As an employer, you need to consider many different workplace laws, regulations and updates to ensure that your business is meeting workplace standards. While mistakes happen, by understanding the common compliance errors businesses make, you can take steps to avoid these yourself. This article will discuss the top compliance errors businesses make and provide tips to ensure your business remains legally compliant.

Compliance Framework

There are key areas where employers must ensure they are compliant. These include under:

  • Fair Work Act 2009 (Cth) (Fair Work Act);
  • National Employment Standards (NES);
  • Fair Work Regulations 2009 (Cth) (Regulations);
  • modern awards; and
  • enterprise agreements.

Non-compliance with the above areas can result not only in penalties, but also in reputational damage. This is seen regularly in recent high-profile underpayment scandals. As such, every business needs to be serious about complying with workplace laws.

Misclassification

A common compliance error is misclassifying an employee’s level under the applicable modern award. Each modern award contains a section regarding classification and wage rates.

For example, the General Retail Industry Award 2010 (GRIA), contains eight different classification levels, in addition to age-based junior levels and apprenticeship levels. The many levels of potential classification can be difficult to work through and ultimately may lead to classification errors.

To determine the correct classification level for employees, employers need to look at elements such as:

  • duties employees perform;
  • indicative job titles;
  • job-related qualifications;
  • apprenticeship milestones;
  • experience; and
  • management of other employees.

Once you accurately gauge the appropriate classification for each of your employees, you will need to ensure that you keep this updated. If there are any changes to your employees’ employment status, you need to reflect this in their classification. 

To overcome misclassification compliance issues, you should keep up to date job descriptions for each role within your business. This will assist you in cross-checking duties against those contained in each award to ensure that you are appropriately classifying your employees. Each time an employee is promoted, or changes duties, completing a review of their classification will also assist in minimising the chances of non-compliance.

Misinterpretation

Another common compliance error is the misinterpretation of the correct modern award. Often, misinterpretation of a modern award occurs within industries where one general award would otherwise apply.

For example, in the automotive industry, the Vehicle Manufacturing, Repair, Services and Retail Award 2010 applies.

Businesses may use a blanket application of their industry award without specifically analysing whether all roles within the business accurately fall within the particular award.

For example, there are many awards which contain a reference to duties, including administrative tasks. However, in some circumstances, a more appropriate classification for administrative employees is the Clerks – Private Sector Award 2010. Here, the predominant purpose of their role is to perform clerical work of an administrative nature. 

To avoid a compliance error due to misinterpretation, businesses should look at each role within their business individually. Each role should be evaluated against the most relevant modern award, not simply the industry award. The Fair Work Ombudsman website includes helpful tools to assist you in determining the correct award that applies to each role.

Legal Instruments

Enterprise Agreements

Legal instruments govern your employees, including:

Compliance errors can occur when, for example, a business has an existing enterprise agreement, and the base rates of pay are lower than employees would otherwise be entitled to under the underlying modern award.

Generally, enterprise agreements have been approved by the Fair Work Commission (FWC), which confirms that employees are ‘better off overall’ than they would otherwise be under the modern award. 

Each year, the FWC completes a review of the rates of pay contained within each modern award. Often, these rates are increased at the commencement of each financial year. If an enterprise agreement’s base rates of pay fall below the base rates of pay in the underpinning modern award, businesses may be non-compliant and underpaying employees. It is vital to check that the rates of pay you are applying under an enterprise agreement do not fall below the base rates in the relevant modern award.

Award-Free Employees

Non-compliance can also occur when your business does not appropriately differentiate between award-free employees (who do not fall under any modern award) and employees who should be covered by an award. Businesses should be cautious about classifying employees as ‘award-free’ without appropriate advice, as simply not applying an appropriate award can lead to significant non-compliance and risks of underpayment. 

Your legal team can assist you in determining the most appropriate classification for your employees. They can also confirm whether or not your employees are actually “award-free”.

Record Keeping

The Fair Work Act and Regulations outline clear record-keeping obligations for businesses to adhere to. Common record-keeping non-compliance can arise from things such as a failure to:

  • provide payslips;
  • comply with content requirements on payslips;
  • keep appropriate leave records; 
  • ensure records are not false or misleading;
  • keep superannuation records; or
  • keep records for the specified time.

This is by no means an exhaustive list. However, it does highlight the many areas businesses need to ensure they are compliant with in regards to record-keeping obligations.

These obligations are set out in the Fair Work Act and Regulations. Your business should be aware of all record-keeping obligations and set up clear procedures which reflect your obligations. Keeping or maintaining manual records can lead to potential non-compliance. As such, you should maintain computer-based records, with appropriate backups as required.

Key Takeaways

There are many ways that compliance errors can occur. Most often, compliance errors are unintentional. However, regardless of the reasoning for such an error, your business must take steps to rectify any non-compliance. Common compliance errors include:

  • misclassification under a modern award;
  • misinterpretation of modern awards;
  • non-compliance with legal instruments; and 
  • a failure to comply with record-keeping requirements. 

Navigating your compliance with workplace laws can seem daunting, however, engaging an experienced employment law team can guide you to ensure you remain compliant. If you have any questions about ensuring your business is compliant, contact LegalVision’s employment lawyers on 1300 544 755 or fill out the form on this page.

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