With regulators cracking down on non-compliance with wages, tax and reporting laws, employers are being urged not to fall for some of the most commonly broken rules around payroll.
The Fair Work Ombudsman this week revealed it collected more than $40 million in back payments last financial year, for thousands of Aussie workers who had not been paid legal or award rates and entitlements by their employers.
Meanwhile, the ATO is continuing its program of business visits around the country, in part because of employers paying wages in cash.
“Employee-related federal and state-based legislation, as well as employee awards, change regularly. Therefore, companies need to be aware of their legal obligations to enable them to protect both their organisation and their employees,” explained Tracy Angwin, CEO of the Australian Payroll Association (APA).
“Many employers get caught in the trap of doing what has always been done in the past, without tracking legislative changes that could impact their employees and their organisation, and implementing those changes.”
According to Ms Angwin, there are seven rules in particular that employers all too commonly break, setting themselves up for potential strife. These are:
- Payment for out-of-hours work: Work-related meetings and training are still deemed work time, even if they occur out of hours. As such, employees are entitled to be paid for this time. Time in lieu can be given, provided this is specified by the relevant employment agreement or award. The APA warned that from March 2020, 22 awards will have clauses inserted to require employers track these hours for salaried employees, to ensure that employees are not earning below the minimum wage on a pro-rata basis.
- Pay during resignation notice period: Employers are required to pay an employee who resigns for the full notice period, even if the employer insists they not actually serve out the period. On the flip side though, if it is the employee who does not work out the full notice period, then employers need only pay them for the time actually worked. “Under many awards, an employer may be able to deduct up to one week’s wages from an employee’s final pay if they refuse to work their full notice period. Under these awards, the one week cannot be deducted from leave entitlements,” the APA noted.
- Trainee pay rates for trainees and apprentices: Apprentice or trainee rates can only be paid where a registered training contract is in place and submitted to the relevant authorities. An example of the ramifications of this occurred in February last year, when a plumbing company was slapped with a six-figure penalty for not having a registered apprenticeship agreement in place (among other breaches of workplace rules).
- Limiting compassionate leave: “According to the Fair Work Ombudsman, compassionate leave can be taken when an employee’s immediate family member or household member dies, or suffers from a life-threatening injury or illness,” the APA said. “An employee can take two days off on each occasion this occurs — it is not limited to two days every calendar year.”
- Contractor payments versus employees: This is a tricky one for many employers. But as the association warns, tax, insurance and leave obligations for contracts are required in some instances to be the same as for employees. “When an individual contracts to an organisation under an Australian Business Number (ABN), they cannot be automatically classified as an independent contractor. If the contractor provides labour in the same way as an employee, employers still have to meet minimum pay requirements for these workers, and might need to include their payments in their payroll tax and PAYG obligations. The contractor might also be entitled to superannuation, annual leave and sick leave benefits.”
- Unpaid internships/work trials: Unpaid internships and work trials that run for a lengthy period of time are not allowed if the worker does what is deemed to be “productive work”. Their duration is limited to the time required to demonstrate the skills required for the job, according to the APA, which can vary from an hour to a full shift, depending on the nature of the work being carried out. Unpaid work placements or internships, meanwhile, are only lawful when conducted as part of approved job training, vocational placement of work experience. Otherwise, they must be paid the minimum wage, and are “usually classified as a casual with a casual loading”.
- Leave balances on payslips: This is more of a good-to-know than a legal requirement: leave balances are not legally required to be outlined on payslips. However, if an employee requests this information, it must be provided to them.
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.