THE ESSENTIAL GUIDE TO HR COMPLIANCE PART 1 NES & AWARDS EMPLOYMENT CONTRACTS EMPLOYMENT POLICIES INDEPENDENT CONTRACTORS PERFORMANCE MANAGEMENT

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1 THE ESSENTIAL GUIDE TO HR COMPLIANCE PART 1 NES & AWARDS EMPLOYMENT CONTRACTS EMPLOYMENT POLICIES INDEPENDENT CONTRACTORS PERFORMANCE MANAGEMENT THE ESSENTIAL GUIDE TO HR COMPLIANCE 1.

2 RECOGNISE AND RESOLVE HR MISTAKES BEFORE THEY BECOME SERIOUS PROBLEMS. If you re like most small business owners and managers, you probably wear many hats. You re the CEO, bean counter, marketing whiz, sales guru, chief recruiter, lead developer, and more. But if you re growing fast, you ll get to the point when you need expertise in all these areas and this includes the human resources space. All too often HR tasks are pushed to the bottom of the to-do list, or worse, placed in the too-hard basket because it s easy to get lost in the complicated rules and processes. Yet to create a winning business culture, you need to be proactive in the area of HR. And this means being able to recognise and resolve HR mistakes before they become serious problems. Use this essential guide to tick HR compliance tasks off your to-do list before they turn into costly legal claims. 1. NATIONAL EMPLOYMENT STANDARDS AND AWARDS Awards, together with the National Employment Standards (NES) are an integral part of Australia s employment landscape. 2 IN 3 SME S AUDITED INDICATE A LACK OF CONFIDENCE IN IDENTIFYING AWARD COVERAGE FOR THEIR EMPLOYEES. Modern Awards provide minimum wages and conditions for employees so It is critical for you to identify which particular award applies to your employees. Even if you are paying above Award rates, you also need to meet other provisions of the Award including providing the correct entitlements in relation to leave, penalty rates and hours of work. CORRECTLY CLASSIFYING EMPLOYEES IS CRITICAL Look for a relevant industry award with relevant classifications, otherwise reference an occupational award. All too often, underpayments and breaches of awards occur simply because employers are not aware the entitlements. THE ESSENTIAL GUIDE TO HR COMPLIANCE 2.

3 CASE GUIDANCE UNDERPAID JOURNO WINS $128K COMPENSATION By inadvertently misclassifying an employee, one company was found to have underpaid a journalist throughout their entire employment was ordered to pay almost $128,000 in back pay and interest. The Federal Circuit Court found the journalist should have been classified as a grade 4 employee and, until the last pay period in June 2010, should have been paid according to the Journalists (Specialist Publications) (State) Award (NSW) and the minimum wage instrument under the Fair Work (Transitional Provisions and Consequential Amendments) Act Further, from the first pay period after July 2010 until 11 January 2011, he should have been paid according to the Journalists Published Media Award He should also have been given 20 weeks redundancy pay and payment in lieu of notice. As such, the journalist was entitled to $83,210 as compensation for unpaid wages, redundancy pay and pay in lieu of notice, as well as $44,693 in interest. COMPLYING WITH THE NES AND AWARDS The only way of avoiding this kind of back pay claim is to know your full obligations up front. This means you need to have a thorough understanding of the terms and conditions of each of the awards that apply to your business. The most efficient way of doing this is to use HR and payroll software like Employment Hero that is pre-configured to the rule set of the modern awards that apply to your business. NES AWARDS NON NEGOTIABLE Annual Leave Coverage Personal & compassionate leave Breaks Community service Leave Classifications Long service leave Consultations Public holidays Payment of wages Termination of employment Annual leave Reasonable additional hours Termination of employment NEGOTIABLE Hours of work Allowances Overtime & penalty rates Annual leave loading Of course, keeping accurate time and wage records is essential. They not only ensure that your employees continue to be paid at the correct rates but also satisfy any parties that any errors were made in good faith. THE ESSENTIAL GUIDE TO HR COMPLIANCE 3.

4 2. EMPLOYMENT CONTRACTS While employment contracts can be verbal, you ll get into all sorts of trouble if you don t record an employee s terms and conditions when you hire them. Employment contracts written in plain English help you minimise costly and time consuming disputes by providing certainty about the legal rights and obligations of both you and your staff. Your legally compliant employment contracts need to include details of the employee s award (if applicable), work hours, leave entitlements, and remuneration. An employment contract also should set out information on termination of employment, the protection of confidential information and intellectual property, as well as post-employment restraints. 4 IN 5 CONTRACTS AUDITED REQUIRE CHANGES TO MINIMISE RISK TO THE EMPLOYER It s also best practice to include a list of the duties and a job description along with your workplace policies. Of course, you ll need your new employees to sign off on workplace policies as part of your onboarding process. 3. WORKPLACE POLICIES Every business needs to have clear and easy to understand workplace policies and procedures in place. They protect your business from a range of situations, whether it s social media, inappropriate computer use, to discrimination or harassment. Policies are key to developing your business through your people and protecting it against financial risks. 1 IN 2 SME S AUDITED ARE LACKING NECESSARY WORKPLACE POLICIES TO SATISFACTORILY MANAGE RISK. But a policy is only effective if properly communicated and uniformly enforced to all employees. This means you need to explain the policy and provide training if necessary to ensure your employees understand how to comply with the policy and the consequences if they breach it. THE ESSENTIAL GUIDE TO HR COMPLIANCE 4.

5 Make sure employees sign off on a document acknowledging that they are aware of the policy and understand it completely. Should you wish to terminate an employee s employment for breach of a workplace policy, it s essential that you can show that the employee was aware of the policy and that it was both lawful and reasonable. POLICY CHECKLIST ONE TWO THREE FOUR FIVE Clearly explain the conduct expected of employees, and the consequences of breaching policies. Ensure all employees have easy access to your workplace policies. Regularly audit workplace policies to keep them up to date with relevant laws and other policies and procedures in your company. As part of your onboarding program, ensure all new hires review and acknowledge their awareness and understanding of your workplace policies. Where appropriate, conduct regular training on appropriate workplace behaviour. CASE GUIDANCE INEFFECTIVE ZERO-TOLERANCE ALCOHOL POLICY A machine operator at a poultry farm who was dismissed for turning up to her job drunk won her unfair dismissal claim. However, while the employer argued there was a zero-tolerance alcohol policy in the workplace, the Commission found there was insufficient evidence to show that the worker was bound by it. As the employer did not have evidence to show the worker had read and accepted the policy, the employer could not rely on the policy to justify the termination. As a result, the employer was ordered to pay the worker $7000 in compensation plus superannuation. This case again highlights why you need to be clear on what your policies expect of staff and that staff are made aware of the policies. 4. INDEPENDENT CONTRACTORS These days many small businesses need to rely on contractors to quickly adapt to changing business conditions. Engaging independent contractors can provide greater flexibility to meet short term changes in demand for specific skills. 1 IN 3 SME S AUDITED BY EI ENGAGE INDEPENDENT CONTRACTS AND HAVE NOT CLEARLY DISTINGUISHED THEM FROM EMPLOYEES. THE ESSENTIAL GUIDE TO HR COMPLIANCE 5.

6 However, while contractors run their own business and provide services to your business, you can t classify a worker as a contractor simply because they have an ABN and they offer specialist skills. Furthermore, having a worker sign an agreement that states they are not an employee does not necessarily make them so. However, if you misclassify an employee as a contractor, they can claim for unpaid leave entitlements, superannuation, and unfair dismissal. You may also be charged with sham contracting which brings penalties of up to $51,000 per breach (with potential personal liability for directors and managers). INDEPENDENT CONTRACTOR VS EMPLOYEE CHECKLIST There are some common indicators that can help you in determining whether a person is an employee or independent contractor. This is a guide provided by Fair Work Australia. Indicator Employee Independent Contractor Degree of control over how work is performed Hours of work Expectation of work Risk Superannuation Tools and equipment Tax Performs work, under the direction and control of their employer, on an ongoing basis. Generally works standard or set hours (note: a casual employee's hours may vary from week to week). Usually has an ongoing expectation of work (note: some employees may be engaged for a specific task or specific period). Bears no financial risk (this is the responsibility of their employer). Entitled to have superannuation contributions paid into a nominated superannuation fund by their employer. Tools and equipment are generally provided by the employer, or a tool allowance is provided. Has income tax deducted by their employer. Has a high level of control in how the work is done. Under agreement, decides what hours to work to complete the specific task Usually engaged for a specific task. Bears the risk for making a profit or loss on each task. Usually bears responsibility and liability for poor work or injury sustained while performing the task. As such, contractors generally have their own insurance policy. Pays their own superannuation (note: in some circumstances independent contractors may be entitled to be paid superannuation contributions). Uses their own tools and equipment (note: alternative arrangements may be made within a contract for services). Pays their own tax and GST to the Australian Taxation Office. Method of payment Leave Paid regularly (for example, weekly/ fortnightly/monthly). Entitled to receive paid leave (for example, annual leave, personal/carers' leave, long service leave) or receive a loading in lieu of leave entitlements in the case of casual employees. Has obtained an ABN and submits an invoice for work completed or is paid at the end of the contract or project. Does not receive paid leave. THE ESSENTIAL GUIDE TO HR COMPLIANCE 6.

7 5. PERFORMANCE MANAGEMENT Even where you have a valid reason to dismiss an employee, it s critically important to follow due process. In performance management, it s typically not the facts that matter, but the process. Procedural fairness is fundamental to how Fair Work Commission decides an unfair dismissal cases. If you fail to show you have applied procedural fairness before dismissing an employee, or your performance management process is flawed, it will usually result in a finding that the dismissal was unfair. So, when you re handling cases of unsatisfactory performance, you must investigate the matter thoroughly and maintain records accordingly. This means: ONE TWO THREE FOUR FIVE Asking the employee if there is a reason for their poor performance Providing appropriate and timely warnings in writing Giving the employee adequate time to respond and improve their performance Allowing the employee to bring along a support person to meetings Documenting the process. In fact, you need to document all aspects of the employee s performance that are below par and develop a detailed performance improvement plan. CASE GUIDANCE LACK OF PROCEDURAL FAIRNESS The employment of an executive manager of an IT integration company was terminated because of the ongoing poor financial performance of a branch under his management. The company had spoken to the employee on a number of occasions regarding the poor financial performance of the branch. However, at no time did the employer warn him that his employment was at risk. The employee subsequently made a successful claim for unfair dismissal on the basis that the employer did not warn him that his poor performance put his continued employment at risk, and he was not given an opportunity to improve his performance. The Commission agreed. It determined that while there was a valid reason for the termination, and the employee was notified of the reason on three separate occasions, the termination was harsh, unjust or unreasonable because: The employee had not been given an opportunity to respond to the proposed termination. The employee had not been warned that his continued employment would be in jeopardy. THE ESSENTIAL GUIDE TO HR COMPLIANCE 7.

8 ABOUT EMPLOYMENT HERO Employment Hero is Australia s premier all-in-one cloud-based HR, payroll and benefits platform, providing all the tools and resources businesses need to hire great talent, and keep them super happy. Employment Hero s team includes some of the best employment lawyers, HR specialists, and payroll officers in the country, all of whom are ready to work with you as an extension of your company. We have offices in Sydney, Melbourne, Brisbane and Perth. With Employment Hero, our HR and payroll functionality helps you save time and money handling everything from recruitment through to payroll, and performance management in a structured, systemised, and compliant way. Meanwhile, our Employee Benefits program also allows you to enhance your employer brand and keep their people happy by offering the kind of benefits that employees love. We don t charge you for the platform, or your employees for the benefits. We simply take a brokerage fee from the benefits providers. HOW IT WORKS Employment Hero leverages technology, buying power and convenience to get better value on a wide range of services. We try to maximise every cent of an employee s salary, superannuation and savings to deliver the best value corporate superannuation, insurance, home, car, or personal loans, utilities, car leasing and other offers. Participating employees can also access wholesale discounts on over 10,000 products sold via our online marketplace, including the best known fitness, electrical and retail brands. For more information, or a Free Trial, call Alternatively, us at: info@employmenthero.com THE ESSENTIAL GUIDE TO HR COMPLIANCE 8.

Termination of employment

Termination of employment Australia s new workplace relations system From 1 July 2009, most Australian workplaces are governed by a new system created by the Fair Work Act 2009. The Fair Work Ombudsman