Quick Guide to Paying Employees Correctly

Updated: Jul 28

We have put together this Quick Pay Guide to help you find out if your employees are being paid correctly under the Award/s applicable to your business.


If you are certain that an enterprise agreement or other registered agreement applies to your employees, you can adopt a similar process - Simply exclude step 1.


STEP 1. FINDING THE RIGHT AWARD


The first step in finding out if your employees are being paid correctly is by finding out which Modern Award applies to them.


Finding the right Award can be tricky, however, there are a few different resources available that can assist you in finding the Award that applies to your employees and your business.


It is important to remember that depending on the type of occupation the employee performs and the industry your business operates in, your employees may not all be covered by the same Award.


For example, if you run a local heavy haulage business that has a mix of drivers and administration employees then two Awards would likely apply in your business. Your drivers would likely be covered by the Road Transport and Distribution Award 2020 and your administration team would be covered under the Clerks – Private Sector Awards 2020.


Below are a few different resources that can help you determine which Award/s apply to your employees:


a) Fair Work Commission List


If you have an idea of which Award may apply to your business, then going to the Fair Work Commission website may be a good starting point. Here you will find a list of all the Modern Awards listed in alphabetical order. This website is very easy to navigate with finding Awards and reading the Awards themselves.


Click here to go to the Fair Work Commission Modern Award list.


b) Coverage & Classifications


Following on from the above, you may still have some uncertainty about an Award and whether it is the correct Award that applies to your circumstances. There are two key sections in each Award which will help you determine whether it’s the right one.


  • Coverage – this section outlines which industries/ occupations the Award covers, and also what it does not cover; and

  • Classifications Structure & Definitions (usually found in Schedule A of the Award but can hide in other places throughout the menu) – this section will break up each classification by detailing indicative skills, experience and the type of duties for each level or ‘classification’.

c) Fair Work Ombudsman Tool


If you are unsure of which Award applies to your business, then the Fair Work Ombudsman Tool is another great resource.


This tool asks a series of guided questions. It checks firstly whether a registered agreement covers the employee/s. If it does, then no Award will apply to the employees covered by that agreement.


However, if you don’t have a registered agreement, or not all of your employees are covered by an agreement, then you will continue to other questions about job titles and the industry that best describes your business. Based on the information you provide, the Fair Work Ombudsman Tool will (hopefully) then find which Award would best apply to your employees.


Click here to use the Fair Work Ombudsman Tool.

STEP 2. FINDING THE RIGHT CLASSIFICATION


For an employer, it is important to ensure you are aware of which classification applies to your employees and that they are being paid at least the minimum pay rate for that classification.


Every Award contains a classification/definition section, which we recommend employers read thoroughly, to help them determine which classification applies to each employee.


It’s important to note that often, employees covered by the same Award might sit at different classification levels, depending on their tasks, level of responsibility, and years of experience, just to name a few factors.


The Award will break down each classification by describing indicative skills and qualifications that employees should hold and the duties they might be responsible for.


Once you know which classification applies, you will then be able to confirm the minimum pay rate.

STEP 3. FINDING THE MINIMUM AWARD RATE OF PAY


There are a few different resources that can help you find out what the minimum Award pay rate will be:


a) The Award


Every Award will list the minimum rates of pay for each classification. You can find this by going to the Award and finding the ‘Wages and Allowances’ section.


It is important to keep in mind that the pay rate listed in the Award will just be the minimum pay rate and will most likely not include any type of all-purpose industry allowances, travel allowances and casual loading, if these types of entitlements are applicable.


b) Pay Guide


Every Award will have a separate Pay Guide that provides all the pay rates applicable to every type of employee covered by that Award. This includes permanent employees, casuals, juniors (20 years old or younger), and what to pay when employees work overtime, weekends, public holidays etc.


The pay rates in the Award Pay Guides will also list any type of industry or occupation allowances that would apply and whether they are included in the pay rates or paid separately.


To find the Pay Guide for your Award click here.


c) P.A.C.T – The Pay and Conditions Tool


Another way to find out the minimum pay rate is by using the P.A.C.T – Pay and Conditions Tool - which is found on the Fair Work Ombudsman website.


By using the P.A.C.T you will be able to find the minimum pay rate, and also common overtime and penalty rates, and any allowances you select. You also have the option to check pay rates for junior employees, trainees and apprentices, as well as the rates and allowances that applied in previous years.


To use the P.A.C.T you will need to know which Award and the classification that applies.


You can find the P.A.C.T here.

STEP 4. WHAT ELSE DO I NEED TO CONSIDER?


a) Allowances


Depending on the industry your business operates in, and the occupations you employ, you may find that additional allowances apply to your employees.


To find more about allowances, you can read this in the Award under ‘Wages and Allowances’. This section will list which allowances apply, including a description of the amount payable and in which circumstances. Allowances are also listed in the Pay Guide for each Award but often the descriptions are not included.


Examples of allowances that are often overlooked that you may need to consider include various travel allowances, laundry/special clothing allowances or reimbursements, meal allowance for working overtime, on call allowance etc.


b) Overtime Rates


Overtime is another important factor in whether an employee is paid correctly.


Depending on when overtime is worked and how many additional hours are worked, this can vary (increase) the pay rate that should be paid to the employee. For example, when an employee has worked 38 hours for the week but is asked to work overtime (additional hours) on Friday, a higher rate of pay will generally apply. Some Awards require overtime to be calculated on a daily basis, rather than weekly.


You can generally read more about any overtime rates that apply to an Award by checking the ‘Hours of Work’ or ‘Overtime’ sections. Alternatively, the Pay Guide will confirm whether any increased rates apply.


c) Penalty Rates


Penalty rates generally apply on Saturdays, Sundays and public holidays, and are another factor that is often overlooked by some businesses. Each Award will outline what penalty rate applies (if any), and will usually vary depending on the day the employee worked.


An example of where a penalty rate should usually be paid is if a full-time employee who works 38 hours per week and is rostered from Tuesday – Saturday. Although they work a regular 38-hour week, it is important to ensure that the employee is being paid the penalty rate applicable for Saturday and not just the ordinary (week day) rate.

You can read more about penalty rates in the Award, generally in the ‘Overtime and Penalty Rates’ section, if they apply. Alternatively, the Pay Guide will confirm whether any increased rates apply.


d) Hours worked outside the span of ordinary hours


Employers should be aware of the ordinary span of hours apply to each Award applicable to their business as this helps to determine when employees should be starting and finishing work, how they should be rostered and if any overtime or penalty rates apply if they are working outside the span of ordinary hours.


This information can generally be found in the Award under the ‘Ordinary Hours of Work’ and ‘Roster Arrangements’ sections, if it applies.


e) Annual salaries


While it is generally acceptable to pay an employee an annual salary, you should ensure it is in calculated, documented and audited line with the Award provisions.


For example, in the Professional Employees Award 2020’states the minimum annual salaries and hourly rates for each classification, along with some general provisions about how employees should be paid. However, it does not contain detailed requirements for calculations, documentation and auditing.


The Clerks – Private Sector Award 2020 on the other hand, is much more detailed around what is required by the employer. For example, work hours are to be assessed every pay period to ensure that the hours worked are covered by their salary. If the employee works more hours in a pay period than is covered by the salary, then those extra hours should be treated as overtime. The Clerk’s Award also contains several other detailed requirements, including how the salary is to documented for the employee.


The annualised wage provisions vary greatly between Awards so it is recommended that employers thoroughly read the applicable section of the Award and ensure they comply with it.


It should also be noted that not all Awards contain provisions referring the paying of an ‘annual salary’. When it is not obvious that a particular clause will apply, always check the clause regarding ‘flexibility’ or ‘individual flexibility arrangements’ – it will usually be hiding there!


f) Flat Rates & Individual Flexibility Arrangements (IFA)


Whilst flat rates and IFA’s and are a good option for some industries, employers must ensure that employees are better off overall when compared to the minimum rates and allowances of the Award, taking in to consideration any applicable overtime, penalty rates, shift loadings etc (ie. if they were paid specifically as per the Award entitlements).


You should do your due diligence calculations often and document the arrangement in accordance with the Award section relating to ‘flexibility’ or ‘individual flexibility arrangements’.


g) Annual Increases – Every July


It’s also important to remember that every year, usually in July, award rates and some allowances increase. You can read about the latest increases this month in our July Employer Update here.


Every day, Edwards HR supports businesses with wage compliance, auditing and commercial protection initiatives that are both cost effective and tailored specifically to your business.


Contact us today to find out how we can support your business.


Emma Edwards – 0459 818 011 or emma@edwardshr.com.au Alicia Hansen – 0497 497 342 or alicia@edwardshr.com.au Feel free to share this offer with others in your network.