Award Interpretation: More complex than you might think

 In Payroll

Australia is a lucky country, in a lot of ways. We have great weather, beautiful landscapes, not too many people, and most of the time plenty of work. A side-effect of having lots of work to be done, and not the largest population, is that organizations that represent the rights of workers, such as Unions, have a lot of power in our country.

Regardless of your particular political persuasion, and whether you are for or against Unionization, it’s hard to deny the impact they have had on our workforce.

One place where they have certainly affected how the Australian economy runs, is through the setting of Award Agreements. These agreements have been put in place to protect the rights of workers in particular industries. They take into account when an employee should be paid overtime, how public holidays are paid, when casual loading should apply, whether there is a minimum shift length, and so on.

In general, they form a base minimum standard that employees in their respective industries should be employed and paid under… Which is a good thing!

However, these agreements have long been the cause of frustration between employers. While it might be easy for a single employee to understand what they should be paid, it’s much more complex for an employer who might be juggling the conditions of hundreds or thousands of employees.

Here are the key factors that make award interpretation more complex than you might have thought:

1. There are lots of them!

The Fair Work Ombudsman currently lists approximately 130 different awards that people in Australia can be employed under. They can be remarkably specific, such as the “Hydrocarbon Field Geologists Award [MA000065]” or as general as the “Food, Beverage and Tobacco Manufacturing Award [MA000073]”.

While award confusion is rarely seen as a problem in terms of payment of employees, there are certain interesting lines that get drawn between certain awards. For example, the “Fast Food Industry Award [MA000003]” and the “Restaurant Industry Award [MA0000119]” share many benefits, but it still comes back to an assessment over what makes an employer a Restaurant or a Fast Food outlet.

Even within food service, it becomes more complicated. When you work in food service at a Ski Resort, for example, you should be assessed under the “Alpine Resorts Award [MA000092]”. Completing the same task in the same role at a different place can be under an entirely different set of rules – which can make it confusing!

2. They are complex to read.

If you have trouble sleeping at night, I recommend printing yourself out a copy of the “Social, Community, Home Care and Disability Services Industry Award [MA000100]”. It would take me a few nights before I got up to the definition of part time work.

These are lengthy documents, written in very specific legal wordings. To their credit, they are long because they are trying to remove as much ambiguity as possible. The resulting documents, however, can take multiple days – and multiple readings – to understand deeply enough to make determinations about.

 3. They are ambiguous.

As much as they try to clear ambiguity, there are still many areas which require interpretation. For example, a condition in many awards is that the overtime penalty rate for the first two hours equals time and half, with double time thereafter. Not all awards adequately deal with these penalty rates if they are adequately used for days that already have a scaled rate, such as Saturday, Sunday and Public Holidays.

Clearly you aren’t getting both, but the question remains as to what happens to overtime that is reached on a Sunday. Should there be two hours of time and a half (which would be less than the daily rate)? If not, should the Sunday time that would have been overtime get counted towards your Superable Earnings if it’s not getting paid as “overtime”?

Another great example is the way that casual loading is treated when in overtime. Some awards specifically spell out how this is to be done, and some awards do not. We’ve seen firsthand that different employers will interpret, differently, whether the casual loading scales with the penalty rates or not. Which they can do, as the awards are ambiguous.

4. The awards are flexible.

While these award agreements try very hard to have as little ambiguity as possible (and still sometimes fail), there are active areas where some awards are deliberately open to interpretation.

A classic example of this in many awards is how “weekly” overtime is treated. In general, most awards pay to an average 38-hour week. Work more than 38 hours and you get overtime. Simple, right?

However, the key word in those awards is that is an AVERAGE 38-hour week. How does that average get calculated?

Well, that is open to interpretation. Some awards are strictly weekly. With other awards, it can be spread over a fortnight or four-weekly roster. And sometimes it’s entirely up to the employer.

While this flexibility makes sense, consider the situation if you run a roster with a 9-day fortnight. Catering to this flexibility leaves room for employers to interpret the award to suit their own needs.

5. They aren’t standardised.

While awards are generally very similar in nature, there are always specific differences in how things are defined and used. While it might be a bit too difficult to get a consistent language between the documents, there could at least be some standards for how the information is presented.

A simple example is that some awards give rates on a weekly basis, and some on an hourly basis. While a simple calculation can be done to calculate one from the other, rounding difference can often be introduced because of the calculations. If all awards had a standardized way of presenting information, then many of these issues would disappear.

6. Finally, because they can change at any time!

Never has it been more evident of how easily these legal documents can be changed, than when the first political announcements around COVID-19 hit. Almost instantly a large number of awards had brand new clauses which came into effect that very same week.

While I think everyone can understand how necessary that was, it did demonstrate how compliance with these documents is not something that is ever complete.

These agreements are living beasts, which grow and change over time. They must be reviewed and the interpretations checked regularly to ensure that Employers aren’t acting against the agreements.

Award interpretation is complex.

Award interpretation is not easy. It is one of the most complex parts of the Australian payroll landscape, which is clearly demonstrated by the number of employers who have recently been punished for getting it wrong.

These aren’t small operators, who are running their payrolls out of spreadsheets. These are some of the biggest employers in the country, who have teams of employees to manage their payroll. Despite what some individuals might think, they aren’t trying to rip off their employees. They are trying to work through a complex task for a large number of different employees – and making honest interpretation mistakes.

We know that award interpretation is difficult to get right. That’s part of why our business exists. We want to help all companies get it right.

 

This article was originally published on one of the BlueSky group’s brands, Recruit Complete, by CEO Daniel Glynn. BlueSky integrates with Recruit Complete payroll for complex requirements, ensuring a consistently accurate payroll system. We’ve also developed a free payslip checker, ValidateMyWages, to help reduce the risk of error across your payroll processes.

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