Backpay above award payment

Paying above the award? Do it right the first time.

You’ve worked hard to make sure you’re competitive by paying your people a good wage for the work you need them to do and for your industry. Perhaps to the point that you pay a higher flat rate so you also don’t have the stress of constantly calculating overtime and all those confusing allowances?

So it’s a bit of surprise one day to find that you’re still liable for back pay on overtime and allowances when a disgruntled employee asks the question.

Sound like a scary story? Or worse, has this already happened to you or someone you know? And what’s worse, you were probably just trying to do the right thing by everyone.

Either way, this employer ‘nightmare’ is often just the result of not using the right method to agree the higher rates of pay with your employees.

So where does this leave you?

Lady Justice wears a blind fold and carries a set of scales for a reason… the law is impartial and considers only the facts on ‘her’ scale. For the employer in our opening example, it might seem more in favour of the employee if the facts are missing in any shape or form though.

Ask a business owner about ‘scales of justice’ and they might tell you they get it but… they need to be flexible, especially in a very competitive gig economy.

Not surprisingly, the powers-that-be are interested in flexible business but also how they go about doing this (e.g. via ‘facts’ like awards, regulations, minimum conditions of employment and national employment standards to name a few).

The challenging part is therefore not whether you can do it but how to do it correctly using the ‘facts’.

A ‘fair go’ for you too.

I believe Australians pride themselves on being fair – with our industrial relations systems there to put some rules in place for how this is to be achieved. They’re not called ‘Fair Work’ by chance!

This concept of being fair applies equally to both the employer and the employee (remembering the blind worn by lady justice).

So because of this,  the powers-that-be will have most likely created a method to allow you to negotiate higher rates for your people and be protected at the same time.

You just have to know where to look!

Where to from here?

When we’re asked by clients what to do in this situation, the different circumstances will dictate a path to solving their problem.

But here are a few immediate things everyone can check:

1. What does your award say you need to do to pay a flat rate?

  • This will depend on what industrial relations system you fall under for a start, and whether you’re offering award-free employment.
  • Once you know this, you can then determine if the award provides you a guide-map on how to offset over payments in certain cases (putting some ‘facts’ into your side of the scale)
  • Click here for National awards
  • Click here for State awards

2. What does your contract of employment say?

  • Chances are it doesn’t have any provision to allow for above award payments to be offset against a future claim – but check just in case. If it doesn’t, it’s highly likely you need a new contract.

3. Do you differentiate between permanent and casual employees with above award payments?

  • Especially important if you don’t have an ‘offsetting clause’ or what the casual loading covers.
  • Potential individual flexibility agreements may differ.
  • The Fair Work Regulations 2009*  have also recently been amended to provide that, in certain circumstances, employers may claim that an employee’s casual loading payments should be offset against certain NES entitlements owing to the employee. However, one of the tests for this will be whether the contract of employment expressly allows for this!

We hope that you’re now a little more up to speed on a very common pay issue for SME’s in Australia but if you can’t find what you’re looking for, contact one of the RAW HR team and we’ll point you to the correct resources so you can do some initial ‘fact’ checking for yourself.

*Fair Work Amendment (Casual Loading Offset) Regulations 2018 is the specific and recent amendments relating to offsetting casual loading… if you’re interested to Google some more 🙂


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