The Fair Work Commission’s new annualised salary provisions — which will come into effect on 1 March — will require employers under 22 modern awards to be much more stringent about overtime and record-keeping measures.
Aimed to reduce wage theft and non-compliance with awards, the following three practices will become legally enforceable for employers:
- Employers will need to notify employees in writing of their annualised salary and their maximum ordinary working hours outside of the 38-hour week.
- If an employer finds that their employee received less pay on their annualised wage agreement than if they were paid under the award, they need to pay the employee the difference. Any shortfalls must be paid to them within 14 days.
- Employers will need to keep records of the start, finish and break times of their employees.
But, Tracy Angwin, CEO of the Australian Payroll Association, has questioned whether the FWC is taking the right approach.
Ms Angwin explained that the upcoming modern award changes will hurt the culture in a lot of businesses already doing the right thing in terms of flexibility of working hours among their employees.
“Up until now, employers have been able to rely on a system of trust with their employees.
“The new annualised salary clauses in some modern awards, which will require more stringent record-keeping and overtime control measures, such as recording the start, finish and break times of employees, will completely change that. In fact, it could erode the trust between employers and their staff.”
Ms Angwin cautioned that while payroll is one of the most complex and legislated areas of a business, legislators are increasingly creating laws without properly thinking about how employers are going to implement them.
“The 1 March changes — and their propensity to create a ‘clock-watching’ mentality among staff — are another example of this. Clearly, a common-sense approach is needed here to ensure that the intent of the legislation is in fact going to benefit each workplace environment on a practical level.”
Why are the changes happening?
Over the last few months, we have seen a string of businesses called out for doing the wrong thing.
George Calombaris, of MasterChef fame; Heston Blumenthal; Subway; and supermarket giant Woolworths are just a few big names which have been associated with significant and systemic underpayment of staff.
Just last week, Australian conglomerate Wesfarmers confessed yet again to underpaying staff, this time at its general merchandise chain Target, to the tune of $9 million, adding to the $15 million it confessed to earlier at its industrial safety business.
A few days earlier, a Sydney-based business was penalised $41,580 for deliberately underpaying two disability support workers $84,450.
In a recent article published on My Business, Nicola Martin and Kate Staude, from McCabe Curwood’s Employment Group, explained that underpayment often derives from the challenges employers face with navigating, interpreting and implementing the correct classifications for their employees.
“Complexity of the award system is a significant contributor to the underpayments issue. Unfortunately, small errors over a long period can expose employers to the risk of substantial financial penalties.”
Discussing the impending changes, Ms Martin and Ms Staude said that the new clauses could be “hugely onerous on businesses and will no doubt cause employers real challenges”.
“This not just being from the perspective of compliance, but also the risk of a cultural shift (and likely not a good one),” they cautioned.