It feels like we’re regularly seeing media releases of companies mistakenly underpaying staff lately. It’s a reflection of the not-so-simple, Modern Award system, that many businesses employ their staff under. Interpreting the terms of the Modern Awards can be challenging, especially for those not well-versed in the language used, or without proper attention to detail. However, there are steps you can take to reduce the likelihood of also inadvertently underpaying your employees.

  1. Start by ensuring you are applying the correct Modern Award. There are 122 Modern Awards, and your business may be covered by one, multiple or in some cases, no award. (In some industries/roles there is no award coverage, or every role may be covered by an enterprise agreement). It’s not uncommon for there to be two relevant awards in one workplace. You can check the coverage of the award in the Coverage clause, which is usually clause 4, however, you should also read the job classifications, which will either be set out with the pay rates or in a Schedule towards the end of the award.


  1. Pay rates and other entitlements cannot be ‘set and forget’. Once you’ve established the appropriate award, and the relevant pay level, you will also need to understand what criteria need to be met for a wage increase to apply. For example, in some awards, as an employee becomes more experienced, or has been engaged with the employer for a set period, they will be entitled to move up a classification level, which in turn provides them with a higher pay rate. Implementing reminders in your business to review employees experience and time worked in relation to pay rates is imperative to avoid employees staying under the incorrect classification.


  1. Not only do you need to understand the calculation of the pay rates and when overtime and penalties need to apply; you also need to understand which allowances will apply to your employees and under which circumstances. In the Building and Construction General On-Site Award 2010, there are well over 50 allowances listed, many of which have multiple levels of application. Taking the time to properly read and review all the terms of the applicable Modern Award will help you to understand the requirements, and not miss important, relevant clauses.


  1. In many Modern Awards, casual employees, other than irregular casual employees, have the right to elect to have their employment converted to full-time or part-time classification after employment for 6 months. The employer should notify the employee of this right, in writing, within 4 weeks of meeting their 6-month anniversary. Significant changes like this are another area where inadvertent mistakes can be made with re-calculating pay rates for a new employment status.


  1. Calculations of overtime and penalty rates can vary between awards and need to be read carefully to ensure correct interpretation. In some cases, there will be differences in the application of these rules between full-time/part-time and casual roles too.


The reality is, the Modern Award system is likely to be here to stay for some time. Working with a partner like Workplace Central, to review your pay structures, using cloud-based payroll technology, to calculate the correct application of allowances, hours of work, overtime and penalties, could save you a lot of time and resources interpreting the award yourself. Contact our team today if you’d like to know more.