Wage obligations under the modern awards
In order to comply with wage obligations towards employees, an employer will need to understand the following:
Identifying the applicable
Identifying the correct rate of pay that applies to each of your employees is an essential part of ensuring wage compliance.
Once you have identified the modern award that covers your employee’s employment and the employee’s classification under that award, the next step is to identify the correct rate of pay for the employee.
Under most modern awards, an employee’s minimum rate of pay is outlined in the ‘minimum rates’ clause of the award.
Example
Part-time and casual employees
Employees who are casual or part-time are required to be paid a pro-rata amount of what a full-time employee in their classification would be paid according to the hours of work they have performed.
Example
Fast Food Industry Award 2010 (as at 1 July 2021)
Under this modern award the minimum weekly wages payable to an adult Fast Food Employee Level 1 is $848.50. A full-time employee under this award is required to work 38 hours a week. So to find the applicable pro-rata rate you divide the weekly wage by 38. This equals $22.33 an hour.
In order to pay a casual or part-time employee on a “pro-rata” basis you would multiply the amount of hours that the employee has performed in a week by $22.33. Noting however that a casual loading will also apply for casual employees.
Ordinary hours of work
Most modern awards will use the expression “ordinary hours”. This refers to the hours of work performed by an employee for which they are not paid overtime.
Usually hours of work performed have to fall within certain time periods or occur on certain days to be defined as “ordinary hours”.
Penalty rates
Many awards will include higher rates of pay to apply to work performed on a Saturday, Sunday, or public holidays. There are also often penalties for late night work or for early starts. Such time is still ordinary hours of work.
A “loading” is a percentage increase to an employee’s rate of pay for ordinary hours. Understandably many employers struggle with the calculations for such loadings. Fortunately, the Fair Work Ombudsman provides a Pay Calculator that assists in identifying the correct rate of pay to apply on certain days.
Overtime
A modern award will usually include an overtime clause. Overtime occurs where an employee performs work outside of their ordinary hours of work. It is important as an employer to review such clauses thoroughly to ensure that employees receive an overtime payment whenever it is owed.
The actual rate of pay that is charged for overtime varies from award to award. Generally, overtime tends to apply at either the rate of time and a half or at double time.
Example
General Retail Industry Award 2020
The following are some examples of circumstances in which this modern award may require that an employee be paid at the applicable overtime rate:
- where an employee works in excess of 38 hours in a week, or if hours worked in accordance with a roster, in excess of 38 hours per week averaged over the course of the roster cycle;
- all hours worked outside the times of 7:00 am and 9:00 pm Monday to Friday, 7:00 am to 6:00 pm Saturday, and 9:00 am – 6:00 pm Sunday; and
- all hours worked in excess of 11 hours on one day of the week and in excess of 9 hours on any other day of the week.
Junior rates
You should also be aware that depending upon the age of your employees, they may only be entitled to be paid a percentage of the applicable wages for an adult employee.
Example
What resources are available to ensure that I meet my wage obligations towards employees?
The Fair Work Ombudsman can assist you with questions you have concerning employee pay, applicable pay rates, employee hours of work and leave entitlements.
Awards and contracts of
As an employer, it is important to be aware of how the modern award that covers your business interacts with contracts of employment used for your employees.
It is important to understand that an employee’s entitlements as outlined in a modern award cannot be removed by an employment contract. For example, if an employee is entitled to receive a penalty payment for working on a Sunday under the modern award they cannot “sign away” this entitlement under a standard contract of employment.
What can an employment contract do?
Properly used, employment contracts play a crucial role in ensuring wage and record-keeping compliance. The use of employment contracts achieves the following:
Explains when and how an employee is to be paid
An employment contract should confirm how frequently an employee is to be paid (i.e. weekly, fortnightly, monthly) subject to the award. It should also explain if an employee is to be paid:
- at an hourly rate in line with the modern award;
- at a higher hourly rate than the modern award; or
- a salary that compensates the employee for their modern award entitlements.
Ensures compliance with record-keeping obligations
Many awards include requirements that an employee is informed in writing as to the award they are covered by, their classification under that award, their type of employment and when their hours of work will be performed.
The inclusion of such information in an employment contract ensures that this information is recorded and retained in one place.
If you have employees covered by an enterprise agreement, click here for more information.
