The Impact
CURRENT BELIEF
There is a common thought that if an employee is paid an annual salary, the employer effectively owns the employee with the employer being able to ask an employee do additional ‘reasonable’ overtime when required. Coupled with this, there is the assumption that given an employee is paid a salary, they are not covered by a Modern Award. Both of these points are common misconceptions - and with the changes coming in effective 1 March 2020, employers need to ensure they have a solid understanding about which Awards cover their employers along with an understanding of what the individuals annual salary covers.
HOW DOES THIS IMPACT YOUR BUSINESS?
Employers should not underestimate the work involved to implement the changes and the ongoing work required to maintain the new provisions. We listed in our last article the Awards that will have the new provisions added in.
Below you will see a Change Impact Assessment Model which highlights the functions that will be impacted by the changes. This provides a guide for business to work through - highlighting that Human Resources, Payroll, Operations and Finance all need to work together to ensure a cohesive roll-out. Businesses need to ensure impacted employees understand the new provisions and also educate the wider business and importantly, your management teams as this most definitely is not just a HR / Payroll task.
WHERE TO START?
So, where do you start? We recommend setting up a working group incorporating HR, Payroll, Operations and Finance now (or if you are a smaller business pull in the key areas of your business i.e. Finance & Operations). Then start looking at the below points. We will dive deeper into the following in our next post - but we recommend creating a high level plan using the below points now:
Review all employee contracts: Prioritise those who you think will be impacted by the change (we recommend reviewing all your employees) - make note to review your remaining employees once you’ve taken care of you impacted employees.
Update the wording of the contracts as required and have these reviewed by your legal team.
Ascertain current work patterns of impacted employees by working with their managers to discuss periods and patterns of overtime (the outer limits) in order to set limits required.
Schedule a date to have conversations with your employees so you can explain what the changes mean to them.
Find an area in your payroll or HR system to record the employees Award & Classification. We recommend Award & Classification are recorded for all your employees and that these fields can easily be reported on - ideally with an effective date.
Decide as a business how you want to capture the time worked of your employees – do you need a new system? Will paper time-sheets suffice? How you will have the employee sign or acknowledge their hours of work?
Decide on your review period. The new provisions call for a 12-month review period or when an employee ceases employment however given the administrative burden this will be, would it be less onerous to have a shorter review period? I.e. Could you review the hours worked every pay period? This will allow you to capture any hours being worked outside of the set ‘outer limits’ as and when they occur so you can manage the additional hours immediately if need be, as opposed to once a year. Also keep in mind, you will only have 14 days to back pay any hours worked outside of the outer limits - so take this into account when determining if you want to stick with a 12 month review period - what burden would this pose on your payroll team and is reviewing everyone realistic for them? How may this impact the business cash flow?
If you need any assistance with getting these changes implemented by 1 March, please feel free to reach out. We are happy to simply talk through your thoughts on how to tackle the changes.