Employers with employees covered by a modern award must ensure that they review the minimum pay rates that are applicable in the Award every year to avoid the risk of underpaying staff. Not only will underpaying staff affect the morale and employee satisfaction in the workplace, it can also come with hefty penalties from the Fair Work Commission.
How do I ensure I am paying staff correctly?
The first thing to determine is which Award is applicable to the workplace. There are currently 121 modern Awards across a number of industries and occupations, making it challenging to determine which Award is most applicable. Reviewing the clauses including coverage, definitions, and classifications will help determine which Award is most applicable for the workplace.
Once the appropriate Award has been identified, the next step is to classify the role. This is an important part of the process as it will determine the applicable pay rate. This step involves assessing the duties, qualifications, and experience in the Award and matching it with those in the role. The best tool to aid in this assessment is the position description. Classifying a role incorrectly can result in underpaying an employee and can put a business at risk of a claim so it is important to take the time to do this correctly.
What is a BOOT and does it apply to me?
The ‘BOOT’ is an acronym used for the ‘Better Off Overall Test’. It is used to assess the terms and conditions in a relevant modern Award to determine whether an employee’s pay and conditions are more or less beneficial than the Award.
The BOOT looks at the following factors in the employment relationship:
- Pay rates;
- Leave loading;
- Overtime penalties;
- Weekend penalties;
- Breaks;
- Ordinary hours of work;
- Shift penalties;
- Allowances;
- Training; and
- Other work-related conditions that may be relevant.
To ensure that an employee’s pay and conditions meet the requirements of the BOOT, it is important for employers to familiarise themselves with the above factors when determining pay rates.
Just to add even more complexity to the process, many Awards calculate allowances based on a ‘standard rate’, and many allowances are shown as either weekly or hourly rates. It is important to calculate these to a common figure so that the final calculation is correct.
Can’t I just pay them the Award rate?
A common misconception of ‘paying on the Award’ is that it is only applicable to the pay rate, this is not the case. Depending on the hours of work, spread of work, applicable penalties, and other factors, employers who are paying Award rates may be at risk of paying under the Award.
For example, an Award may stipulate that employees must receive a 30-minute break after every 5 hours of work. Depending on the Award, if this break is not provided to an employee, the employer may be liable to pay overtime rates for all hours until the employee takes a break. Assuming that the employer has not factored in paying overtime rates until their employee takes a break, the employer will be at risk of paying under the Award.
Do I have to do a BOOT every year?
Awards do change from year to year and it is important to stay on top of it so that the business isn’t at risk of underpaying staff. In saying this however, once a BOOT has been completed, it is easy enough to update the allowances and pay rates each year to get the new rate. Factors such as hours of work and spread of hours are less likely to change every year and won’t need as much attention. Something to keep an eye on however, is employee classifications. Roles and responsibilities change regularly so it is easy for an employee to move up classifications without much notice. Reviewing position descriptions annually is a good habit to get into to ensure this does not occur.
A BOOT sounds complicated, what if I can’t do that or don’t have the time?
Awards and BOOTs can be complex and quite often, take a lot of skill, training and experience to do correctly. Professionals such as the team at Cornerstone HR, can be called upon to assist employers in Award interpretation and BOOTs or wherever needed.
Check out our previous blogs, Are you at risk of underpaying employees?, Approaching Salary Increases and Benchmarking and Fair Work Surprise Audits for some more information about Awards and the BOOT.
If you need assistance in conducting a BOOT, or want support in Awards, get in touch with our team via the chat box here or give us a call on 08 6150 0043.
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