Understanding your Fair Work obligations

If you were looking for a sign to revisit your compliance with Fair Work, this is it.

Ensuring legal compliance with Fair Work Australia legislation can often be a complex, lengthy and frustrating process for business owners to navigate, yet it is one that should not be neglected. Before the dust has settled on the highly publicized payment bungle made by MasterChef judge George Calombaris, fellow celebrity chef Adriano Zumbo has become the latest cautionary tale to show that getting it wrong – even by mistake – can have devastating repercussions.

A business found non-compliant with Fair Work will not only be required to immediately repay any back-payments owed, the company and the individual responsible can also be charged with hefty penalties for each contravention of Fair Work – which in the case of Calombaris cost $2.6m.

With Fair Work announcing they are beginning a crackdown by randomly auditing over 1600 businesses, there has never been a better time to make sure your ducks are in a row when it comes to correct employee management and record keeping. To make it easier for you, we’ve put together a checklist of the most crucial basics of meeting Fair Work requirements. We should say: if you’re in doubt a quick call to your lawyer or Fair Work will help you make extra sure you’re doing the right thing – but the below should be more than enough to get you started.

First: Revise your Awards.

Awards are the legal documents that outline the minimum rate of pay and conditions of employment for workers. There are 122 awards that cover most people who work in Australia, so it is worth investing the time to make sure that the award selected for your employees is the correct one. Within Deputy, you can access resources such as our Awards Library and our Award Interpretation system to make this process a little easier, or you can search the FWC database for a comprehensive listing of all awards.

It is one of the most rife complaints dealt with by Fair Work, and from small businesses to large franchises – nobody is exempt from their award obligations. A recent audit of a popular pizza chain by Fair Work found 24 of the 26 franchisees to be non-compliant with minimum wage requirements, owing their employees a total of $12 086. Not only did they need to make these back payments immediately, but were charged with an additional $6 300 in fines as well as facing litigation due to the severity of their underpayments.

The three key takeaways to keep in mind when assessing your awards are:

1 – The Awards Change: The minimum wage within awards is reviewed annually, and it is the employer and the employees’ responsibility to be aware of any 1 July increases and to ensure that they are being paid the minimum wage under their modern award.

2 – Award Exemptions: It is possible that some employees may not be covered by modern awards, but it is crucial to know if and when this applies. Managers, for example, may not be covered by the modern award even if one applies to the industry in which they work. Employees covered by an Enterprise Bargaining Agreement (EBA) are also exempt from modern awards – however as the name suggests this is not an agreement that can be arbitrarily decided by a single employer: it is a legal agreement that must be mapped out between the business owners, unions and Fair Work to ensure that the employee is not at any disadvantage.

3 – Multiple Levels and Awards: It is often the case that within the same industry, not only can multiple awards apply but also multiple levels within each award. The different levels within awards are determined by factors such as the employees’ age, experience, qualifications and the type of work that is required in the role. Each level typically means different pay rates, minimum leave requirements, etc.

Second: Set The Record Straight: Time sheets, Wage Records, Pay slips and other Employee Records

The benefits of accurate record keeping are plentiful: in addition to providing crucial insights that can help run your business better over time (i.e. identifying skill shortages, planning for tax payments and making it easier to get a loan or sell a business), employers are also legally obliged to keep clear, easily accessible and accurate records of their employees for 7 years.

All employers should familiarize themselves with the complete list of employee details that must be kept on record here, but it is worth highlighting the two areas of record keeping in which Fair Work comes down particularly hard:

1 – Timesheets: It is crucial that employers have accurate records of the hours of work completed by all of their employees. For casual or irregular part-time employees, this means timed and dated accounts of work completed, while for any other type of employee, any details of overtime work must be specified in records, as well as any written agreements between the employer and employee if there has been an averaging of hours.

2 – Wages Paid: Employers must keep records of the payments they have made to employees, including the rate of pay, the gross and net amounts paid with any deductions, any bonus payments, loading or penalty adjustments, and any monetary allowance given. To the employees, it must be shown that regular pay slips have been provided within one working day of each payday, containing all of the details mentioned above, as well as a lengthy list of other general details.

If you haven’t already switched to digital time sheets, we can give you plenty of reasons why should, not least of which being that all of your employees’ hours will be automatically recorded and stored for you, effortlessly guaranteeing compliance. You should also consider a solution that integrates your timesheets with your payroll. That way your payroll is always reconciled with the hours worked by employees, and saving hours in payroll processing time each week.

Third: Breaks, Penalty Rates and Creating Fair Schedules

Just as the minimum rate of pay varies within the modern awards, so too do the rules around break periods, minimum and maximum hours, overtime, penalty rates and allowances that need to be considered for each individual employee. In addition to the award specifications, other factors such as visa restrictions, age and ability, and various bargaining agreements may impact your employees’ available hours and rate of pay.

There are a lot of myths that have become widely accepted surrounding penalty rates and allowances that FWC are working hard to dispel – particularly those around the entitlements of junior workers. Fair Work is currently closing in on businesses that try to adopt practices that avoid paying overtime and penalty rates, such as offering a flat hourly rate of pay or ‘cash-back’ schemes.

Employee Entitlements

Interpreting and accounting for the multiple employee entitlements that must be included when creating a roster is an intricate operation for even the most organized employer, and it is not surprising that unpaid entitlements are one of the most commonly flagged issues with Fair Work.  

Fortunately, there are tools available that can greatly reduce the risk of breaching compliance with regards to employee entitlements. When you use Deputy’s Award Interpretation system, once you nominate which employees’ award applies to your business the Deputy app automatically adjusts to include any entitlements that need to apply to your employees while also providing a real time costing of what the weeks wages is going to look like.  

Fair Scheduling

While it is not a legal requirement on most Awards, it is best practice to ensure that rosters are reasonable and fair for all employees. Creating fair rosters that take into consideration your employees needs and requests as well as your business’ needs is a great way to avoid the disappointment and stress caused by employees cancelling last minute or swapping out of scheduled shifts, while also engendering a culture of cooperation and workplace positivity.

In creating fair rosters, there are three key areas that should always be considered:

1 – Fatigue Management: Employers should realize the difference between the legal hours someone is allowed to work, and the number of hours their employee can realistically manage. From a Uni student to a working parent, there are any number of reasons why an employee might desire less hours than they are legally permitted to work. It perhaps goes without saying, that staff retention is significantly higher amongst employees that don’t feel unfairly overworked, allowing them to feel satisfied with their work-life balance.
Completing stress profiles for your employees is a good way for employers to avoid fatigue in their workforce. When an employee reaches their maximum hours for the week, they will be flagged as ‘stressed’ when attempting to include them in further shifts. While the warning may be overridden (there are always exceptions), the feature is a great way to ensure workers aren’t consistently being rostered on to shifts they are reluctant to work.

2 – ‘Clopening’: The ‘clopening’ shift refers to employees being rostered on to a closing shift followed by a consecutive opening shift , leaving minimal time for rest in between. While there is legislation that applies to this practice in regard to full time and part-time employees, casual workers are not covered by this. A successful business begins with happy and healthy employees, which is impossible if they are consistently closing out after dinner at midnight and opening up before breakfast at 4am.

3 – Balancing Skills: While staying on budget is a necessary priority when creating rosters, employers should be careful not to yield to the temptation of creating rosters based solely on the cheapest available combinations. Rostering adequate staff that are competently skilled in all areas needed for your business to run smoothly, which may also vary depending on the hour and the day of the week, is a fine art at the best of times.

Communication is Key

Most businesses recognize that open communication between employers and employees is a good idea, creates a strong culture, and helps build a team. But there is also a minimum legal requirement that employers must adhere to regarding communication around change that is delineated within each award. This can include things like major changes to company structure, or smaller changes such as altering rosters.

The employee should be made aware that it is in equal part their responsibility to stay up to date with any changes that may be made to their modern award, and feel that they can comfortably address any issues with their employer if they believe a mistake has been made, without needing to immediately escalate the issue externally.

While the scandals of Calombaris and Zumbo may seem far away, it is worth remembering that in both cases their contraventions of Fair Work were a result of mismanagement rather than calculated intent. Compliance with Fair Work needs to be taken seriously, not just to avoid paying large penalties but also to ensure the wellbeing of your employees and your business is taken care of. Compliance doesn’t need to be a headache, with the right tools you can set up your business to automatically comply so you can return to the things you love about running your business.