Fair Work Commission hands down 3.3% wage increase

The Fair Work Commission today issued its decision in the 2016-2017 Annual Wage Review.

As we predicted, the decision came in at 3.3% (about midway in our predicted range of 3 – 3.5%).

That takes the Federal Minimum Wage to $694.90 per week, or $18.29 per hour with effect from 1 July 2017.

This constitutes an increase of $22.20 per week to the weekly rate or 59 cents per hour to the hourly rate based on a 38 hour week.

The increase will also apply to modern award rates effective from 1 July 2017.

In the decision summary, the Panel stated: “In previous Reviews, the Panel has accepted that if the low paid are forced to live in poverty then their needs are not being met and that those in full-time employment can reasonably expect a standard of living that exceeds poverty levels. While we have not departed from that position, we acknowledge that the increase we propose to award will not lift all award-reliant employees out of poverty, particularly those households with dependent children and a single-wage earner. However, to grant an increase to the NMW and award minimum rates of the size necessary to immediately lift all full-time workers out of poverty, or an increase of the size proposed by some parties, is likely to have adverse employment effects on those groups who are already marginalised in the labour market, with a corresponding impact on the vulnerability of households to poverty due to loss of employment or hours.

The level of increase we have decided upon will not lead to inflationary pressure and is highly unlikely to have any measurable negative impact on employment. It will, however, mean an improvement in the real wages for those employees who are reliant on the NMW and modern award minimum wages and an improvement in their relative living standards.”

Employers need to review employees’ wages to ensure that they continue to receive at least what they would be entitled to under the relevant award.

Those who have enterprise agreements in place need to check whether the agreement provides for passing on of the Annual Wage Review decision or whether they need to adjust wages because wages provided for under the Award will fall below the new award rates from 1 July 2017.

 

New bill set to raise Fair Work penalties by 900%

The federal government recently presented the Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017 to parliament and it is expected to pass into legislation with bipartisan support.

This bill has far reaching consequences with the proposed changes to the Fair Work Act 2009 including:

  • Introducing a higher scale of penalties for ‘serious contraventions’ of prescribed workplace laws up from $54,000 to $540,000 per offence for a corporation and from $10,800 to $108,000 per offence for an individual
  • Increasing penalties for record-keeping failures.
  • Making franchisors and holding companies responsible for underpayments by their franchisees or subsidiaries where they knew or ought reasonably to have known of the contraventions and failed to take reasonable steps to prevent them.
  • Expressly prohibiting employers from unreasonably requiring their employees to make payments (e.g. demanding a proportion of their wages be paid back in cash).
  • Strengthening the evidence-gathering powers of the Fair Work Ombudsman to ensure that the exploitation of vulnerable workers can be effectively investigated.

Particular attention is also being given to exploitation of migrant workers so businesses need to ensure that visas are in order and any work limitations are complied with.

Ridgeline HR offers a range of services to support businesses in getting compliance right and minimising risks internally and across franchise groups and supply chains.

Fair Work Ombudsman’s new “Record My Hours” App

The Fair Work Ombudsman has released a new “Record My Hours” app to enable workers to automatically record their hours of work using geofencing technology.

In essence, what happens is the worker enters the location of their workplace and the app will automatically track and record the hours that they spend in that location.

The Fair Work Ombudsman has done this to tackle a problem that they commonly encounter in investigating underpayment of wages complaints and that is the employer’s failure to maintain or produce adequate or accurate records.

Between 1 July 2016 and 31 December 2016:

  • 64% of the court cases initiated by the Fair Work Ombudsman involved an element of alleged record keeping or payslip violations and
  • 347 infringement notices with on the spot fines ranging from $540 to $2,700 were issued for record keeping and payslip contraventions.

Employers should ensure that they are doing the right thing with payslips and record-keeping to ensure legal compliance, minimise risks of fines and, of course, because that is all part of looking after your people.

Information on pay slip and record keeping requirements is available here.

Myths in employing young people a target in 2017

In a recent media release, the Fair Work Ombudsman, Ms Natalie James, announced a 2017 campaign to address widespread underpayment of young workers across Australia. Here is part of what she had to say including commentary on 10 myths that the Fair Work Ombudsman’s officers commonly come across.

Ms James says that in 2017 her Agency will have a particular focus on proactively checking that employers of young workers are doing the right thing.

“Young workers can be vulnerable, so we place high importance on checking and treat cases of their rights being contravened more seriously, which means we are more likely to pursue enforcement action,” Ms James said.

Between July 2011 and June 2016, the Fair Work Ombudsman received more than 27,000 requests for assistance from young workers and recovered over $18 million for young workers who had been short-changed.

Ten common young worker myths the Fair Work Ombudsman encounters are:

MYTH 1: Paying low, flat rates of pay for all hours worked is OK if the worker agrees.
FACT: Minimum lawful pay rates are mandatory. In many jobs, penalty rates must be paid for evening, weekend, public holiday and overtime work.

MYTH 2: Lengthy unpaid work trials are OK.

FACT: Unpaid trials are only OK for as long as needed to demonstrate the skills required for the job. Depending on the nature of the work, this could range from an hour to one shift.

MYTH 3: Employees don’t need to be paid for time spent opening and closing a store or for time spent attending meetings or training outside their paid work hours.

FACT: If a meeting or training is compulsory, then it is work. Employees must be paid for all hours they dedicate to work and this includes time spent opening or closing a store. For example, if an employee is required to be at work at 7.45am to prepare for an 8am store opening, they need to be paid from 7.45am. 

MYTH 4: Employers can make deductions from an employee’s wages to cover losses arising from cash register discrepancies, breakages and customers who don’t pay.

FACT: Unauthorised deductions from an employee’s pay are unlawful. Deductions can be made only in very limited circumstances. 

MYTH 5: Employees are obliged to buy store produce such as clothing or food.

FACT: Employers cannot require staff to purchase store produce. This includes any items for which the worker may receive a staff discount. For example, an employer cannot require workers to purchase the particular clothing stocked in a retail outlet.

MYTH 6: Unpaid internships are OK for all inexperienced young workers looking to get a foot in the door.

FACT: Internships can only be lawfully unpaid when they are a requirement of a course at an authorised educational or training institution, or an approved programme of work under Social Security Legislation.

MYTH 7: Employers can pay young workers as ‘trainees’ or ‘apprentices’ without lodging any formal paperwork.

FACT: Employers must negotiate and lodge a registered training contract for an employee in order to lawfully be able to pay trainee or apprentice rates. An employer cannot pay an employee trainee rates just because they are young or new to the job.

MYTH 8: Paying employees with goods such as food or drink is OK.

FACT: Payment-in-kind is unlawful. Employees must be paid wages for all work performed.

MYTH 9: If a worker has an Australian Business Number (ABN) they are an independent contractor and minimum pay rates don’t apply.

FACT: Having an ABN does not automatically make a worker an independent contractor. Fair Work inspectors apply tests of fact and law to determine whether a worker’s correct classification is as an independent contractor or an employee. Whether an employer has labelled a worker as a contractor and required them to obtain an ABN may not be relevant.

MYTH 10: Pay slips aren’t mandatory – employers only need to give employees pay slips if they ask for them.

FACT: Employers must give all employees a pay slip within one working day of pay-day. Employers can give employees paper or electronic pay slips, such as a link sent via email.

There are no surprises here for us at Ridgeline HR because we also encounter misunderstandings like these in the course of our work.

 

Protecting against accessorial liability

The Fair Work Ombudsman has been very active in pursuing individuals who it believes have reasonably been a party to contraventions of minimum wages and conditions whether overtly in action or by omission or failure to exercise due diligence.

Investigations into cases involving large businesses such as Coles and Woolworths and Myer who contract work out to other entities which do not meet their compliance obligations have been undertaken from the perspective that the principal in the supply chain should have known and acted to prevent the non-compliance even though it was not the actual employer.

This raises questions about who might be considered an accessory to a contravention and here is what the Fair Work Ombudsman recently had to say about that.

Section 550

Under section 550 of the Fair Work Act; a person who is involved in a contravention of the Act is held responsible for that contravention. A person is involved in a contravention if they:

  • have aided, abetted, counselled or procured the contravention; or
  • have induced the contravention, whether by threats or promises or otherwise; or
  • have been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or
  • have conspired with others to effect the contravention.

What does this mean for individuals?

Anyone who is found to be involved in a contravention of the Act can be personally liable for compensating employees and paying penalties imposed by the court. The Fair Work Ombudsman has used this provision to hold company directors personally accountable for the actions of their companies. This effectively means that liquidating a company is no guarantee of avoiding the consequences of non-compliance with the Act.

But section 550 can extend to anyone involved in a contravention. This can include human resources and payroll officers, line managers, accountants and advisors.

What does this mean for companies?

If a company, as the employing entity, contravenes the Act: that company is automatically responsible for that contravention and may have penalties imposed by a court. But under section 550 a company that is not the employing entity, may be found to be involved in a contravention and may also have penalties imposed by a court.

This is important for companies to consider especially in their supply-chain and procurement processes. Effectively it means that companies cannot outsource their non-compliance. For example if one company contracts another company to supply cleaning staff; and those cleaners are underpaid: both companies may be held accountable by a court. 

This has broad implications for businesses that use outsourcing, franchise arrangements or complex supply-chains. The full scope of section 550 in these types of arrangements has not been settled by the courts, however, the Fair Work Ombudsman is determined to take action to ensure a culture of compliance is established and maintained broadly across all businesses.

You should also note that fines of up to $10,800 per offence can be imposed on individuals and up to $54,000 per offence can be imposed on companies.

What you need to do

Firstly, if you are an employer, ensure that you are aware of and comply with your own obligations as an employer and that these are properly documented in employment contracts/letters of offer etc.

Secondly, if you contract work out to another party, verify that that contract enables the other party to be capable of meeting its employment compliance obligations and that that other party actually does so.

Thirdly, if you are an internal HR Manager or other Manager, ensure that you have processes in place that genuinely test whether work contracted out is conducted in accordance with employment obligations (ie people are contracted and paid appropriately). This needs to be more than having the contractor just tick a box

Fourthly, if you are an external business advisor, ensure that the advice that you provide is competent and, if you are not confident of your competency in employment matters, engage a delivery partner to provide that competency.

Ways that we can help

Ridgeline HR has been providing just that sort of advice since we started in 2000. We have done this with hundreds of clients across all sorts of industries throughout Australia. We have serviced the members of an industry association and the clients of accounting firms for many years and we have been recognised by federal government agencies in the past for our expertise.

We now also offer a supply chain education and audit service which in essence involves us auditing supply chain participants’ compliance and advising them on any areas that they need to fix. This proactive approach to assuring downstream compliance provides a simple and practical approach to managing the risk of accessorial liability.

If you are interested in exploring ways in which we might be of assistance in these areas, call Peter Maguire on 0438 533 311 or email peter@ridgelinehr.com.au

Will your termination pass the “3 tents test”?

Having been in the field of human resources management for over 30 years, there have been plenty of occasions where I have had to consider disciplinary action and termination of employment as remedies for misconduct.

In doing so, we need to consider fairness from a couple of angles:

  • Substantive fairness which requires that the action taken would not be harsh, unjust or unreasonable and
  • Procedural fairness which is about ensuring that due process has been followed and the principles of natural justice have been complied with

A process that I use to consider the substantive fairness of an action is to assess them against the “3 tents” namely:

  • Content: what actually happened, ensuring that you are aware of the facts of events that have given rise to consideration of action?
  • Intent: was the action or dereliction of duty or other offence deliberate or was it due to a misunderstanding or a heat of the moment thing and is it in or out of character for the individual concerned?
  • Extent: what was the effect of the action or dereliction of duty or other offence on the business and/or employees and/or other parties?

Of course there are the procedural elements to attend to as well but ensuring that the action that you propose will stand up to the “3 tents test” is a good start.

7 steps to effective policies

One of the most common requests we get at Ridgeline HR is for assistance in developing HRM policies and procedures for our clients.

Many businesses think that simply having a policy is enough to demonstrate compliance but there is actually a lot more to it than that as businesses too often find out the hard way.

It is not much good having a policy if it is not practised in fact and the fact is that, if a business doesn’t follow it’s own policies, it automatically has a compliance problem.

And there is quite a bit of work involved in ensuring that policies are both appropriate and managed in the right way to achieve their objectives.

There are 7 steps to effectively implementing policies:

  1. Be clear about why the policy is necessary(and, if it isn’t, don’t do it).
  2. Ensure that the policy aligns in content and presentation with your vision, values and strategy (don’t create contradictions).
  3. Communicate the policy appropriately to everyone to whom it has application (on launch and progressively through inductions, refreshers etc as necessary).
  4. Train people who have roles to play in application of the policy in how to perform those roles in the right way.
  5. Assess risks (eg people who might have potential to breach the policy or need additional support to comply with it) and implement appropriate risk management strategies.
  6. Consult people and review practice regarding the policy to ensure that it is working as intended.
  7. Review the policy annually to take account of any legislative or best practice developments as well as organisational experiences to continuously improve it and ensure ongoing compliance – return to Step 1.

Perhaps the thing that I find most remarkable about most organisations which focus on risk management is that they don’t actually assess risks that exist in their organisations when they implement a policy. See Step 5 above.

There is too often a mentality that, if the rules are communicated and an individual then doesn’t follow those rules, the risk is transferred from the business to that individual.

For organisations that might be in that space, I suggest that you consider why the policy is needed in the first place – ie what purpose (other than complying with a legal obligation) does it serve in the management of people?

Or, to put it another way, why did it become a legal obligation in the first place?

Do your policies exist for policies’ sake or do they have a positive impact on your people and culture?

When do I hire a HR Manager?

This is a question that I am commonly asked by SMB owners, often when the business is a little out of control because it has grown to the point where the owner cannot personally supervise everything that is going on anymore.

My initial response is that you are asking the wrong question up front and you should first ask: “What is the best way to manage the growing number of people in my business?”

Firstly let’s break that down into component parts which I call the 4Cs of people management:

C1: Commitment

This is the base level of people management and is fundamentally about ensuring that the business  has a plan providing clear direction and understands and is compliant with its legal obligations as an employer in relation to such things as:

  • Wages and conditions of employment
  • Workplace health and safety
  • Equal opportunity, discrimination and harassment
  • Privacy

C2: Capability

This is about building the processes for managing people which include or add to what you have done in compliance but also facilitate:

  • Effective conversations about team and individual performance and development
  • Skills analysis and learning and development activities that are aligned with business needs
  • Reward and recognition that has meaning, is properly aligned and is affordable, providing the right return on investment
  • Targeted recruitment and retention of the right employees and fair and effective management of the exceptions.

C3: Competency

Having put the systems in place, you need to develop the abilities of your people to apply them and comply with them in a consistent and competent manner by:

  • Training your leaders and managers in the application of the processes with their teams and individual team members
  • Educating all of your people about the processes and their roles and obligations
  • Ensuring that you practice what you preach and both require and allow your managers to do their jobs and
  • Incorporating the leadership qualities you need in your criteria for selecting your managers

C4: Culture

This is when it all comes together – you know that you are compliant with your legal obligations, you have people management systems that work and your leaders and managers are really driving improvements because you:

  • Have a clear vision and business strategy with measurable goals for improving business performance and “your people get it”
  • Understand the competencies that you need and your investment in training and development delivers improvements in performance
  • Engage your people in improving business performance and recognize and reward them for their contributions and
  • Have leaders and managers who ensure that your people are on board, contributing and continuously improving their capabilities and performance.

The truth is that your specialist HR resource needs (ie the skill set required) will differ depending on where your business is in the above hierarchy.

At levels C1 – C2, there is a greater emphasis on administration, compliance and risk management whereas at C3 – C4, there is a much more strategic focus on organizational development, engagement and leadership.

What will not change is that you need your managers and leaders to be on board every step of the way because they are the real people managers every day.

That leaves us with a different but much better question: “How do I best support my managers to do their jobs better?”