Employing staff certainly adds a layer of complexity to your business. For many small businesses hiring staff is an essential way to meet growth goals and manage your client’s expectations. Understanding how to pay staff is not something we naturally know, and we often see that staff are not being paid correctly. It would seem that almost every week one major company is called out for not paying their staff correctly (and these include some of the biggest employers in Australia), so it understandable that the small business owner struggles to get it right.
There are so many rules around paying staff that your mind boggles. The Government want small businesses to employ yet the red tape involved and the penalties for getting it wrong can be a deterrent for many. We understand that rules are needed so as not to exploit our staff, but most employers are not trying to exploit anyone. They unfortunately just haven’t kept up to date with the rules, or made assumptions about pay rates without doing the research.
The way we employ and pay staff in Australia is governed by the Fair Work Act 2009, and monitored by the Fair Work Ombudsmen. The best source of information for any of this is the Fairwork website.
Let’s take a few minutes to review some basic elements about employing and paying staff.
National Employment Standards (NES)
Do you know what the NES are? They are a set of 10 minimum standards of employment that apply to pretty much all employees in Australia. The 10th rule is that you provide all new employees with a copy of the Fair Work Information Statement…does this mean you are breaking the rules already? Have you been giving all your staff this when they commence work?
To download a copy use the following link, and I suggest you take a read of this and make sure you are complying with these basic standards.
Of note, the maximum work week is 38 hours per week. Not 40 hours, 38 hours.
Find your Award
Speaking with a client a few weeks ago, I asked what award he paid his staff under. The award he quoted doesn’t even exist anymore. Most awards have now been replaced with Modern Awards and the best place to find your Modern Award is the Fairwork website. I know, reading awards can be incredibly boring, but please take the time to read the award that is applicable to your business. Pay particular attention to the minimum rate and the casual loading that applies to the minimum rate (if you are employing casuals). Make sure you at least paying this minimum rate.
It is also important to read the Classifications that apply to each rate, and make sure your staff are correctly classified.
Use the calculators on the Fairwork Site
The Fairwork website has a pay calculator that steps you through the questions you need to answer to determine the correct rate of pay. The link to this calculator is below.
Take the time to work though this and keep a copy on record for each staff member. If questioned, you can show Fair Work how you came up with the payrate for your staff. Remember that if a junior rate applies to a staff member, that rate is going to change when they have a birthday. You should run this pay calculator at least one a year for all staff to ensure things have not changed. Maybe link that to their birthday as a way to remember to do this.
If you are member of an industry body you should get updates if awards change, but as a general rule, most award rates are updated on 1 July each year. Put it in your diary or set a phone reminder to check this each year. Include it as part of your year end process. Be interested in media stories about employment so you can be alerted to wage rises.
Temporary changes are in place due to COVID-19, including the delay to some award rate increases this year. If COVID-19 is impacting your ability to pay or retain staff, it may be worth reading the information on the Fair Work website. There are plenty of rules about what you can and cannot do due to COVID-19.
Pay your super
I feeling like a broken record, but just a reminder that superannuation is not an optional extra for staff. It is mandatory. It must be paid and it should be paid on time.
What if I have got it wrong?
Seek help from a professional. You will need to rectify the situation and may need help to calculate the back pay or the missing entitlements. Your accountant is a great starting point if you are having difficulties. This is an issue you really cannot ignore so take time to add a HR check up to your to-do list today.