One of the most common errors we’ve identified that leads to underpayments are businesses incorrectly classifying employees, whether that be choosing the wrong award, or employee classification within it. Ensuring that your employees are being paid under the correct award is the first step to being payroll compliant. Failing to be compliant at these first steps means all other payroll compliance measures in place within your business will be redundant.
There are over 120 Modern awards covering various types of industries and occupations, some of the most widely used being:
- General Retail Industry Award 2020
- Fast Food Award 2010
- Aged Care Award 2010
- Manufacturing and Associated Industries and Occupations Award 2020
- Clerks – Private Sector Award 2020
If you are interested in downloading a free wage schedule for any of these awards, and plenty of others, click here.
The issue with ‘award free’ employees
With 122 different awards, employees from all different industries are covered, meaning that in the vast majority of cases an employee isn’t actually ‘award free’. Throughout our interactions with all types of businesses, we regularly see business owners incorrectly classifying their employees as ‘award free’ under the impression a simple salary will cover all their entitlements they’re entitled to under the award or even that no award will be applicable. This can obviously lead to underpayments, as well as further penalties for the business.
Which award should you use?
With so many awards, many businesses struggle to pick which one they should be using. Within each award (provided by the Fair Work Commission here) generally Clause 4, titled Coverage, identifies which employees are covered by the award, and those who aren’t. It is important to review this section carefully as it is key in identifying which award covers your employees. Small distinctions can be key, especially when differentiating between two awards with similar coverage or different classifications in the same award. Given there are 122 Modern Awards, there will be awards that are similar to others, making it more difficult for employers to correctly classify their employees’ award coverage. Once again, it is important for the employer to review the award documents carefully before coming to a decision. If you are unsure about the process and would like assistance, get in contact with ER Strategies here to discuss our WorkShield service packages.
What if you use the wrong award?
Using the wrong award can often lead to underpayments, whether that be from differences in the base rates, or other entitlements such as penalty rates for nights and weekends. When found by the FWO, businesses will be made to pay back the underpayments and possibly face fines, which can differ in severity depending on the circumstances. If an employer purposely uses the wrong award they can be heavily fined for misrepresenting employees’ workplace rights. These penalties are much more severe and can be up to $126,000 for individuals or $630,000 for corporations, per contravention.
If you are struggling to identify the correct award, get in contact with ER Strategies here to see how we can help you under our WorkShield service packages. Or just take a look at our Expert Guide on Payroll Compliance, where we cover just about everything you need to know.