Finance

Get your bookwork in order

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Regulatory compliance can be a pain, but not doing so can also be costly. Every business must know what is expected. By PETER VITALE of VECCI.

By Peter Vitale of VECCI

It’s just a little over 12 months since the Federal Government’s WorkChoices legislation came into effect, and it’s still a hot topic for discussion. Just last week, the new regulations about keeping employee records came into effect.

Like any regulation, WorkChoices has created new or different requirements for business to ensure compliance – and a failure to comply can carry some hefty penalties.

It’s worth reflecting on a few of the more significant changes that affect your bookwork, and what you need to do to make it right.

Employee records and payslips

The most obvious place to start is indeed with the new record keeping requirements. SmartCompany had a short article about the detail of these requirements in February. While the onerous detail contained in the original regulations has been wound back, it’s worth re-iterating two key issues.

First, your business may have been keeping records in accordance with the requirements of local state law. If your business is conducted through a company, you will almost certainly now fall under the federal regime. The differences between the two may only be minor, but it’s critical that you ensure your bookwork meets the federal criteria.

Which leads to the second point – penalties in some states will now be at least double what they were pre-WorkChoices.

The maximum penalty for companies for each breach is $2750, and for individuals $550. And there’s more. For the first time, inspectors from the Office of Workplace Services (OWS) will have the power to issue on-the-spot fines of $275 for companies and $55 for individuals. The head of the OWS, Nicholas Wilson, has indicated that his inspectors will not be taking a heavy-handed approach in the first instance, but most business will not want to run the risk.

Even more importantly than just the records, businesses need to be able to show that they have paid their employees in accordance with the law. The OWS has recently had a number of high-profile successes in prosecuting employers for underpaying employees. Fines of up to $33,000 can apply. This doesn’t include any amount of underpayment that the courts may order an employer to make up to the employee. Having good records will help show compliance.

Transmission of business

While the rights of employees involved in a transmission of business have been altered by WorkChoices, there is some extra paper work for the employer who has taken over a business.

Businesses must give formal notices to employees who are transferring into their business that contain details of the employee’s entitlements and copies of any relevant awards or agreements. Copies of the notices also have to be lodged with the Office of the Employment Advocate (OEA).

A failure to comply with these requirements could lead to a fine of up to $33,000 for companies and $6600 for individuals. If you’re looking to acquire another business, make sure that you or your advisers do comprehensive due diligence on employee entitlements early. You have 28 days from the date the new employee begins employment with your business to give the required notices to the employees, and a further 14 days to lodge them with the OEA.

Flexibility, awards and workplace agreements

WorkChoices provides businesses with unprecedented opportunities to streamline remuneration arrangements, payrolls and working hours arrangements for employees. But many of these arrangements can only be effectively implemented with a Workplace agreement made under the Workplace Relations Act.

While it might be convenient to pay an employee flat hourly rates, or annualised salaries, employees must receive over the course of a 12 month period at least the minimum hourly rate fixed for their classification. There are also award penalty rates, loadings and the like to be considered. Getting it right is critical.

Under the pre-WorkChoices system, employers had a safety valve in the form of the OEA or the Australian Industrial Relations Commission (AIRC). An agreement could not be implemented without being approved by either of those bodies. Under WorkChoices, the onus is on employers to ensure that Workplace agreements comply with minimum standards.

Penalties abound for getting it wrong – for failing to comply with an Australian Fair Pay and Conditions Standard; for failing to give employees the necessary notices and time for considering an agreement; for lodging an agreement not properly approved by the employee or employees; for not lodging a workplace agreement with the OEA; for not notifying employees that an agreement has been lodged with the OEA; for lodging an agreement with the OEA that contains prohibited content; for failing to comply with an applicable award term.

There are many other items that might arise in the life of a Workplace agreement. Most of the penalties that can be imposed by a court for breaching these requirements are up to a maximum of either $33,000 or $16,500 for companies.

Cashing out leave

A common question for business is whether or not an arrangement can be reached with employees to “cash out” leave entitlements. Employers who fall under the WorkChoices regime can cash out annual leave and personal/carer’s leave, provided there is a Workplace agreement in place that allows that to happen.

There are limits that are set out in the legislation and, as indicated above, employers need to understand the requirements for getting a Workplace agreement right.

A common question from employers is whether long service leave can be cashed out. In most cases long service leave entitlements continue to be fixed by state laws, which were not overridden by WorkChoices.

The short answer is that an employer and an employee can agree, by implementing a federal Workplace agreement, to cash out long service leave entitlements. However, the Victorian Parliament has enacted laws that require employers to give specific written notice to employees of alterations to their long service leave rights, which potentially could include cashing out arrangements. There is a penalty of up to $10,000 applicable.

Lessons for employers

Employers need to make sure they keep up with the additional paperwork that WorkChoices has generated – non-compliance is a big issue for the Federal Government, and SMEs that don’t keep up may find it is a costly oversight.

 

 

Peter Vitale is a solicitor, the General Manager of Workplace Relations Services at VECCI and a principal at CCI Victoria Legal.

 

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