Mount Martha Accountant | Tax Returns

Author Lisa Biggs 26 Feb 2020

Trying to pay people correctly and setting up complex payroll systems can be a tricky and confusing business. We have all seen in the media recently the government are cracking down on people that are in breach of the Modern Awards and Fairwork guidelines. In some cases it can mean huge fines and in extreme cases it can be jail time. In a lot of cases Employers believe that they are doing the right thing, but it pays to check and double check.

What are some things you can do to avoid this and make sure you are compliant? We have come up with some questions and instances that you could get caught out that we have seen from businesses and have tried to give some guidance on them.

 Here is a list of all Modern Awards in Australia But how do you know you have put my employee on the right Award?

• Fairwork have a website that can help you if you answer some questions about the employee, it can guide you to the correct award. Award Guide

How do you know which is the correct Level in the award?

• With regards to the which level for that employee each award has a section ‘Classification Definitions’ you need to go in there and try to match a level to the tasks and responsibilities your employee will be taking care of.

How do you know how much to pay at that level?

• Each Modern award has a section ‘Wages and Allowances’ which tells you the minimum annual and hourly rate. But Fairwork also produce a ‘Pay Guide’ document that is like your cheat sheet and tells you what the base hourly rates are each year and the rates for penalties etc.

Do you increase the base award rate for your award based employees in the first complete pay period for each new Financial year (July). (There are others that do it more often like SCHADS but you will need to check each award and they will tell you when they do it)

• Fair work increases the base hourly award rate every year. Each year you need to be working out what to increase your award hourly base rates too. This increase is also done to allowances as well. Also your employee might be on year 1. Remember when they get to 12 months service then you need to increase to Year 2.

Does your employee work more than 38 hours a week at your request? Or more than 76 hours a fortnight? Or more than 152 hours every 4 weeks? If so, you probably should be paying them overtime.

• You need to check the relevant awards for those employees to determine when overtime is triggered and at what rate you should be paying it.

Is an employee entitled to over-time if they choose to come into work early or stay late for personal reasons? Eg. Mary carpools with her husband and he drops her off 30 min before you require her to start. Is she entitled to over-time?

• Over-time is ‘approved’ overtime. You need to make sure that you clearly outline start and finish times with your employees. If they make a choice to come in early or stay late for personal reasons then there is no over-time payable. However you need to remember they are not required to work those extra periods they can just get a coffee or read the paper etc.

Does your employee work ‘after hours’ (eg after 6pm / 7pm / 8pm)?

• Exact time is depending on the award, but employees are entitled to afternoon allowances and night allowances. You need to be mindful if you are asking employees to stay late then they can be entitled to further penalties. Check the relevant awards / agreements to see when those penalties are triggered. Another question to keep in mind, are those penalties payable on top of over-time? Check, you could be over-paying employees?

Does your employee work weekends?

• Different awards have different penalties payable for different days of the week. They are not all the same. Review your relevant awards to ensure you are paying the correct loadings for your employees.

Does your employee work split shifts? They might be entitled to a special allowance for this.

 Certain awards have allowances for First Aid, Uniform and Laundry, Meal allowance

• I advise going through the awards covering your employees really thoroughly and checking the Allowances payable to make sure that they are not applicable to your employees.

 Leave

Do you pay out any unused Annual leave when an employee terminates?

• Every permanent employee is entitled to 4 weeks (prorata) of annual leave per year. If they have a balance on their final day, then it must be paid out on termination.

Do you pay 17.5% leave loading to your award-based employees?

• Award based employees are entitled to 17.5% leave loading or penalties on top of their Annual leave. Whichever one is greater. This is also payable on the final leave payment

Do you give your permanent employees 10 days (prorata) per year of personal leave?

Every permanent employee is entitled to 4 weeks (prorata) of annual leave per year. This is not paid out on termination.

Do you pay your casual employees who have been employed for more than 7 years Long service leave?

• Casual employees who have been employed for min 7 years (varies by state) are entitled to Long Service Leave.
• If they have resigned or been terminated during this period then it is not applicable.
• But if they have been your employee for 7 years then they are entitled to take Long Service Leave or be paid it out on termination.

Do you give your casual employee the same shifts every week?

• Casual employees are meant to be just that, casual.
• If you are giving them the same shifts week in week out then there is an argument that they are treated as a permanent employee and so should be accruing Personal leave and Annual leave. This is an area to be watchful of.

Do you need to give your employees pay slips?

•  Yes, it is a legal requirement every pay. There is also mandatory information that must be on a payslip so make sure you check to ensure you have all the required data you need on that document.
• They can be mailed or emailed.

These days as well as sending your employees their payslips you also need to send this data to the ATO every pay using a system called STP

 When is a person an employee or a contractor?

• This can be a tricky one. Employers think ahh it’s ok I can just get a contractor in and then I am only having them short term and they are not my employee. I don’t have to pay them super nor accrue leave. But if you are providing the tools and equipment for their work and directing them when to come in and when to leave, then person could be deemed an employee. Employers could be liable for leave entitlements and super payments on top of the money they are already paying that person. Keep in mind that you also have to make sure you are covered for workcover for this person. If you think you might be in this situation I would say it would pay to look into further.

 Do you need to keep detailed records?

• Yes for time sheet based employees, it is important to keep records of employees time sheets and start and finish times and employees should be signing off those time sheets as well as managers. You don’t need to keep time sheets for Salaried employees (same pay and hours every week).

Do you need to keep detail records of Time in Lieu?

• Yes, you need to record the days TIL accrued and the days that it is taken. Otherwise if you find yourself having to pay it out you could be paying it at double time rather than the time and a half that would have been paid had you kept records. We recommend using a spreadsheet.

If you need more information or would like help setting this stuff up please get in contact with our payroll specialists here