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Annual Salary Agreements: Why a whole-of-business approach is critical to ensuring compliance

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If you’re a HR or payroll professional, you’re likely all too aware of the Fair Work Commission’s (FWC) comprehensive annual salary obligations which took effect from March 2021.

Given the high-profile cases of underpayments impacting both large and small organisations, you know the imperative to ensure compliance with these obligations, and the risks of failing to do so.   

But are your organisation’s leaders aware? 

One of the common misconceptions surrounding the annual salary agreement obligations is that maintaining compliance is purely the responsibility of the HR and payroll department.  

However, ensuring compliance, and the risks of not doing so, extend to an organisation’s leadership too. A wholeofbusiness approach is needed to ensure your organisation is compliant and risk-free.  

It’s therefore imperative that your organisation’s leaders are fully aware of their critical role in ensuring compliance, as well as the personal and organisational risks of failing to do so.  

Communicating the risks of non-compliance to your leaders 

In my previous article, I highlighted the severe personal and legal financial penalties C-level executives and board members can face if found to be involved in a contravention of the annual salary agreement obligations. 

The FWC states that in the event of an organisation contravening Australian workplace laws, they can take the matter to court to prosecute the organisation OR a person within that organisation, if they were involved in the contravention.  

It’s not only HR and payroll personnel who can face litigation. It can also extend to the likes of company directors or secretariesofficials of the organisation, accountants, or other departmental managers.  

If litigation is successful, an individual can receive a maximum fine of $13,320 per contravention. Or for a ‘serious contravention,’ a maximum of $133,200.   

This could be in addition to fines levied against the organisation itself, and any repayments it must make to employees who were found to be underpaid. Please read my previous article for a full break-down of the penalties an individual or organisation can face.  

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Why a whole-of-business approach is critical to annual salary agreement compliance 

In addition to these legal and financial risks, it’s also imperative to ensure your organisation’s leaders are aware of their critical role in ensuring compliance with the annual salary agreement obligations. 

In 2020, Fair Work Ombudsman Sandra Parker made the responsibility of organisational leaders clear. 

“I am calling on boards to seek assurance from their chief executive officers that wages are being paid to employees in accordance with the law. The buck ultimately stops with the chair, she said.  

The responsibilities of leaders may include: 

  • Implementing compliant software that satisfies the comprehensive record-keeping and reconciliation requirements of the annual salary agreement obligations
  • Ensuring the HR and payroll team are capturing accurate and detailed time and attendance records for those covered by Modern Awards, including all hours worked, breaks, and overtime
  • Providing confirmation that employee time and attendance records are accurate to calculate the Award entitlements and compare against what was actually paid
  • Providing visibility at an executive level that all FWC reporting obligations have been satisfied
  • If required, implementing health checks, risk assessments or audits of payroll processes, governance, and systems by external parties
  • Ensuring the HR and payroll department has timely access to legal counsel to help prevent or rectify possible annual salary agreement contraventions
  • Implementing organisation-wide communication channels and guidelines for employees to report errors in their pay, and issue concerns or complaints thereof

The message to Australian organisations of all sizes and industries is clear; preventing annual salary underpayments is not just an issue for payroll and HR teams. The buck ultimately stops with C-level executives and company boards. 

Make sure your organisation’s leaders are fully aware of the critical role they play in ensuring compliance and mitigating risk.

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