Annualised salary arrangements offer simplicity and predictability in employee contract negotiations, payroll processing and budgeting, but they do come with hidden complexities, particularly in adhering to Fair Work Commission reporting requirements. To ensure accurate calculations and compliance, employers can leverage the power of an award interpreter. Belowwe explore how award interpreters canhelp streamline annualised salary calculations and reporting compliance for payroll teams.
An Overview of Annualised Salary Arrangements and Reporting
Annualised salaries streamline payroll processing and provide predictability for employees. When offering an annualised salary to an employee, it is assumed that the employee will be better off overall when compared to being paid an hourly award rate along with penalties loadings and overtime, whilst providing flexibility in terms of hours of work.
Since March 2020, the Fair Work Commission has introduced formalised reporting requirements around Annualised Salary Arrangements, meaning that it is no longer safe to assume that salaried employees are being paid sufficiently. Under these requirements, it is now necessary to perform regular reconciliations to ensure that employees have in fact been paid more than they would have had they have been paid an hourly award rate plus any loadings, penalties, overtime and allowances.
Understanding the Role of an Award Interpreter
An award interpreter is a digital tool that interprets and applies modern award rules in order to calculate employee payroll entitlements based on the days, dates and times they have worked. Entitlements and benefits which are unique to individual businesses can also be included in these calculations. When changes to legislation occur, the award interpreter can be updated to ensure payments to employees are correct and compliant.
Facilitating Annualised Salary Calculations
Award interpreters can automate complex overtime calculations, handle shift and rostering differentials, and adapt to specific industry requirements, providing tailored solutions for each award or business unit. To do this, it is necessary to capture the exact start and finish times of each employee’s worked shift, along with other potential items such as break lengths and additional responsibilities. This is a big change for many workplaces, as traditionally workers paid on an annualised basis do not fill in timesheets.
For employees on an annualised salary, The Fair Work Commission specifies that this calculation needs to be completed every 12 months at a minimum. This would be a huge task, and should any back payments be due, it could also mean an unexpected hit to the business’s bottom line.
By processing start and finish times I.e., timesheets on a more regular basis through an award interpreter, it is possible to generate a more frequent reconciliation of employee payments. Doing this also facilitates other legislative requirements such as capturing employee agreement to the timesheets being used as a basis for the reconciliation.
Ensuring Compliance with Modern Awards
Ensuring employees pass a Better Off Overall Test (BOOT) is a key consideration. It compares the annual salary being paid with the actual time the employee has worked to ensure that accurate remuneration is being paid. It is required that employers undertake at least one BOOT each year, but with a Workforce Management system like Rosterspace, an employer is able to perform reconciliations in line with regular payroll processing. This enables any pay discrepancies to be handled as soon as they arise.
The Benefits of Utilising an Award Interpreter
Employers save time and costs by minimising or eliminating manual calculations and avoiding penalties related to non-compliance. Depending on the award which the employee ultimately sits under, the required calculations can be highly complex. A powerful award interpreter should be able to automate these calculations and provide an output that is easy to compare to payments produced by the payroll system.
Selecting the Right Award Interpreter
There is a lot to consider when choosing the right award interpreter and workforce management system, as the award interpreter is generally just one component of your workforce management system.
The needs of the organisation itself need to first be taken into account, as it’ll inform how advanced the award interpretation capabilities are. Organisations would need to look at which awards are applicable, how complex the award conditions are, the size of their workforce and any existing compliance concerns they may have. Leaning on the payroll and HR teams for these insights is a great first move.
From an award interpretation perspective, accuracy of the calculations is a high priority considering how complex awards and enterprise agreements in Australia can be. The higher the accuracy of a system, the lower the likelihood of compliance issues and manual rework. Other considerations include its integration capabilities and reliability.
From an award interpretation provider, an important consideration is the accessibility and quality of their vendor support and training. As an Australian owned and operated business, the Rosterspace support team understands the challenges faced by businesses dealing with local legislation.
Assessing a workforce management system by its award interpretation capabilities
Assessing the award interpretation capabilities of a workforce management system should be a key component of any organisation looking at implementing a new system or assessing the quality of an existing system. This is particularly true for larger organisations and those who fall under several modern awards or enterprise agreements. The quality of the award interpreter will directly influence the likelihood of under or overpayment events down the line and impact the time and workload placed on the payroll team when it comes to routine payments or remediation exercises.
Accurate annualised salary calculations are crucial for ensuring compliance. Award interpreters simplify payroll processes, promote transparent practices, and enhance overall payroll efficiency. Employers can embrace award interpreters to streamline calculations, adhere to modern award requirements, and foster fair and compliant payroll practices.
Rosterspace is an Australian workforce management software made for advance award interpretation. To find out more head to www.rosterspace.com.au