A question business owners often ask is "Can I avoid penalty rates by paying above Award wages?".
Unfortunately, the answer is not straightforward (it depends on a lot of factors). What is certain is that you should not assume it's okay; this can land your business in a legal mess. Fortunately, some simple planning can help you pay your staff right and avoid problems with Fair Work.
In a recent legal case, a Perth business was found to have breached workplace laws by paying employees above the minimum wage, believing this would cover the shortfalls in not paying penalty rates.
The employees regularly performed work during unsociable hours at night, on weekends and on public holidays. They were generally paid at their usual rate for work performed during these times, with no extra penalties.
The company admitted failing to pay casual loading, allowances, and minimum, overtime and penalty rates of pay. It was fined by the court, and has repaid the wages of the staff who were underpaid.
The reality of the Australian Award Rate system is that it's very complex. Still, business owners are expected to comply with it, which is not particularly easy. For instance, different Awards allow for different approaches to structuring wages.
What can you do to avoid getting caught out? Here are 7 action steps:
- Work out a typical roster or employment pattern for your business. For instance, the hours the business will operate, the types of role and level of skill required, and the mix of permanent and casual employees.
- Consider whether you want or need to pay above Award rates. Award rates set a minimum rate of pay and conditions. However, to recruit the appropriate staff for your business you may want or need to pay more than the minimum.
- Obtain expert advice on your employment arrangements. This means advice from a workplace relations law specialist who can provide you with guidance on the appropriate pay rate and penalty rates. The right expert will also be able to advise you on options for simplifying your pay structures while keeping within the law.
- Use the wage rates to calculate the cost of staffing your business. Does the business work financially using this employment pattern or are changes needed?
- Obtain advice about the employment documentation you need for each role in the business. The right expert should be able to provide you with sample documents and review them once you have customised them for your business.
- Set up your payroll system to apply these employment arrangements. We recommend KeyPay cloud payroll for this.
- Set review dates for self audits of your pay systems (or ask your accountant) and an annual review with your workplace relations law specialist to help you stay up to date.