Previous articles in this series have addressed the role of the Legal Services Award 2020 (the award) in the private legal workplace, the types of jobs covered by the award, the types of employment allowed under the award, and hours of work provisions of the award.
The award also regulates minimum payments to employees. The minimum weekly and hourly rates for different classifications of full-time employees are set out at clause 15.1 of the award. Schedule B to the award contains a summary of minimum hourly rates of pay, including overtime and penalty rates.
Employees carrying out duties for one or more days above their normal classification rate are entitled to minimum higher duties payments (clause 15.3). Clause 15 also contains minimum rates for junior employees and employees subject to traineeships or the supported wage systems.
In addition to their wages, employees may be entitled to award allowances in certain circumstances under clause 18. These include a meal allowance and travel payment in overtime situations, uniform allowance, living away from home and protective clothing allowances as applicable.
Of particular note is the requirement to pay employees a vehicle allowance where an employee is required to use their own vehicle for work purposes (clause 18.4). At the time of writing, an allowance of $0.78 per kilometre is payable for motor car usage. Where an employee is required as a condition of their employment to provide a motor vehicle for work purposes, then the employer is required to pay all expenses including registration, running and maintenance (clause 18.4(b)).
Requirements in relation to the payment of superannuation are set out in clause 19 of the award. Compulsory superannuation contributions must be paid into a fund of the employee’s choice, including any additional contributions authorised by the employee.
If the employee does not have a fund of choice, then clause 19.4 sets out the particular superannuation funds into which payment may be made under the award. Employers need to be careful to make payment of contributions into an award-compliant fund.
Rules about payment of wages are set out at clause 16 of the award. Wages must be paid fortnightly, unless agreed otherwise, by cash, cheque or EFT into a bank or financial institution account nominated by the employee. All amounts due on termination of employment must be paid within seven days of the employment ending.
It is important for employers to understand that an employee cannot be paid less than the minimum rates (including overtime and penalty rates) and allowances specified by the award, even by agreement. There are serious penalties for failing to observe these provisions.
An employer can pay above award rates but it is equally important that properly documented arrangements are put in place to formalise such arrangements and provide the employer with a level of protection. There are two choices open to employers. The first is to utilise the annualised wage arrangement under clause 17 of the award.
This enables an employer to pay a full-time employee an annualised wage in satisfaction of any or all of the award provisions relating to minimum rates, allowances, overtime, shift penalty rates and annual leave loading.
An annualised wage must be no less than the amount the employee would have received under the award for their work. It is necessary to specify in writing:
- the annualised wage payable
- which applicable award provisions are satisfied by payment of the annualised wage
- the method of calculation of the annualised wage, including specification of each separate component of the annualised wage and any overtime or penalty assumptions used in the calculation and
- the outer limit number of ordinary hours which would normally attract a penalty rate payment and the outer limit number of overtime hours which the employee may be required to work in a pay period without any extra payment.
If an employee works more than the hours provided under the annualised wage arrangement in any pay period, then the employee will be entitled to separate payment in addition to the annualised wage. The clause also requires an annual comparison review with the award and that detailed records of hours of work and breaks are kept and signed off by the employee each pay cycle.
An alternative is to rely on a common law ‘offset’ clause in the contract of employment in order to pay an annual salary rate to an award covered employee. The Fair Work Commission has said that employers may make contract arrangements to pay employees in accordance with a salary arrangement that compensates or ‘buys out’ identified award entitlements without engaging with the annualised wage arrangements provision in the applicable award. However, care needs to be taken to ensure:
- the contractual offset clause is precise about the award entitlements being covered by the above award wage
- records of hours worked will still need to be kept and regularly reviewed to ensure that the employee is in fact receiving as much or more than they would be entitled to receive under the award, and
- the payment of an above-award salary amount does not result in the employee being paid less than the award requires for any particular pay period.
Given the recent publicity surrounding large corporate underpayments, employers should consider their own particular circumstances in determining the best approach in order to ensure award compliance.
Rob Stevenson is the Principal of Australian Workplace Lawyers and a QLS Senior Counsellor Email firstname.lastname@example.org.