Fair Work Mass Small Business Pay Audits - Should I be concerned?
Fair Work has been auditing small-medium businesses lately, and common breaches with workplace laws are often pay rates and leave entitlements. The Fair Work Ombudsman conducted a mass audit in 2018, and out of 672 businesses audited, 299 were not complying with workplace laws, amounting to 44%! This resulted in backpay $202,227 to 264 workers, a high number for small business. The Ombudsman issued many formal cautions and on-the-spot fines, and one small restaurant had to commit to paid professional audits for 2 years, potentially costing thousands of dollars.
Most businesses do not even know what they need to comply with, or where to look. For instance, have you thought about the below areas and tested your employees records against the instrument?
- Casual Loading
- Personal and Annual leave entitlements, and loading
- Stand-down periods
- Requested conversion from casual to permanent
- Apprenticeship pay rates and competency progression
- Junior employees and annual pay rate increase
- Saturday, Sunday, and Public Holiday penalty rates
- Time in lieu, redundancy, and entitlement payouts on termination
- Reducing an employee’s hours
- Pay rates and employee skill level
The list is long, and this is only a small snapshot of what is in an award. Worse still, depending on the industry, the award varies significantly, and some industries do not even have an award!
The first thing to consider when applying awards to your employees is their skill level. Each award has a list of skill tiers that you must assess your employee on, and you should do this at least annually. As an added bonus, assessing this is good business practice, as it will help you to understand how your business works, who is pulling the most weight, and possibly identify how to operate more efficiently! This employee skill level will determine their minimum base pay rate. When assessing a skill level, you must take notes and record why you have chosen this skill tier and ensure that an employee contract (if there is one) lists job responsibilities that are within that tier of work. If you find that an employee is becoming more useful, and performing duties outside the scope of their contract, review it, and review their skill tier as well, as their pay rate will likely change.
Another important point for base pay rates are apprentices and juniors. Both of these types of employees are dealt with in respective sections of the award. Both are paid on a percentage of their base wage, so it is vital that their base wage is based accurately on their skill level and responsibilities. The biggest compliance error with juniors and apprentices are annual reviews. You must conduct annual reviews regardless, but it is particularly important with apprentices and juniors as their pay rate will almost certainly change, regardless of their responsibilities. For apprentices, this is because they progress in their course, and for juniors, it is simply because they grow older.
This is only a tiny amount of detail in an award but is exactly where you should start as it is regularly where small businesses seem to go wrong. In a small business, it is not common to have a Human Resources Manager, and typically bookkeepers and accountants are not well-read on award compliance, so who do you turn to? In future posts we will explore more detail around the awards, and go into many of the other points from the list at the start of the post, and we hope this post will provide some practical guidance and at least point you in the right direction to get started, but what do you think? Is there an area you would like to know more about?