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Is it time to simplify Australia’s awards system?

By Deanne Firth
08 February 2019 — 2 minute read

With a number of companies tripping up on the payment of penalty rates, allowances and superannuation, is it time we simplified Australia's awards system?

Last year the Australian Federal Police announced they had miscalculated superannuation for 3,700 employees estimated at $22.3 million dollars.

The short payment came about from the terms of their 2007 enterprise agreement that expanded the types of allowances that were eligible for superannuation purposes to include night shift and overtime.

Lush underpaid 5,000 workers $2 million after the move to the Fair Work Acts system of “modern awards”. Super retail group; owner of Rebel, Supercheap and BCF discovered, in August 2018, $7.9 million in underpayments to 4,500 staff. The underpayments related to penalty rates and allowances as well as overtime hours and time in lieu.

In the above instances, there was no suggestion that the short payments were made intentionally or knowingly. What this indicates is a major problem with the complexity of the awards system in Australia. In these three examples alone not only did the employer make a mistake but 13,200 employees did not notice that they were paid incorrectly. These were not businesses deliberately underpaying staff where questioning of payments would result in dismissal.

Awards are a legal document and as such are written in a complex manner. For example, under the Cleaning Services Award 2010 there are three levels of classification, different rates for ordinary hours, Saturdays, Sundays, Public holidays as well as shifts that start prior to 6am, commence after 6pm or for permanent night shift as well as split shift allowances. Additionally, there are allowances for toilet cleaning - if a large portion of the day involves cleaning toilets an allowance of 1.766 per cent of the standard rate per week is paid or 0.359 per cent per shift, a cold place and hot place allowance if you work more than one hour of your shift in a cold or hot place – the amount of allowance varying depending on the temperature. Height allowance, own transport allowance, first aid, leading hand, meal allowance if you work an additional 2 hours without prior notice, refuse collection allowance if a major portion of time is on refuse collection, uniform, higher duties allowance – if you perform higher duties for more than 4 hours in the day you are paid for the whole day if under 4 hours just the actual time you performed higher duties.

Whilst I acknowledge you can’t simply cut out all the allowances and make a flat rate payment across all industries, I do believe more can be done to simplify the awards system.

I believe one of the easiest changes that could be made is that instead of increasing the superannuation guarantee rate to 10% in June 2021 that superannuation is added to all allowances – so that super is calculated as a flat rate across all wages. This would reduce the mistakes around superannuation and allow for easier data matching.

Single Touch payroll (STP) for businesses with less than 19 employees passed the Senate in December 2018, meaning all businesses will have to comply with STP from 1 July 2019. STP aligns employers reporting obligations to the ATO with their payroll process. This gives the ATO real time data about salaries and wages, PAYG and super. This will help the ATO better monitor superannuation guarantee payments but it will not help monitor whether actual wages paid are correct per the awards system.

Awards are too complicated, even after the award simplification process. If the Australian Federal Police can’t manage to pay their staff correctly how can the 730,000 small employers in Australia be expected to get it right.

Deanne Firth, director, Tactical Super 

Is it time to simplify Australia’s awards system?
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