It is a standard response from many employers that they pay ‘well above the Award’. Regrettably many employers have only a passing knowledge of the Award minimum rates of pay let alone the numerous allowances and various conditions that apply in the payment of shift loadings, weekend penalties and overtime rates of pay that might apply.
One little reality about the application of penalties and overtime rates relates directly to the payment of an hourly rate that is above and in some cases well above the prescribed minimum Award rates.
Most employers simply apply the overtime rates and penalty loadings specified and required under the various Awards to their over Award payment – in many cases this can lead to weekend and overtime rates of pay that – particularly in times of economic stress – are unsustainable.
The reality is that there is no lawful requirement for an employer to apply penalties and loadings to over Award payments. The legal obligation of employers is to ensure they do not pay less than the prescribed minimums of the Award. In essence this means that you can offer an attractive rate for ordinary hours but you can use the Award minimums to calculate your pay rates for weekend and overtime. Obviously this must be clearly stated and specified within your employment contract documentation to ensure clarity and compliance with your obligations as an employer.
In this way you can – to some degree – offset your higher hourly rate of pay for ordinary hours and limit the time and a half and double time calculations that would ensue by calculating on these higher rates. A simple example is a situation where the Award rate is say $25.00 per hour for ordinary hours, as the employer you offer $30.00 per hour. Using your higher rate you may be up for a $60.00 per hour payment on a Sunday, but by using the Award rate limit this to $50.00 per hour – a saving of $10.00 per hour. You are still compliant with the Award; the rate is still favourable but potentially more sustainable than $60.00 per hour. Apply this to a Public Holiday of 250% and you are offsetting nearly $13.00 per hour.
Of course, if by custom and practice you have always calculated your rates based on your over Award rates then you may be heading for troubled waters if you try and amend your practices without consultation and agreement from your employees. However all things are negotiable and having a discussion with employees as to the reasons for this may elicit support for an agreed change to rates. Of course the debate over penalty and overtime rates is a matter currently under review in the Modern Awards with a push by employer groups to limit the application of weekend penalties to a blanket 25% in the light of 7 day trading. We await developments in this area.
Need more information? – call us to discuss.