Payroll Blog

Modern Awards: The Impact on Payroll

Modern Awards Impact on Payroll

Modern awards set out the minimum terms and conditions of employment on top of the National Employment Standards (NES). They provide entitlements such as rates of pay, hours of work, allowances, penalty rates and overtime. As such it is critical for HR and Payroll managers to be aware of any changes to modern awards that affect their employees.

Utilising outsourced payroll services or ‘cloud payroll‘ providers can reduce the risk of non-compliance for many organisations, ensuring the currency and accuracy of pay rates and other entitlements. At E-Payoffice for example, our system can automatically calculate hours and apply penalties, loadings and overtime based on the updated Award or EBA. Our dedicated payroll expert can also flag any relevant or potential issues and talk you through the impact of any changes to awards.

Stephen Booth, head of the Employment Law team and a Principal at Coleman Greig Lawyers, has prepared the following summary of the first review into modern awards, highlighting the key issues and what businesses need to consider from a payroll perspective.

Keeping Up with Modern Awards

The first 4-yearly review of modern awards commenced in January 2014, and whilst it still has some way to go, it is presently intended to be completed by the end of 2018. This review process has been so demanding that the Fair Work Commission has deferred the second 4 yearly review (previously scheduled to begin last January) until the current 4 yearly review is complete and the dust has settled on the changes made to awards as a result of the current review.

This deferment has been actioned so that all relevant parties have the chance to review how the amended modern awards operate in practice, and has come as a relief to pretty much everyone involved in the process.

The Fair Work Commission has been amending awards as various streams of the process have been completed. Generally, this occurs with a model term being developed to be inserted into most awards – although there are many instances wherein individual awards have a variation of the model term, due to different considerations for particular industries or occupations (such as patterns of work, or established custom) which the FWC has taken into account.

Taking the above into consideration, it is imperative for those people responsible for companies’ HR and payroll to stay vigilantly aware of any and all changes within ‘their’ awards, and to implement any changes to their organisation’s current practice necessary in complying with the relevant changes. There is no substitute for reviewing the applicable awards and noting any changes which have come about in the last 4 years, as these will generally have derived from the 4-yearly review.

Particular changes and issues to consider include:

  • Excessive annual leave accruals
    The model term includes a detailed process for employees insisting on taking, or employers directing employees to take, accrued annual leave in excess of two years’ worth of leave (8 weeks, or 40 days for a full-time employee). The model also includes limits on when and how much leave an employee can be directed to take. This is intended as a last resort following discussion between the employer and employee regarding the reduction of accrued leave by consensus.
  • Other annual leave changes
    The annual leave amendments also include a process to allow the limited cashing out of accrued annual leave. Amendments also affect the granting of leave in advance, and have mandated the payment of leave to be on a pay period by pay period basis, rather than being received as a lump sum at the beginning of the leave, as was traditional. This is thanks to the near-universal use of EFT for payment of wages.
  • Casual conversion
    Although not yet completely finalised, casual conversion clauses are on their way. The model clause permits an employee with 12 months of service to request conversion to either part or full-time employment, if the employee’s actual pattern of work would fit the definition of part or full-time employment without any significant adjustment.In turn, the employer can refuse the employee’s request where:
    • the employee’s pattern of work would not fit the definition of part or full-time employment without any significant adjustment;
    • it is expected that the hours of work will change significantly within the next 12 months;
    • the position will cease to exist;
    • there are other reasonable grounds for refusal.
    The routine obligation on employers is to notify a casual employee, within the first 12 months of their engagement, of the potential right to convert to part or full time employment, by advising the employee of the content of the casual conversion clause.This is something which Coleman Greig suggests will need to be set up to happen systematically, perhaps at the same time as the Fair Work Information Sheet (FWIS) is provided at the commencement of employment
  • Minimum engagement requirements for casuals have been added to modern awards, or have been modified where they already existed.
  • Overtime provisions for casuals are under review. There may be further amendments to standardise just how awards deal with work outside the span of hours, or in excess of 38 hours.
  • Overtime: Time Off In Lieu (TOIL) provisions have been either added or standardised, generally providing for TOIL Agreements (a template agreement is available in the award), taking into consideration each TOIL agreement, and with the time off to be taken within 6 months, and if not, or if requested instead of TOIL, to be paid at the overtime rate. TOIL is generally to be taken at the ordinary time rate (time for time), except for where existing award provisions have provided for TOIL to be taken at the overtime rate.
  • Payment of wages: The model clause provides for the pay period to be either 1 or 2 weeks, or alternatively 1 month – with rules concerning changes from weekly or fortnightly to monthly payments by agreement with the majority of employees. There may also be some possible restrictions with regard to whether this can apply to lower award classifications. These amendments are yet to be finalised.
  • Annualised salary clauses: This is part of the review, and may result in annualised salary clauses being introduced to a broader range of awards than we are currently seeing.
  • Domestic violence leave: After a very involved process, the FWC has decided that awards should contain a standard term providing 5 days unpaid leave for an employee suffering the impact of family or domestic violence, with respect to activities that are impractical to take part in out of work hours (e.g., court attendances, moving house, changing children’s school arrangements etc.).The 5 days is an annual entitlement, accruing on the anniversary of official employment, and does not accumulate (thus it is not paid out on termination). This leave is available in full to part-time and casual employees, not pro-rated.The employee is required to provide evidence of the activity to be undertaken, such as police, court, family violence service documents, or a statutory declaration. The clause should be finalised by the end of June 2018, and should appear in most awards at that point.
  • Still proceeding are enquiries into rationalising public holiday provisions in awards, and additional provisions relating to family friendly working arrangements and flexibility requests.If you require any assistance to understanding the changes to those awards relevant to your business, please don’t hesitate to get in contact with the Coleman Greig Employment Law Team. We can help you to identify the changes to the awards that are relevant to you, and what they may mean in practice.

Stephen Booth, Principal
Coleman Greig Lawyers
Phone: +61 2 9895 9222

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