Well, the answer is about as complex as the awards themselves.
Just like an onion, the reason why industry awards interpretation is so complex in Australia is layered. From historical industrial relations dynamics to technical requirements, the following provides a broad summary of the factors leading to this complexity. Get ready for a 101 in Award Interpretation complexity.
What is a modern award?
To start things off it’s important to understand where modern awards fit when referring to employee entitlements. In Australia the National Employment Standards (NES) set out the minimum entitlements that every employee in Australia receives. When applying a modern award, it is these standards that we must refer to where the award might not make a specific call.
A modern award is industry specific and sets out the minimum terms and conditions for employment beyond those in the NES, and in Australia there are over 100 awards. Specifics include entitlements that relate to pay, hours of work, rosters, breaks, allowances, penalty rates and overtime. Each entitlement needs to be implemented within the organisation’s workforce management system with respect to the business’s own requirements and processes, and updates need to be made when there are changes to the Award. Only then can full compliance with these awards be achieved.
Across the range of awards, there are certainly similarities, but these can be nuanced as well. For instance, under the Social, Community, Home Care and Disability Services (SCHADS) Industry Award overtime is paid where a worker commences a shift within 10 hours of finishing the previous one, whereas under the Retail Award, overtime is paid unless a 12 hour break has been achieved.
We also see that employees in similar industries do very different jobs, so it’s understandable that these entitlements would vary, and no assumptions can be made. For example, a social worker working under the SCHADS award is paid at a rate of 200% of their ordinary rate, while a Nurse under the Nurses Award is paid at 175%.
Before we go any further, it is also important to point out that Enterprise Agreements often contain the same level of complexity as an award might, and in some cases, even more! An additional challenge when working with Enterprise Agreements is that the wording can often be ambiguous, meaning that the business’s own interpretation is crucial in understanding exactly how a workforce management system needs to be configured to be compliant.
The human factor
Awards and legislation, where payment rules are derived and drafted by lawyers and can be difficult to understand if you’re not one. This can lead to incorrect interpretation and implementation of an award and possible remediation work in the future.
Awards and enterprise agreements can be difficult to understand as they are often filled with “legal speak”. Modern awards were designed to remove as much of this as possible, and they certainly go a long way in achieving this, but that doesn’t mean they are simple in their nature.
Furthermore, the actual implementation of the award conditions into a workforce management system requires technical skills and resources which many payroll teams don’t have. The sporadic nature of award rule changes also means that those who do get trained to make updates may lack the cadence in making changes to retain the required knowledge I.e. “use it or lose it”. It is for these reasons that a Rosterspace implementation includes in-depth documentation so that all relevant parties within the organisation understand how their award has been configured and can refer to the documentation when needed.
Technically, it gets more complex
The various conditions within an award are often interrelated so when an update or change is applied by the regulating authorities, small tweaks can have downstream impacts. This interrelationship adds to the complexity and makes testing of changes incredibly important.
Integration is another important area not to be overlooked. Integration between the payroll or HRIS system and the workforce management system generally requires consultancy and good design so that it can operate seamlessly. Two businesses running the same payroll / HRIS system would have unique design and configuration applied, which means that integration with the workforce management system needs to be carefully considered. Usually, it is the payroll or HRIS system which acts as the source of truth for employee records. If these employee records are not updated in the WFM system correctly, it may result in incorrect application of the award rules or double handling of the data.
Business processes. No two businesses are the same.
Two organisations falling under the same award may apply certain award conditions differently. This can be due to variations in day-to-day processes, or a difference in how the rules are physically interpreted. An example of this might be in how shift penalties are paid; are they paid as individual grossed up amounts, or as itemised loadings on top of the employee’s base earnings. Another example is the accrual and payment of time in lieu; there are many ways to handle this, which all comply with the underlying award requirements.
The smaller the business, the higher the likelihood that an Off-The-Shelf software system would be sufficient. The larger the organisation is however, the greater the complexity and the need to align business processes AND award regulations. This calls for both expertise as well as the software to handle it.
If this individualised approach is not available through your workforce management system, the outcome is likely that you’ll have to adapt business or payroll processes to the award rather than the other way around.
Complex to say the least
Without diving into the nuances of each modern award, it is clear to see that there are a variety of technical, operational and business factors that contribute to the complexity of modern industry awards, and it is easy to see how mistakes can be made. Ensuring that an organisation is accurately interpreting their award and paying employees accordingly is not a ‘set and forget’ exercise. The appropriate software, hardware and human expertise is needed, along with ongoing support to maintain a compliant position and avoid remediation down the line.
Rosterspace is an Australian workforce management software made for advance award interpretation. To find out more head to www.rosterspace.com.au