As you might have noticed from the media recently getting salaries right can be harder than it seems. And it can be complicated; myths abound about what you can and can’t do and our industrial system, while simpler than it was is by no means straight forward. So, here are my top 5 tips for ensuring that you’re paying your people right. Note, they do assume your organisation is not operating under an enterprise agreement; these have different and unique parameters (though the fundamental principles are usually not too dissimilar).
1. Most employees, unless they’re senior managers - an even then in some cases they are - are likely to be covered by an Award, especially if you’re in a service delivery business like hospitality or retail. There are lots, The Age reported the other day that the hospitality industry is governed by more than 22 Awards (I haven't checked the number), but as an example, there are different Awards for hotel restaurants vs stand-alone restaurants and cafes vs fast food outlets vs the diner at the local RSL. The FairWork Ombudsman can help you determine what Award your staff are covered by. They even have a pay calculator on their front page. You may need to call though if you are in any way unsure as some of it can be quite nuanced and you may, in fact, be covered by more than one award. Resource: https://www.fairwork.gov.au/
2. You can’t just say ‘oh well, everyone has to do extra hours to get ahead’. You are obligated to pay people for the time they work. If you pay people above their award rates you can absorb penalties to the extent that you pay them above that award rate, provided you have a clause in your employment contracts making it clear that you are doing that. But … that doesn’t mean you can just ask someone to work an extra 20 hours a week because you’re paying the $100 a week more than their minimum wage. What it means is if you pay them, say, $200 a week more than their minimum wage you can absorb any additional penalties, such as overtime to the degree that that additional payment covers those hours. So, if they do $300 worth of overtime, and you have only paid them $200 more than the award rate, you owe them $100. You can see how that can add up.
3. While we’re on minimum wages, there isn’t just one minimum wage – the minimum wage/s that applies to your organisations will depend on the Award that applies. That’s because different kinds of jobs require different levels of skill and qualification. You will need to read through the classification descriptors in the Award/s that cover your organisation to determine the starting point for each employee based on their role, tenure and in some cases, their qualifications.
4. Awards (generally) don’t cover everyone. Usually an Award will cover front line staff and some managers and as mentioned, you may have different awards covering different staff types. Usually, they do not cover senior managers (there are exceptions). There is a section at the start of each award that describes who is covered by that Award. Under the old pre-modern system professionals (accountants, HR staff, IT specialists) were not traditionally covered by Awards and people often think this is still the case. It isn’t always … again, you will need to check the Awards that are relevant to your workplace. I have come across a few workplaces where they have thought that because someone had signed an employment contract they were not covered by the Award. This is also generally not the case. You cannot contract out of an Award if the person is covered by one.
5. People on high incomes generally aren’t covered by an Award. Currently, the Award Free threshold is $153,600* pa. That doesn’t include Super or things like bonuses. However … there have been cases where the Commission has determined that someone is Award covered despite their salary for a range of reasons (particularly if they do not have staff management responsibilities or the position is specifically covered by the Award), so don’t assume your highly paid staff aren’t covered. Things that can factor in is if they are in a managerial role or simply vs a highly paid but comparatively junior technical role for example.
So, as you can see, paying people can be complicated. If you’re unsure you may find your industry employer association useful, or your state chamber of commerce if there isn’t one for your industry. There are various outsourced HR provides (such as this one, though there are plenty of others) who can ensure you're set up correctly. The FairWork Ombudsman is an excellent source of free advice and always willing to work with employers to get it right.
*Updated with the post-July 2020 figure.
Note, this content does not constitute legal advice, is not intended to be a substitute for legal advice and should not be relied upon as such.