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New year, new rules: Payroll expert reveals 6 crucial employee awards and legislative changes to look out for in 2020

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Tracy Angwin, CEO of the Australian Payroll Association
Tracy Angwin

A new suite of major changes to employee awards and legislation will come into effect this year, with a leading payroll expert warning large organisations and SMEs that they must comply with them or face consequences by the Fair Work Ombudsman.

Tracy Angwin, CEO of the Australian Payroll Association – an industry network that has helped hundreds of organisations over the last 25 years ensure their payroll departments meet legal requirements – says: “Legislation and individual awards around employee entitlements change regularly. Organisations are required to comply with Federal, State-based, and award-based legislation together, making it one of most complex and legislated areas of business administration.

“The most significant change will come into effect on 1 March 2020, when we see the introduction of important new practices for payroll aimed at reducing wage theft and non-compliance with awards. Up until now, employers have been able to rely on a system of trust with their employees. The new annualised salary clauses in some modern awards, which will require more stringent record-keeping and overtime control measures, will completely change that.”

Tracy Angwin reveals six changes to employee awards and legislation to watch out for in 2020:

1.  From 1 January 2020, employers must pay super on an employee’s gross rate of pay – including on any salary they have sacrificed.

It will no longer be possible for an employer to pay super only on the reduced salary of an employee with a salary sacrifice agreement. This is one of two superannuation guarantee (SG) changes that will affect employees who employ on a salary sacrifice arrangement from January 2020 onwards.

2. Salary sacrifice cannot contribute to mandatory super contributions. 1 January will also mark the end of employers utilising a salary sacrifice to make up all, or part, of their compulsory SG contributions

This is the second component of the SG changes. It ensures that any proportion of an employee’s salary that is ‘salary sacrificed’ cannot be put into a super fund as part of the mandatory 9.5 per cent in super contributions that should be contributed by the employer. “I recommend that employees review all salary sacrifice arrangements for impacts for compliance with the new law,” says Tracy.

3. From 1 March 2020, employers will need to notify employees in writing of their annualised salary and their maximum ordinary working hours outside of the 38-hour week.

Under 22 modern awards, if an employee works any hours in excess of a 38-hour working week, the employer must ensure that they don’t earn below the minimum wage overall. This forms the first part of the Fair Work Commission’s recent decision to change annualised salary provisions under 22 modern awards from March 2020 onwards.

4. Employers must keep records of the start, finish and break times of their employees.

This means that any excess hours worked in each roster or pay period must be paid to the employee as overtime, if their annual salary does not pay them at or above the minimum wage for their total hours. Importantly, records must also be signed, or acknowledged as correct, by employees for each roster or pay cycle. Tracy cautions, “My biggest concern is the practicality of the new model clauses, and how these will impact the culture of employers. They may feel they are being micro-managed, and this runs the risk of eroding the trust around overtime working hours that has been established between employers and their staff.”

5. From 1 March, each year employers must pay employees for overtime worked if their salary does not cover that overtime.

If an employer finds that their employee received less pay on their annualised wage agreement than if they were paid under the award, they need to pay the employee the difference. Any shortfalls must be paid to them within 14 days.This process needs to occur every 12 months, even upon the termination of a contract.

6. Employers will need to self-correct any unpaid superannuation, under the proposed SG amnesty.

The SG Amnesty bill passed the House of Representatives in November and has now moved to the Senate. The bill, which is likely to be passed, will provide a one-off amnesty for employers to self-correct any unpaid super contributions, and will grant employers six months from the date of royal assent to come clean to the Australian Taxation Office. After the amnesty period, higher penalties will be applied – up to 200 per cent. Tracy says, “Those who have failed to come clean on unpaid superannuation should act on this sooner, rather than later. This will give them more time to maximise the opportunity and navigate any unseen complexities.” 

Tracy adds, “It is crucial that businesses hire a qualified payroll professional, or an external managed payroll service provider, who can keep abreast of the upcoming changes in government legislation and employee awards. They can also join an organisation, such as the Australian Payroll Association, to receive regular updates on awards and legislation, stay up-to-date with benchmark systems and processes, and review their own systems through regular online or in-person payroll training.”

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