Following the Closing Loopholes legislation amendments in 2023 and 2024, the Fair Work Ombudsman has been working hard to educate employers and close these loopholes in practice.
To further reduce underpayments, the Fair Work Ombudsman has released this month a warning to employers about ‘dodgy ads’. It is therefore important to get it right before you post a job advertisement!
Key Points
- Employers paid $110 thousand in fines for ‘dodgy ads’ and $473 million for underpayment last financial year.
- Identifying the correct award and classification is essential before advertising.
- Understanding award nuances, whether that be leave entitlements, overtime, allowances, and what triggers them, is essential to avoid common underpayment mistakes.
The Fair Work Ombudsman has released figures showing that unlawful pay rates in advertised jobs over the last 12 months have doubled, up from 156 in 23-24 to 318 in 24-25. Employers, as a result, have paid over $110,000 in fines across the financial year.
“This is most likely the tip of the iceberg,” says Acclaimed Workforce and Bayside Group General Manager, Joe Galea. “As specialist recruiters, we’re looking at job boards every day and regularly see jobs advertised with salaries that don’t appear to be aligned with the Award.”
Australia’s employment legislation is complex, and the sweeping changes in recent years have created challenges for employers. With 122 Modern Awards in the Australian Fair Work system, employers are particularly vulnerable when it comes to award interpretation and application.
This latest report on job advertising, released by the Fair Work Ombudsman, simply demonstrates that companies can and do get it wrong. We discuss why it’s important to get employee pay rates correct, common underpayment mistakes and other considerations for employers.
Why ensure your Award Interpretation is correct?
“Our Recruitment Consultants, who engage staff every day, will still check regularly with our workplace relations team, as some jobs are more open to interpretation,” Joe says. “It’s better to have checks and balances in place, so you get it right the first time.”
Before posting a job, it is essential that you have confirmed:
- What award applies to this role?
- What classification is the role in the award?
- What is the correct rate of pay?
Common underpayment mistakes and considerations
Award coverage and classification cover the minimum entitlements of employees, which means a simple misstep in this process can result in exposure. “Even companies who have the correct process in place can be tripped up, without expert advice and regular audits,” says Joe.
Case Scenario
This is an example of how easy it is to make mistakes. A small legal firm wants to engage an Office Administrator to assist with basic administrative duties and answering incoming calls. The hiring manager conducts a search for an Administration Award, and the Clerks Award comes up, which is then applied. The job advertisement is then posted, with the duties pitched at entry level, so the Level 1 rate of the Clerks Award of $25.74 is listed.
In this scenario, the legal firm is in breach of the correct award minimum wage, for two reasons:
- The correct Award is the Legal Services Award.
- The duties described answering incoming calls, which classifies the role as Level 2.
The actual pay rate should have been listed as $28.12. This simple mistake can result in a fine for advertising a job at an illegal pay rate, as well as an underpayment claim for any payments made (there is a difference of approximately $4,700 per year).
“Not only does our recruitment team use Workplace Relations experts to check specific roles, the understanding of other entitlements within the award is a guideline for compliance, and for budgeting,” says Joe.
When applying awards, you need to answer the following questions:
What allowances apply and what are the triggers?
There are a range of allowances available across Australia’s Modern Awards, including meal, travel, tools and equipment, uniforms and clothing, qualifications, first-aid and on-call allowances, and there are pitfalls in many of these. It is therefore essential to recognise when and how they apply. If considering the travel allowance for example, a common mistake employers make is to pay the ATO travel rate of $0.88 per kilometre. This is often below the award requirement (many awards pay $ 0.98 per kilometre).
Is the employee a casual and are you paying casual loading?
Casuals generally have different terms and conditions for leave entitlements, standard hours, overtime and allowances. Shift work may also trigger additional entitlements. Casual loading requirements are generally detailed in the Award. Furthermore, payslips must break down payments, with casual loading listed as a separate payment.
Are the start/finish times in line with the Award?
The Award will include start and finish times, with the hours in between generally deemed as ordinary hours. Some awards will have provisions to allow these hours to be changed if an agreement is reached. For example, when an employee requests to start and finish half an hour earlier, or to work less days across the week with the same hours. However, not all awards allow for this, which means changes to hours may trigger overtime.
When does overtime kick in? Overtime provisions will differ depending on the Award and employment status i.e. full-time, part-time and casual. In the Manufacturing Award as an example, overtime can be owed for any hours worked above the agreed upon daily and/or weekly hours. For part-time employees, this will depend on the hours detailed in the employment contract. Full-time workers will trigger overtime when they work more than eight hours per day, unless otherwise agreed in accordance with award provisions. In calculating overtime in this award each day will stand alone.
There is a lot to unpack, so it is best to get assistance from experts to help you minimise the risk of non-compliance.
Acclaimed Workforce, through our affiliate Bayside Group's
Workplace Relations team, can conduct audits to identify any potential mistakes. Alternatively, they offer workplace advisory services, which means you have access to workplace relations professionals when you need them.
