Whether it’s your first employee or your fiftieth, payroll compliance matters. But navigating payroll laws and following industry best practices can be a challenge.
The most important thing for employers to get their head around is, that ‘payroll’ is not just about paying your staff. In-fact under Australian law it covers hiring and firing, salary entitlements, leave entitlements and bonuses just to name a few. It is also directly linked to payroll tax and accounting which means there is also legislation to consider. For employers understanding payroll compliance and the associated obligations is a non-negotiable.
In this article we look at 3 key things every employer should know when it comes to payroll compliance.
1. Tick your ‘National Employment Standard’ (NES) boxes
The National Employment Standards (NES) are made up of 10 minimum employment entitlements and make-up much of your payroll compliance obligations. The NES have to be provided to all employees, along with the national minimum wage (note: casual employees only receive certain entitlements).
What are the 10 minimum entitlements of the NES?
- Maximum weekly hours of work = 38 hours + reasonable additional hours.
- The entitlement for certain employees to request flexible working arrangements
- Maternity and Paternity leave arrangements = up to 12 months unpaid leave per employee, plus the right to request an additional 12 months (unpaid) thereafter.
- Annual leave = 4 weeks paid leave per annum (certain shift workers are entitled to an additional week).
- Personal/carer’s leave and compassionate leave = 10 days paid leave, two days unpaid carer’s leave as required, and two days compassionate leave (unpaid for casuals) as required.
- Community service leave – unpaid leave for voluntary emergency activities and leave for jury service, with an entitlement to be paid for up to 10 days for jury service.
- Long service leave – a transitional entitlement for employees that comes from an applicable pre modernised award, pending the development of a uniform national long service leave standard.
- Public holidays – a paid day off on a public holiday, except where reasonably requested to work.
- Notice of termination and redundancy pay – up to five weeks notice of termination and up to 16 weeks severance pay on redundancy, both based on length of service.
- Fair Work Information Statement – must be provided by employers to all new employees, and contains information about the NES, modern awards, agreement-making, the right to freedom of association, termination of employment, individual flexibility arrangements, union rights of entry, transfer of business, and the respective roles of the Fair Work Commission and the Fair Work Ombudsman.
Source: Australian Government, Fairwork Ombudsman
2. Managing Modern Awards
On July 1, 2009, a new fair work system (under the Fair Work Act 2009) came into play. One of the key changes was the ‘modernisation’ of awards operating in the Commonwealth workplace relations system. This ‘modernisation’ consisted primarily of consolidating awards into industry or occupation-based categories.
Modern awards cover conditions such as:
- minimum wages
- types of employment (full-time, part-time or casual)
- overtime and penalty rates
- work arrangements (rostering or variations to working hours)
- annualised wage or salary arrangements
- allowances (e.g. travel allowances)
- leave, leave loading and arrangements for taking leave
- superannuation
- procedures for consultation, representation and dispute settlement
Payroll compliance dictates that the responsible entity when it comes to keeping on top of their relevant modern awards, any associated transitional arrangements, and future changes is you the employer. (For example: Did you know that from July 1, 2017 the minimum wage in Australia was increased by 3.3%?)
For help finding the minimum pay rates in your award refer to the fairwork.gov pay guides, including the most frequently used penalty rates and allowances.
3. Your obligations to keep records and provide pay slips
Many small businesses mistakenly believe that they are exempt from pay-slip and record-keeping obligations. Be warned – regardless of your business size or staff requests, employers must keep a range of payroll compliance records (to prove their employees have received their correct entitlements).
In June 2016 the Fair Work Fair Work Ombudsman (FWO) released a Report on campaigns it had undertaken to check record-keeping practices of small businesses across Australia during 2014 and 2015. Almost 1400 employers were audited in every State and Territory. Spot checks of 1376 businesses found that 988 (72%) were compliant with their record-keeping and pay-slip obligations. However, 46 employers were asked to back-pay a total of $620,023 to 336 of their workers who they believed had been short-changed due to a lack of record keeping/ proof.
Record Keeping for payroll compliance includes:
- general employment records
- pay records
- hours of work records (timesheets)
- leave records
- superannuation contributions records
- individual flexibility arrangement records
- guarantee of annual earning records
- termination records
- transfer of business records
Your payroll compliance obligations also require that you issue each employee a pay slip within one working day of paying them. The Fair Work Regulations 2009 specify what records must be kept and what information must be contained on these pay slips. Record keeping and payslip information and templates are available to access and download on the Pay slips and record-keeping page.
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