Reducing the risk of underpaying wages

There are over 120 different Awards under the Fair Work Commission that could apply to your workplace at any given time. Every Award has different rules and they are frequently being updated and changed to protect employees.

There are a few ways to reduce your risk as a business:

• Ensure you know which Modern Award covers your employees or group of employees
• Understand and apply the relevant Modern Award entitlements
• Ensure all employees have an employment contract and are paid in line with it
• Don’t Google pay rates, instead go directly to the Fair Work Commission website for the most recent and up-to-date information

The types of Awards and which is right for you

There are five different Award types: 

1. Industry Awards – Awards that are based on industries and include common industries like retail and hospitality as well as rare industries like cotton sheeting.
2. Occupational Awards – Awards that are not based on the business itself, but rather the occupations of the employees. Some common occupational categories include the Clerks Private Sector Award and Professional Employees Award.
3. Industry and Occupational Awards – Awards that provide coverage for both industry and occupation and are usually used in manufacturing, plumbing and healthcare industries.
4. Miscellaneous Awards – Awards that provide coverage for those who are not covered by an Industry or Occupational Award.
5. Award Free – Those who aren’t covered by any of the above are classified as Award Free.

The Award Coverage Process

Understanding and selecting the appropriate Awards for your organisation can be an extremely complex process. To assist with this, CCIQ has developed an Award Coverage Process to help business owners and HR personnel make the right decisions.

Step 1: Identify the industry your business operates in

The vast majority of businesses will fall into a common industry, and sometimes multiple Industry Awards can apply to your business. For some industries like retail, fast food and hospitality, this is very straightforward, but it can also be very complicated depending on the nature of your business and how it operates.

The best way to identify the Industry Award that is suitable for you is to rule out the Awards that don’t provide coverage. You can do this by reading the Coverage Clause and using a process of elimination to find the Awards that could potentially provide coverage.

Once you’ve narrowed it down, you’ll need to review the Awards in a little more detail. Here you’ll use the dictionary provided by each Award, as well as the Classification Structure, which sets out what the Industry Award will cover.

Step 2: Classify your employees under the Award

Once you’ve found the correct Award that applies to your industry, you have to identify if it will apply to your particular employees.

To classify employees under that Award, you’ll again need to review the Classification Structure in detail, and through a process of elimination, rule out which levels an employee can’t be classified at.

It might be helpful here to refer to the position description of your employee. It is not uncommon for businesses to reverse engineer the Classification Structure to develop a position description for an employee. That way there is no dispute as to what level that employee will be under in the chosen Award.

Some classifications are very objective and others subjective. Start with objective then move to subjective, making judgement calls to substantiate determination.

Step 3: If there is not Industry Coverage, an Occupational Award may apply

If you’ve reviewed the Industry Award but there is no Classification Structure for a particular employee, then you’ll need to review the Occupation Awards.

There are only a few Occupational Awards, but it is still important to check if any apply to those working in your business. These Awards also have a Coverage Clause and Classification Structures, meaning it is a matter of repeating the above steps of finding a potential Award and determining a Classification under the Award by a process of elimination.

This Award doesn’t cover the business, but it does cover the work the employee is doing.  Again, you might like to reverse engineer the Classification Structure for the position description so there is no dispute as to what level your employee is classified at.

Step 4: If your employees cannot be classified under an Industry or Occupational Award, a Miscellaneous Award may apply

In the rare case that your employees cannot be classified in the above classifications, they may be covered by the Miscellaneous Award.

The Miscellaneous Award is there to catch low income roles that are not considered professional, highly skilled or high up the food chain in a business. This Award provides the minimum baseline entitlements that are found in all the other Awards, such as overtime, penalty rates and annual leave loading.

Once you’ve found potential coverage under the Miscellaneous Award, you’ll again follow the steps outlined above to select the best coverage.

Step 5: When coverage under an Industry, Occupational or Miscellaneous Award has been ruled out

If you’ve got an employee that is not covered by any of the above, then they can be classified as Award Free. This is quite common in high level positions including those who need Tertiary Qualifications to support their role, are considered a professional in their occupation, are a member of an employee association body, need an accreditation to be practising their profession or are a high-level manager who has a great deal of autonomy in an organisation.

Those in these positions are generally considered high income earners and sit well above the national minimum wage. These sorts of roles are only entitled to the baseline entitlements under the National Employment Standards and the remainder of entitlements for that employee will come from a contract itself.

Key takeaways

• Award Coverage can be very simple or very complex, depending on the facts of the situation, what is going on with your business and what role the employee is doing for your business. That’s why it is important to not look at your business as a whole, but instead look at employees individually and what they do for your business.
• It is essential to look beyond the fancy and fluffy job titles, as they don’t always reflect the actual work being done and can be very obscure.
• Pick the Award that best suits the employee. You don’t get to choose the Award that you want to apply.
• Businesses and roles change overtime as can Awards, Classifications and Coverage. It is important to review what your Award, Classification and Coverage is as part of regular reviews, to make sure you don’t end up in a situation where your employee is not being given their base entitlements or the salary you’re paying your employees doesn’t match their baseline entitlements.
• If you need assistance, ask for help and ask questions. You don’t want to get this wrong. CCIQ helps businesses everyday to select the right Award Coverage for their employees.