Payroll Blog

How to Interpret Australia’s Complex Award System

Australia’s Award System

How to Overcome the Difficulty of Interpreting Australia’s Modern Awards

In recent years, many high profile cases involving the widespread underpayment of employee wages has soured the reputation of some of Australia’s most beloved brands.

From 7-Eleven and Woolworths through to Coles, Grill’d, celebrity MasterChef judge George Calombaris, and Qantas, to name a few.

Each of these businesses’ has admitted to underpaying staff in a variety of ways. Such as miscalculating penalty rates, failure to pay the correct overtime, technical errors with their electronic payroll system, and the underpayment of superannuation.

Yet, despite the myriad of ways these underpayments have occurred, a common sentiment shared by employers, payroll experts, and CEO’s is this: Australia’s award system is complex, hard to interpret, and needs to be simplified in order to avoid future payroll errors.

This begs the question: Why is the Australian award system so hard to interpret, and what can you do about it? Read on to find out.

Why the Australian award system leaves employers’ scratching their heads

There are many reasons why the Australian award system is perceived as complex.

Below is a breakdown of some of the most common complaints raised by employers and commentators across Australia.

Complex language. Easy to misinterpret.

One of the most common complaints is the use of language. Many employers and commenters state, while the rates are correct and easy to understand, the language used to describe the terms and conditions of how those rates apply to certain employees is hard to understand.

Why is this the case? Because Modern Awards are primarily written by lawyers. So their use of language, although technically correct, makes it hard for everyday people to make sense of the award system in ways they can understand.

Fortunately, the Fair Work Ombudsman (FWO) has taken steps to simplify the way Awards are described. However, based on the recent headlines surrounding large-scale staff underpayment, it’s clear that even large organisations are still struggling to stay compliant and avoid such payroll errors.

Plus, if large businesses are struggling with award interpretation, then what chance do small business owners have?

Too many awards

Australia currently has 122 awards, which have already been reduced from over a thousand, and each one has their own minimum requirements in regards to base pay rate, penalties, tax, super contributions, leave entitlements, and more.

Worse still, these minimum requirements often differ based on the type of employment (i.e. full-time, part-time, and casual). Considering that many businesses often employ staff who fit under a range of employment types, it can become a real challenge for employers and payroll staff to make sense of each award, and apply the terms correctly for each and every employee.

On top of this, employee remuneration can also change based on the time of day an employee works. While most awards offer penalty rates for employees who work overnight, the amount at which the wage increases can vary.

When taking all this into account, it’s clear to see why some employers feel there are too many awards.

Lack of support from FWO

Understandably, when employers do have trouble interpreting awards, they can contact the FWO directly for advice.

However, when asked about specific details, often the FWO will simply quote a clause, instead of actually taking the time to explain what a specific clause means and how it should be applied in key situations.

As a result, both small and large employers are left with no other avenues to help them make sense of the Australian award system. Thus, increasing their chances of making a serious yet unintentional payroll error.

Software from Overseas

Some larger organisations that have been caught out have admitted to sourcing their payroll software from overseas to cut costs but the issue is that they are not set up to interpret Australian awards.

How to interpret Australia’s award system and protect your business from payroll errors

In an ideal world, the Australian award system would be thorough enough to cover the basic rights and entitlements of all relevant employees, yet clear and simple enough for the average employer to understand.

However, it remains to be seen when such a reform will occur, and what it’ll take to protect all employers from accidental payroll errors.

It would be beneficial if our governing body took some responsibility and actually provided helpul advice to business owners to aid them in the complexities rather than simply quote a clause that ‘is up for interpretation’.

E-Payoffice offers Payroll Software and Payroll Services and works with each client to get a set of interpretation rules that are in line with the Award or Agreement their employees are paid under.

Our Payroll software is designed to save you time and hassle when it comes to award interpretation.   Our system is developed here in Australia for our complex legislation and all our staff work out of our Sydney office. How it works is simple. When you use our App or Clocks for time collection the online timesheets populate with shift start and finish times, the software then automatically calculates the correct hours, penalties, loadings, and overtime in accordance with the relevant Award or Agreement.  As a result, your employees are always paid the correct wages and entitlements.

Let E-Payoffice take the stress out of award interpretation for you. Our reliable payroll software will make sure your employees are correctly paid in line with their Award or EBA, and that your business achieves full compliance.

To request a FREE demo of our Software, contact E-Payoffice today.

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