01 Sep “I pay above award so that doesn’t apply to my business”

If I had a dollar for every time an employer said to me “I pay above award rates so that doesn’t apply to my business” or “my staff are on salary so we don’t need to worry about that”, I would be a very rich woman.

I am hearing these two phrases or versions of more and more at the moment as employers are implementing salary increases and following the increases to the modern award rates that were effective 1 July. Unfortunately for many employers this belief that paying above award rates or salaries means that they don’t need to worry about certain aspects of award entitlements, is wrong.

This is a classic example of just because you say it, doesn’t make it true!

Take for example the 1 July increases to the modern award rates; while you may have been paying above award rates for the 2015/2016 financial year you need to consider after 1 July 2016 are your rates still above award rates? If not, you will need to increase them, if they are, by how much? Usually employers who pay a salary or above award rates do so in satisfaction of other award entitlements that may otherwise be payable, such as overtime penalty rates or annual leave loading. If your rates are no longer above award, or if they still are but not by as much, consider whether or not you still pay enough to compensate for these entitlements. It may be the case that you need to increase your rates further.

Additionally, if you do not have a set-off clause in an employee’s contract of employment you may be in breach of the applicable award and/or may not be able to rely on the higher rate should an employee challenge their entitlements.

A set-off clause allows above award payments to be set-off against award entitlements (such as overtime, penalty rates, etc.). If however, the salary paid to an employee does not cover off the applicable modern award entitlements, then the employer could potentially be liable for an underpayment.

So what should employers do? 

We strongly recommend as an employer you undertake a current wage analysis and comparison for each employee in a standard pay cycle.  This involves comparing what an employee is paid compared to what they would otherwise receive under the applicable modern award.

This should be done at least annually, but also when implementing new contracts, new salaries or when there is a change in the applicable modern awards that apply to your employees, such as a wage increase.

This will identify whether there is any short-fall that may require addressing.

Sarah Neideck is a Senior Associate with HR Law, a boutique firm specialising in workplace relations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.