Australia: Award Compliance Under The New Work Choices Regime

There has been a lot of publicity in the ACT recently about Award compliance after the Office of Workplace Services conducted a compliance audit of Canberra restaurants and cafes.

A number of these businesses have been found to have underpaid employees and have been required to rectify these underpayments. A couple of employers have been prosecuted by the Office of Workplace Services.

Some businesses, which believed they were paying above award wages, were surprised to find on audit, that they were in breach of some award provisions.

As approximately 75% of businesses have some employees which are covered by awards, and many businesses are not sure which awards they are covered by, it is useful to understand the matter of award compliance under the new Work Choices regime.

As a result of the changes under the Work Choices legislation, the basic rates of pay for ordinary hours worked set under an award have become part of the pay scale set under the Australian Fair Pay and Conditions Standard. These rates, which will be adjusted from time to time by the Australian Fair Pay Commission, remain the minimum standard and cannot be undercut.

However award-prescribed pay rates for work outside ordinary hours (eg overtime or penalty rates) are "Allowable Award Matters". They will apply unless altered or excluded by a Workplace Agreement.

Many employers, seeking to do the right thing by their employees and wanting to obtain and retain quality staff, pay well above the minimum basic rates of pay (ie for ordinary hours) set under the relevant award. They believe they are complying with the award and are paying "over award" rates.

However, awards are complex and it can be difficult to identify all the various pay rate provisions.

For instance, an employer who decides to pay over the award rate for ordinary hours is still in breach of the award if the rate prescribed in the award for work done outside ordinary hours is not paid. This is so even if the employee actually receives the same or more money in total than they would have been paid using the various award rates.

This can be demonstrated as follows. John does a normal days work and finishes at 7.00pm. In total, John does 9 hours work. His employer pays him $144.00 for the day (9 hours x $16). Under the Award, John’s minimum entitlement is $123.50 (8 hours x $13 and 1 hour at $19.50). Notwithstanding he actually received more than this amount for the day, failure to pay for the hour of work from 6.00pm to 7.00pm at the overtime rate is a breach of the award.

Employers can escape this complexity and risk by making a workplace agreement with their employees. Through such an Agreement, the Award is excluded and the Allowable Award Matters can be modified or excluded. These provisions can be replaced with alternative arrangements to suit the employer’s business requirements and to the staff eg agreement on what are the appropriate ordinary hours given the nature of the particular business and an agreed fixed rate or dollar amount for any work done outside those hours.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.