As part of the Closing Loopholes No 2 Act, employers will soon be subject to the new wage theft laws from 1 January 2025.
The legislation will introduce a criminal offence for employers who intentionally underpay their employees. The South Australian Business Chamber are here to help employers ensure that they are doing the right thing and paying all staff correctly. Over the coming months we will provide you with some housekeeping tips to help ensure you are paying staff correctly.
Our first housekeeping tips relate to Annual Leave Loading and Overtime.
There are circumstances where employers prefer, and can, incorporate Annual Leave Loading and, or overtime rates into the base hourly wage. More often than not employers will assume that paying a higher hourly rate than the minimum rate will cover them and there is nothing further they need to do. Unfortunately, this is not always enough to establish that these entitlements are covered.
If an employer wishes to pay a higher hourly rate to compensate for the employee’s entitlement to annual leave loading and/or overtime rates, the employer needs to ensure that the employment contract adequately addresses this and clearly explains what the higher amount is in compensation for. Merely stating that the rate is higher than the minimum is not enough.
For annual leave loading, employers need to calculate what the employee would be entitled to for a full 52 weeks and then incorporate this back into the hourly rate of pay. The employment contract should then state that the above minimum rate of pay incorporates the employee’s entitlement to annual leave loading. Employers should be aware that annual leave loading is generally an Award entitlement, but you should always check your employment contracts and policies for your Award free employees.
For those employers who require their employees to work a certain amount of reasonable overtime each week, they may consider incorporating these overtime rates into a higher hourly rate. This would allow for a simpler payroll process. The employer does not need to apply different penalty rates as these have already been factored into the above minimum rate of pay. An employer can only do this if they have worked out a calculation to determine how much overtime might be worked in a week and what the employee would have received if they were paid penalty rates; this would then need to be incorporated into the base hourly rate.
Employers can easily come unstuck and be subject to an underpayment claim if they have not correctly calculated the above entitlements and if they have not ensured that their employment contracts make it clear on what is incorporated into the hourly rate of pay.
Employers should take action now and review their employment contracts and arrangements to ensure that they adequately address the agreed terms and conditions of employment. Drafting these clauses and ensuring these calculations are correct is complicated! SABC’s team of Consultants are experts in industrial relations and can work with you to conduct a review of your current wages and contracts to ensure your compliance with the new legislation ahead of the commencement date, 1 January 2025.
Our team or Workplace Advisors are also on standby to provide you with advice on the Closing Loopholes legislation.
Contact our Business Advice Hotline on (08) 8300 0000 (select option 1) and we will make sure you are ensuring your compliance.
