How new timekeeping rules will change workplaces

Hannah Wootton

Feb 19, 2020

AFR

Employers will soon be forced to record the hours worked by salaried staff under new changes that have shaken up the workplace.

Underpayments at Woolworths, Coles, Target and Ashurst that have come to light in recent months have stemmed from a failure to ensure salaried staff working overtime or penalty shifts were adequately compensated for that time.

Kingston Reid managing partner Alice DeBoos says common law contracts won’t be affected by the new rules.

While a general obligation to do so has existed for years, controversial Fair Work Commission rules coming into force on March 1 will increase the burden on employers to show they are reconciling hours and pay for award-covered staff.

“There are certainly changes that are coming into a large number of modern awards on March 1, but those changes are not the reason why there’s an issue with the payment of salaries at the moment,” Alice DeBoos, managing partner of boutique employment law firm Kingston Reid, told The Australian Financial Review.

The new rules are only an extension of the existing general obligation on employers to ensure staff are not underpaid for the full amount of hours they work, Professor John Howe of the University of Melbourne said.

“The general obligation is a fundamental principle of our system that if you perform work then employers have a legal obligation to meet the legal minimum standards of that work.

“There’s now an additional obligation [under the new rules] but it’s more about employers verifying they meet that [general] obligation than any change in relation to what they actually owe employees. Now they just have to make more effort to show they are complying.”

More red tape

Industry bodies have pushed back against the new obligations, saying the burden of recording hours is unfair to both employers and employees.

The model clauses provided by the FWC under the new rules require annual reconciliation of pay with hours and that these hours are accurately recorded.

Professional services firms ripe for underpayment scandal

But the ruling also imposes “outer limits” requirements that notify staff how many overtime or penalty rate hours they can work in a week before they veer into territory where underpayment of the award may be occurring.

This means employers will realistically be required to perform reconciliations every pay period or roster cycle.

Further, two of the model clauses prohibit employers from requiring their staff to work in excess of a prescribed number of penalty rate or overtime hours in any pay period or roster cycle.

Again, employers will not be able to ensure they meet these obligations without keeping on top of hours worked in those periods.

However, employees can be hired under either an annualised salary arrangement pursuant to a modern award, or an annual salary pursuant to an offset clause in a common law contact.

The March 1 rules only apply to the former, according to Ms DeBoos.

“The vast number of employers use common law contracts with a set-off clause, which says something like ‘the salary we pay you includes an amount for annual leave loading, penalties and reasonable overtime’,” Ms DeBoos said.

IR Minister Christian Porter said penalties would become “unavoidable” for employers that underpay workers.

But set-off clauses do not mean employers do not need to record their staff hours and ensure they are still being paid at award rates.

Australian Industry Group workplace policy director Stephen Smith said the set-off clause may avoid the more detailed prescriptions of the new award rules but wouldn’t allow employers to escape obligations to record salaried workers’ hours.

“Even though you can have a set-off clause its utility is reduced because you’ve got nothing that stops the regulations applying.”

“Even if you pay someone under a common law contract, you don’t know that is setting off award entitlements unless you know how long that person is working,” Ms DeBoos added.

She said this means employers need to keep across their staff hours to make sure they are meeting award entitlements.