Strategies to Ensure Proper Employee Wage Payments

Relevant For:

Small and medium business owners, HR professionals and payroll managers/bookkeepers.

Key Points:

  • Ensuring correct employee payments is crucial for legal compliance and employee satisfaction.
  • National Employment Standards (NES) provide minimum worker entitlements.
  • Modern Awards outline additional conditions and pay rates for specific industries.
  • Enterprise bargaining allows workplace-specific employment conditions.
  • Employment contracts clarify remuneration and expectations.
  • The ‘Better Off Overall Test’ ensures alternative conditions benefit workers.
  • Non-compliance with wage requirements can lead to significant penalties.

Full Article:

Ensuring your employees are paid correctly is vital for maintaining a positive work environment and protecting your business from potential legal claims. Paying employees their correct legal entitlements not only boosts morale but also safeguards against underpayment claims.

Employers have complex legal obligations regarding wage payments. Even large companies with sophisticated HR departments, like WorkPac Pty Ltd, can make mistakes, as evidenced by the WorkPac Pty Ltd v Skene [2018] FCAFC 131 case, where WorkPac was ordered to compensate an employee for misclassification.

For small-medium business owners, navigating these obligations can be daunting. To help, we outline the key legal requirements below.

The National Employment Standards (NES)

The NES, under the Fair Work Act 2009 (Cth), sets the minimum entitlements for workers:

  • Maximum weekly hours
  • Flexible working arrangements
  • Parental leave and related entitlements
  • Annual leave
  • Personal/carer’s leave, compassionate leave, and domestic violence leave
  • Community service leave
  • Long service leave
  • Public holidays
  • Notice of termination and redundancy pay
  • Provision of the Fair Work Information Statement

Employers must adhere to the NES minimum wage and ensure all additional regulations and agreements exceed these standards.

Modern Awards

Modern Awards apply to most Australian employees, specifying entitlements and conditions above the NES. They classify workers into categories with varying pay rates, often including penalty rates for non-standard hours, such as nights and weekends in the hospitality industry.

Enterprise Bargaining

Enterprise bargaining allows workers and employers to negotiate employment conditions specific to their workplace, resulting in agreements similar to tailored Modern Awards.

Employment Contracts

Employment contracts clarify the employment basis and expectations. These contracts detail remuneration, which can be an annual salary, hourly rate, or involve salary sacrifice, all of which must comply with the NES and relevant Modern Award or Enterprise Bargaining Agreement.

The ‘Better Off Overall Test’ (BOOT)

Employers and employees can negotiate alternative conditions reducing pay if the worker receives something of greater value in return, like flexible working arrangements. This ensures the worker is ‘Better Off Overall.’

Basic Wage Requirements

All agreements must meet minimum pay rates. Employment contracts should consider the applicable Modern Award, ensuring terms meet or exceed the award’s standards. Failure to comply can result in significant legal penalties for underpayment.

Key Tactics

Understanding what to pay your employees is crucial.

  1. List employee duties and include them in a written contract.
  2. Use the Fair Work Australia website’s online tool to identify the relevant Modern Award and ensure compliance with its requirements.
  3. Regularly review these standards to avoid underpayment issues.