Changes to the Fair Work Act, introduced yesterday on March 1, will affect how employers pay their employees annualised salaries.
Ben Thompson, a qualified solicitor and cofounder of Employment Hero, has called these changes “onerous and widespread.”
We previously spoke to Tracy Anguin about the changes in employee awards and legislation, which you can find here.
In July of last year, The Fair Work Commission made a decision that as of 1 March 2020, the obligations of how many employers pay their employees an annual salary are changing.
The decision inserts new rules about annual salaries in several awards, including:
- Banking, Finance and Insurance Award
- Broadcasting Award
- Legal Award
- Manufacturing Award
- Mining Award
- Pharmacy Award
- Rail Award
- Water Award and more.
Why is it changing?
According to Thompson, these changes are “part of The Fair Work Commission’s broader strategy to close loopholes and ensure Australian businesses are paying employees their full legal entitlements.”
Impact on employers
The changes to the terms of over 20 modern awards vary slightly between each award, but the overarching takeaway is that nearly one million Australian businesses will be affected.
According to Thompson, this means most business owners are at risk of serious consequences if they do not comply with the new obligations.
Failure to meet these obligations is equivalent to breaching a modern award, with penalties up to $63,000 per breach.
“If last year is anything to go by, these incoming changes are only going to make employment pay scandals more common in Australia,” said Thompson.
Thompson attributes the increase in pay scandals to the complexity in reporting annual salaries.
“Failure to follow procedure will result in company directors being held personally liable, with penalties including banning directors from sitting on boards, million-dollar fines and up to 10 years jail time,” said Thompson.
What are the new obligations for employers?
According to Thompson, there are four new obligations which include:
- Employers must ensure award-covered employees track and submit all hours worked each week either in writing or electronically;
- Employers must specify in writing an ‘outer-limit’ of ordinary and overtime hours an award-covered employee might be required to work – if the worker exceeds these hours, the employer must pay them an additional sum;
- At a minimum, once per annum or upon termination, employers must run a report comparing an employee’s salary to the employee’s full entitlements under the award for all the hours they have worked in the relevant period;
- Employers must immediately top-up an employee’s salary for any underpayments identified in comparison with their modern award entitlements.
Impact on employees
The changes impact businesses employing full-time workers covered by one or more of the 22 modern awards that have the annualised salary changes.
The annualised salary changes mean business owners have a legal obligation to change the way they pay their employees.
This includes recording hours diligently and upon termination, running annual reports to ensure any underpayments are identified in comparison with the employee’s modern award entitlements, while reconciling any shortfalls immediately.
“It’s important to note that many of these affected Modern Awards have broad coverage. For example, the Clerks – Private Sector Award 2010 covers “employees engaged wholly or principally in clerical work, including administrative duties of a clerical nature.” Almost every business will employ at least one person who is covered by this definition, therefore up to one million businesses could be affected,” said Thompson.
What can you do?
Thompson advises that business owners are compliant with the changes within the Fair Work Act and “act immediately or risk the serious consequences of negligence.”
“Running a business is becoming more and more complex, so employers must do everything they can to make it easier on themselves – and that starts with compliance,” he said.