Avoiding an underpayment scandal
Understanding how and why underpayment occurs is integral to ensuring you are paying staff the correct wages.
There has been a seemingly endless series of underpayment scandals that have rocked the Australian industrial relations landscape. While larger organisations have primarily been in the firing line, small-to-medium-sized businesses are not immune from attracting the attention of the Fair Work Ombudsman.
Finding the right award is critical
In many instances of underpayment, the cause is linked to a lack of knowledge about modern award terms. It is vital before hiring staff for employers to ask the questions; will my future employees be covered by a modern award? If so, which award applies to their employment?
For physiotherapy businesses, a majority of employees will be covered by the Health Professionals and Support Services Award 2010. This award sets out the minimum terms and conditions of employment for all applicable staff and must be followed to ensure legal compliance. If assistance is required with award classification, please contact the APA HR service.
Once an employer has the relevant award identified, the following questions need to be answered:
- on what basis was the employee hired (ie, full-time, part-time or casual)?
- what are their expected hours in a pay cycle?
- what are the penalties and loadings that may apply to the employee?
- what are the entitlements that may apply to the employee?
Where to next?
Once the appropriate award has been selected, it falls on the employer to identify an employee’s award classification level. A number of different factors will come into play when determining an employee’s classification level including, but not limited to:
- the duties and responsibilities of the employee’s position, as per their job description
- the employee’s level of experience
- the employee’s level of seniority
- any relevant qualifications the employee may hold.
An employer must advise an employee in writing of their award classification level upon commencement of work. Any changes made to the employee’s classification thereafter must be communicated in writing as they occur.
Defining the employee’s award classification level will help to understand the relevant minimum rates of pay, as well as how and when penalty rates may apply, such as overtime, weekend and shift penalties.
Can you pay above the award to offset your need to pay penalties, loadings and allowances?
An employer can offer an employee a wage or salary that is in excess of the award minimum rate. This wage or salary can be designed such that it includes compensation for award entitlements such as:
- overtime penalties
- weekend and public holiday penalties
- annual leave loading
- shift loading
- vehicle/travel allowances
- clothing and laundry allowances.
An above-award wage or salary needs to take into consideration the employee’s working patterns and be set at a rate that takes these penalties into account. Furthermore, any allowances that may apply to the employee should be taken into consideration when calculating remuneration.
In addition to actively ensuring an employee’s above-award remuneration leaves them better off overall, employers should take steps to convey to the employee the intention of their above-award wage or salary and have a contractual clause addressing these entitlements in the payment agreement.
In doing so, the employer can explicitly show that the compensation an employee is receiving is in excess of their entitlements under the award and offsets any requirement to provide additional remuneration.
When paying an above-award wage or salary, employers should be cautious and put steps in place to constantly ensure they are adequately compensating their employees for the work they perform.
Many underpayment scandals relate to annualised salaries failing to adequately satisfy award entitlements which should have applied, so it is vitally important to constantly review annualised salaries to ensure the employee is better off overall.
To further assist members in determining whether they are paying their staff correctly, the APA HR in Practice service has developed an underpayment resource, which is available online at australian.physio.
>> The HR in Practice workplace relations advisory service is operated by Wentworth Advantage for APA Business Group members. If you have any questions about this article, or if you require assistance with award classification, contact the HR in Practice service on firstname.lastname@example.org. For more information on the benefits of joining the APA Business Group, email email@example.com or call 1300 306 622.
Disclaimer: Please note that the information contained in this article does not apply to unincorporated businesses operating in Western Australia. If this is the case for your business, contact the HR in Practice service for advice on ensuring compliance with applicable employment legislation.
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