EOFY Checklist – Employment Law

The new financial year is underway and an important “new year” resolution is to take time to review and ensure that your business is compliant with its employment obligations and practices. Although there are many other tasks that take our attention at the start of the New Year, taking time to review your employment compliance can save several headaches in the future.

It is important to consider:

1. the wages you pay in light of the Fair Work Commission’s decision to increase minimum and Award wages;
2. superannuation contributions;
3. employment contracts; and
4. employment policies.

Wages

In late June 2022, the Fair Work Commission (FWC) determined a minimum wage increase of 5.2% and a modern award increase of 4.6% in its annual wage review decision.  Here are the important details for your business-

1. 1. Who gets a 5.2% increase and who gets 4.6%?
      • The increase of 5.2% is for employees who are not covered by a modern award but who are entitled to the National Minimum Wage.  For employees covered by modern award wage rates the increase is 4.6%.
   2. From when does the increase apply?.
      • In most cases, the increase comes into effect as of the first full pay period on or after 1 July 2022.  There are some exceptions for whom the increase does not come into effect until the first full pay period on or after 1 October 2022. You must check if the increase is applicable to your business is 1 July 2022 or 1 October 2022.
   3. What if I pay employees well above the minimum award rate?.
      • You are not statutorily obliged to increase the hourly rate you pay your employees if you already pay above the National Minimum Wage or the award minimum rates. It is important however, that you check and ensure that with the increase in the National Minimum Wage or minimum award rates, that you are still paying above the minimum.
   4. What if I have an Enterprise Agreement?.
      • If your employees are covered by an enterprise agreement, you must still consider the impact of the minimum wage and award rate increases.  This is because award entitlements and the National Minimum Wage cannot be displaced and must be met as a minimum, even if an enterprise agreement covers the employment.
      • Of course, the Better Off Overall Test (BOOT) can be a complex assessment.  It may be that employees are still better off overall even if their wage rates are less than the minimum rates. This is because enterprise agreements can contain conditions and allowances that, overall, still leave the employee better off.  For assistance with such complex enterprise agreement queries, contact us.

Superannuation

The Superannuation Guarantee Charge Act 1992 is changed to increase the compulsory superannuation contributions by employers from 10% to 10.5% as of 1 July 2022.  All employees’ superannuation is to be paid at 10.5% from 1 July 2022.

If you have employees on an annual package which is, for example $100,000 inclusive of superannuation contributions, then you are not obliged to increase the annual package, and you can, if you choose to, adjust what is paid directly to the employee to cover the increased superannuation contribution.

Also, the Superannuation Guarantee (Administration) Act 1992 is amended to abolish the exclusionary threshold of $450 per month. Prior to 1 July 2022 there was an exemption from paying superannuation guarantee contributions if an employee did not earn more than $450 (before tax) in a month.  This $450 exemption no longer applies, and superannuation contributions are payable on all earnings.

Employment Contracts

This is often the time of year when employees are promoted to higher duties or change roles. It is important that you consider whether the employees written employment contract covers and is suitable for the new role or level of seniority.

Too often, employers either do not have employment contracts with their employees or have inadequate contracts because they used a so-called “template” that was suitable for a different role or time.  Employment contracts that effectively minimise legal risks for an employer must be drafted carefully and for the particular circumstance.

Employment Policies

The New Year is a very appropriate time to review employment policies.  With increasing scrutiny on workplace conduct including sexual harassment, bullying and harassment and anti-discrimination, it is vital that these are covered with a clear policy that meets the statutory requirements.

Company policies are beneficial to a business in many ways. They demonstrate that your business is being operated in a businesslike manner, they provide clear direction for your employees, and make clear the values of your business. They provide a framework for when workplace issues arise and will save you and your business time when a problem does arise as you already have a framework to handle the problem.

What to do from here

Although a review or audit may be far from your mind at the moment (especially when you’re not in the midst of any employment disputes), now is the time to do a review and to minimise the risk of an employment dispute before one raises its head.

From here you should:

1. determine, or crosscheck, which modern award applies to your employee (there may be more than one);
2. identify when a wage rate increase comes into effect;
3. ensure that you are paying employees either the minimum rate, or above (including if you already pay above the award or are covered by an Enterprise Agreement);
4. ensure your payroll system has been updated with the new compulsory superannuation contribution rate and that the superannuation threshold exemption has been removed;
5. review your employment contracts and update them for any employees whose roles have changed or for all employees if operational change requires an amendment to the contracts; and
6. consider that your employment policies are capable of minimising your legal risks into this new financial year.

Of course, if you are unsure about your compliance, or whether any increase applies to your business, you should contact us for advice.  Starting a new year with a compliance checklist and an employment risk health check may avert many employment disputes as the year unfolds.

Queries

For further information regarding the above, please contact the author or any member of our Employment, Workplace Relations & Safety team.

Disclaimer

This information and the contents of this publication, current as at the date of publication, is general in nature to offer assistance to Cornwalls’ clients, prospective clients and stakeholders, and is for reference purposes only. It does not constitute legal or financial advice. If you are concerned about any topic covered, we recommend that you seek your own specific legal and financial advice before taking any action.