Areas of oversight
The FWO is a statutory body that operates independently of Government and has powers in investigating suspected contraventions of Commonwealth workplace laws. While the focus of the campaign is on education and compliance, FWO can thus prosecute employers where they identify non-compliance. There are substantial penalties that can be imposed on employers who are found to have breached minimum employment conditions.
Errors are costly
For example, contraventions of terms of modern awards, such as those relating to the payment of minimum wages and penalty rates, carry a maximum penalty for corporations of $33,000 and for individuals of $6600. Employers are also required to issue pay slips and make and keep accurate records for all employees. Penalties of up to $16,500 for corporations and $3300 for individuals apply for contravention of these provisions, so it is important to also be familiar with these obligations. Accordingly, it is crucial that employers ensure compliance before being audited.
Minimum wages to rise
The Minimum Wage Panel of Fair Work Australia (FWA) recently increased all modern award minimum wage rates, and the national minimum wage, by 3.4 per cent. The increase commenced operation from the first pay period on or after 1 July 2011, which is the same time as the second phase of the transition between pre-modern awards and modern awards.
The 3.4 per cent increase represented a departure from previous minimum wage decisions where flat-dollar increases had been ordered. FWA concluded that flat-dollar increases had led to compression of relativities in award classifications, meaning that the gap between the wages attached to higher classifications in awards and lower classifications had shrunk as a result of the succession of flat dollar increases.
The 3.4 per cent increase equates to a $15.51 per week rise in the national minimum wage.
This is substantially lower than the $28 per week sought by the Australian Council of Trade Unions (ACTU), but there are award classifications where the 3.4 per cent increase will see the wage rate increase by $28 per week and more. However, for the substantial majority of award classifications the increase will be between $21 and $23 per week.
Impact on IPA members
The 3.4 per cent minimum wage rate increase in modern awards will affect clerical and administrative employees employed within member practices, along with other award-covered employees.
Many member practices pay their award-covered employees an annual salary rather than the weekly or hourly rates prescribed by the relevant award. For clerical and administrative employees who are not covered by industry-based awards, there are obligations that must be met under the Clerks – Private Sector Award 2010 in relation to these annual salaries. In particular, for an annualised salary arrangement to be valid it must specify the provisions of the award covered by the annual salary and the salary must adequately compensate the employee when considered against what their entitlements would have been under the award.
Salary review required
It is also a requirement that the annualised salary be reviewed at least annually to ensure the “adequate compensation” requirement is being met. The minimum wage increase is a sensible trigger point for such a review. In undertaking this review it is essential that all award entitlements and actual working patterns are considered. It should be noted that annualised salary provisions are not a common feature of the modern award system, and so caution should be exercised before entering into such arrangements, or assisting clients with such arrangements, where they relate to other awards. This does not mean that employees covered by other awards cannot be paid an annual salary, but it is essential that the contractual provisions reflecting that arrangement provide protection to the employer against potential underpayment claims.
