, it must consider the feedback provided and check the applicable award for any additional consultation rules or requirements
• Understanding all monetary allowances – Most businesses know the common allowances like a first aid or meal allowance, but there are some obscure award-specific ones including: a vaccination allowance, adverse working conditions allowance, laser safety allowance and an underground allowance. There are also allowances that many businesses forget, such as the special clothing allowance in the General Retail Award that includes providing and laundering uniform.
• Underpayments – This isn’t a new issue and is a byproduct of the complex system. The Fair Work Ombudsman and Wage Inspectorate are bringing these issues to light and punishing those who willfully withhold payments. However, many businesses are inadvertently underpaying their workers.

Common issues leading to underpayment include:

• Failing to pay penalty rates when workers have not had the required rest period between shifts
• Failing to pay overtime to part-time and salaried staff
• Failing to pay allowances
• Incorrectly accruing annual leave entitlements.

Payroll errors add up, so the quicker they are identified the easier it is to manage.

While awards and agreements are usually long documents, don’t take any short cuts. Having easy access to the document can help you refer to it regularly.

If you haven’t read the award or agreement recently, do it and keep up to date with changes.

The Victorian Chamber’s Award Subscription service helps our members stay up to date with changes and current wages rates. If you are not subscribed, access the member portal or call the Workplace Relations Advice Line.

#3: Set and review pay rates, including annual salaries

Where annual salaries are paid to award-covered employees, there can be a risk of underpayment.

If an employee is receiving an annualised salary under an award or an annual salary subject to a contract, they must receive at least the equivalent under the applicable award. Businesses must regularly audit salary payments, paying close attention to those problem areas.

To audit a salary, a business needs to have accurate records (see #5 below). It also needs to know the ins and outs of the award. Work and rest hours should be collected in a spreadsheet with formulas applied to ensure appropriate rates of pay capture all base rates, overtime, penalties and allowances.

If the calculation reveals the rate actually paid is the same or less, take time to assess and understand the problem areas. Immediate action must be taken to compensate any underpayment and ensure future compliance.

#4: Provide the required breaks and understand the consequences of failing to do so

Failing to provide a sufficient break, including a break between shifts, can result in subsequent underpayment as employees will often be entitled to overtime. Businesses can get in trouble when rostering staff to work consecutive shifts or failing to account for overtime worked.

If an employee doesn’t receive the break they are entitled to, it can mean all work subsequently performed attracts a penalty rate (often equivalent to overtime) until and unless they get the break or rest period required. Sometimes one hour of overtime at the end of a shift can mean an employee isn’t getting the necessary rest period.

If employees are working overtime, carefully think about the process in place to monitor this. Can employees perform overtime without getting any prior approval? If so, what process or triggers need to be in place to ensure rest period requirements are satisfied?

Given breaks and rest periods are so important, and being mindful of the recordkeeping requirements, maintaining accurate shift and break records is a must.

#5: Keep records

Businesses must retain employee records for a minimum of seven years (and even longer for records associated with long service leave). These can be called upon by the Fair Work Ombudsman so it’s vital they are easily available and accurate.

The records need to contain basic information such as name, nature of employment, start date, rate of pay including gross and net amounts paid, deductions and any amounts paid in respect of bonuses, loadings and penalty rates. Businesses also need to keep an accurate record of the overtime hours worked.

Take time now to review your records. If you were to receive a claim from an employee arguing they had been underpaid, would you be able to provide accurate records? If you are not sure, get in touch to get it right and avoid being on the back foot.

If you are confident you have the right information, test it. Run a sample audit to check the records and confirm the correct rates were paid and met the award minimums.

HR Comply

The Victorian Chamber recently launched HR Comply, an all-in-one HR review, documentation and support package. Read more about it here.

If you are a Victorian Chamber Complete Member, make the most of your membership by checking you have signed up to the Modern Award Subscription Service. You will get updates on key award changes to help you stay ahead of the game.

The Workplace Relations Advisors and Consultants are also available and on hand to answer any question you may have. Members can call on (03) 8662 5222.

If you are looking to upskill your staff and strengthen your internal workplace relations capabilities, visit the Victorian Chamber’s training directory. A variety of short courses are available, including our popular course Employment Law, a practical perspective.