The complexity of industrial Awards.
There has been a recent increase in media headlines in relation to staff underpayments by employers across various sectors including retail and hospitality. The most common response to incidents of underpayment is in relation to the complexity of industrial Awards, with over 100 Awards in Australia.
Our knowledge and exposure to the aged care sector has identified the complexity of multiple Enterprise Bargaining Agreements (EBAs) and Awards due to the various employee classifications and levels, variation in hours across employees and other entitlements such as allowances. The majority of staff in the aged care sector are part-time or casual workers and will have a variation in work hours and exposure to additional entitlements such as overtime, weekend and overnight rates.
Management need to scrutinise the EBAs and Awards applicable to their industry to ensure staff are remunerated accurately for hours worked. It is crucial for management to regularly review employee hours worked and determine the applicable additional rates and allowances. Employees are to be paid based on their employee classification (e.g. Personal Care Worker), level and pay point, and will receive an increase in their pay point level based on work anniversaries. As there are many factors to be considered under EBAs/Awards particularly across different employee classifications, it can increase the risk of under or over payments.
As per Australian Taxation Office legislation, Superannuation Guarantee (SG) is payable on Ordinary Time Earnings (OTE). It is important to consider which payments are classified as OTE in accordance with legislation and applicable EBAs/Awards. Management should regularly review pay codes set up in their payroll software to ensure SG is paid accurately. Salaries and wages are the largest cost for aged care organisations and are subject to the complexity of various pay codes. Particular pay codes such as overtime, allowances (e.g. uniform, laundry or travel) and parental leave, which are not classified as OTE, do not attract SG. Pay codes classified as OTE such as ordinary hours, annual leave or long service leave are applicable to SG and any shortfall in superannuation payments require payment to the ATO of amount owed, interest and administration fees (and possible penalties).
There is the risk of staff underpayment across the aged care sector and various industries that follow EBAs and Awards, and as we have seen in the media, it can result in reputational damage and additional costs to the organisation.
An internal audit engagement can assist with the review of payroll reports to ensure pay codes, rates and superannuation designations are in accordance with EBAs, Awards and relevant legislation. If you have any queries in relation to this article, contact our Audit Specialists for more information on (03) 9835 8200.