Newsletter No 88 - 24 September 2008 |  |
News
Feature
Your questions — Our answers
News
Australian Capital Territory — changes to LSL 12 September 2008
The Legislative Assembly for the Australian Capital Territory recently amended both the Long Service Leave Act 1976 [ACT] and the Long Service Leave (Building and Construction Industry) Act 1981 [ACT] now providing for employees to take long-service leave at any time after seven years.
The amendment Act commenced from 10 September 2008.
The main points of the amendment Act are:
- The Act now provides for long-service leave entitlements to be accessed by employees on a year-to-year basis after an initial 7-year period of continuous service with the employer.
- The Act deletes a reference to long-service leave accruing in 5-year blocks after an initial seven-year period with respect to pay in lieu of leave.
- It is now an offence if an employer does not provide an employee with their leave entitlement if the employee asks for 4 weeks or more of long-service leave. This change was necessary because the amendment makes it possible for employees to access leave after an initial 7-year period on a year-to-year basis, which may be as little as 4.3 days of leave.
- An amendment to the Long Service Leave (Building and Construction Industry) Act 1981 [ACT] corrects an anomaly created by the 2007 amendments to this Act concerning employer reimbursements in the building and construction industry portable long-service leave scheme.
LSL after 7 years
The Act has been amended to remove the 5-year entitlement blocks and to allow for per annum accrual of entitlements after 7 years service has been achieved.
This will allow employees to take long-service leave at any time after 7 years without being disadvantaged when compared to the pre-2005 model.
The reason for the amendment to the Act is a consequence of an amendment to the same Act in 2005, which changed the eligibility period for long-service leave in the private sector from 10 years to 7 years.
Under the previous legislation, the calculation of entitlement was still determined in 5-year blocks after the initial 7-year eligibility period had elapsed. This led to a situation that those choosing to take their entitlement in the last 2 years of the existing 5-year entitlement block found themselves disadvantaged in comparison to the pre-2005 situation.
Under the previous legislation, employees choosing to take long-service leave after 10 or 11 years of service would be entitled to 8.67 weeks of leave. Under the current legislation, employees choosing to take long-service leave after 10 or 11 years of service are only entitled to 6.07 weeks leave. This represented a loss of approximately 2 and a half weeks, as the employee is not entitled to further leave until at least 12 years has elapsed.
Building and construction industry
The amendment to the Long Service Leave (Building and Construction Industry) Act 1981 [ACT] removes the formula that was introduced in 2007 that reimburses employers where employees elected to take long-service leave under the Long Service Leave Act 1976 [ACT] or other Act, instead of under the portable scheme. This amendment removes the formula and provides how reimbursements to employers are determined based on what was actually paid to the employee subject to the governing body's approval.
Details
The amendment Act can be viewed online.
New 457 visa employee protections 24 September 2008
A Bill has been introduced into the Senate to strengthen the integrity of temporary working visa arrangements including the Subclass 457 visa program.
The Migration Legislation Amendment (Worker Protection) Bill includes four main measures to protect overseas workers from exploitation. These measures provide for:
- expanded powers to monitor and investigate possible non-compliance by sponsors;
- the introduction of penalties for employers found in breach of their obligations;
- improved information sharing across all levels of government; and
- better defined sponsorship obligations for employers and other sponsors.
More inspectors
The new laws will provide for inspectors to monitor workplaces and conduct site visits to determine whether employers are complying with their sponsorship obligations. Their powers will be similar to the powers of workplace inspectors under the Workplace Relations Act 1996.
Fines of up to $33 000 are proposed for employers found in breach of the obligations in the Migration Regulations. The department will retain the ability to cancel an employer's approval as a sponsor or bar them from making applications for approval as a sponsor for a period of time.
Information sharing
The Bill proposes amendments which will allow the Commissioner of Taxation to disclose tax information of visa holders, former visa holders, approved sponsors, or former approved sponsors to the Department of Immigration and Citizenship in order ensure correct salary levels are being paid to visa holders.
Sponsorship obligations
The Bill provides for Regulations to clearly set out the sponsor obligations that employers must satisfy when employing a temporary overseas worker.
The prescribed obligations will clearly set out the period of time in which an obligation must be satisfied, and the manner in which the obligation is to be satisfied. The obligations will for the first time be imposed by operation of law.
The obligations to be specified in the Regulations will be the subject of consultation with stakeholders and finalised in the coming months.
Additional public holidays in Victoria 19 September 2008
Amendments to the Victorian Public Holidays Act to make Melbourne Cup Day a state-wide public holiday and also to provide an additional day if Boxing Day and New Years Day fall on a weekend, have been passed.
The legislation has not yet been proclaimed, but will commence in the near future.
Some consequences of the new legislation for upcoming public holidays are:
- the 2008 Melbourne Cup Day will now be a public holiday in all of Victoria, unless a local government has already put in a request for another day to be scheduled as the alternate holiday
- Boxing Day in 2009 will fall on a weekend — 26 December will remain a public holiday but there will also be a substitute public holiday on the following Monday. As a result, penalty rates will apply on both days.
Review awards/agreements
The Victorian Chamber of Commerce and Industry is recommending that employers review the awards and agreements (both formal and informal) which apply in their workplace in light of these changes to the legislation. For example, some workplaces have informal arrangements for Melbourne Cup Day which may now be impacted.
Draft modernised awards released Source: Australian Business Industrial
12 September 2008
The Australian Industrial Relations Commission has released 14 draft 'modern awards'.
Over the next 6 weeks the Commission is seeking the views of employer and employee representatives, and other stakeholders about the draft awards. The Commission will then revise them, with the final versions of these modern awards to be released in December 2008.
Modern awards — background
A new system of 'modern awards' is one of the key features of the Federal Government's new workplace relations system. Along with the 10 National Employment Standards (NES), the proposed system of modern awards will form the 'fair minimum safety net' for employees in the federal system.
Modern awards are intended to be simple to follow, and allow flexible and productive working practices.
The introduction of the modern award system is not intended to disadvantage employees nor increase costs for employers.
Modern awards will replace the current jumble of federal awards, NAPSAs (Notional Agreements Preserving State Awards, which are the federal form of pre-WorkChoices state awards) and state awards for private sector employers. A major goal of the Commission is to reduce the number of awards. It is aiming to make the modern award system so that there are only one or two modern awards applying to any single business.
Employers should assess
Employers should assess how the draft classifications might apply, and whether the rates and conditions in the draft awards impose new costs. Another important factor for employers to consider is the coverage of the draft awards. Does the relevant modern award apply to the business' operations, or a relevant part of its operations, or does it cut through functions which should be under the one set of conditions?
Priority sectors
The priority sectors are shown below together with the draft modern awards issued for those sectors. In some sectors there is more than one modern award and a number of manufacturing sectors were bundled up together.
The priority sectors do not cover all industries, but one of the priority sectors is clerical work. All employers are potentially directly affected by the draft modern award (the Clerks — Private Sector Award 2010) made for this sector.
Other draft modern awards have a wider coverage than apparent from their title. For example, the draft Retail Industry Award 2010 covers community pharmacies, hair and beauty establishments.
Some employers operate in industries which interact with one or more of the priority sectors. They may be impacted by the coverage provisions of one or more of the draft modern awards.
The priority sectors and draft modern awards
The 'priority sectors' awards are listed below.
- Coal Mining Industry — Coal Mining Industry Award 2010
- Glue and Gelatine Industry — Manufacturing and Associated Industries and Occupations Award 2010
- Higher Education Industry — Higher Education Industry — Academic Staff — Award 2010; Higher Education Industry — General Staff — Award 2010
- Hospitality Industry — Hospitality Industry (General) Award 2010
- Metal and Associated Industries — Manufacturing and Associated Industries and Occupations Award 2010
- Mining Industry — Mining Industry Award 2010
- Private Sector Clerical Occupation — Clerks — Private Sector Award 2010
- Racing Industry — Racing Clubs Events Award 2010; Racing Industry Ground Maintenance Award 2010
- Rail Industry — Rail Industry Award 2010
- Retail Industry — Retail Industry Award 2010
- Rubber Plastic and Cablemaking Industry — Manufacturing and Associated Industries and Occupations Award 2010
- Security Industry — Security Services Industry Award 2010
- Textile, Clothing and Footwear Industry — Textile, Clothing, Footwear and Associated Industries Award 2010
- Vehicle Manufacturing Industry — Manufacturing and Associated Industries and Occupations Award 2010
More information
Modernised awards in more detail 12 September 2008
Some of the 'standard' contents of the modernised awards are discussed in more detail below.
Redundancy pay
The draft awards contain a model provision dealing with redundancy, and include severance pay — at reduced levels — for small business which would operate 'prospectively' and therefore not apply to periods of service prior to 1 January, 2010, when the modernised awards will come into operation.
However this has already proved too much for the federal Government, and IR Minister Julia Gillard has released a statement saying the Government is 'concerned about the potential impact on small business of the newly proposed redundancy pay model award clause'.
The statement has been taken to mean that if the AIRC does not delete this provision, the Government will move to ban it through legislation — which would have the backing of the Opposition.
Application
The AIRC has released a statement covering how the draft modernised awards would apply in certain areas, such as:
'Each modern award will have an application clause indicating to whom it applies and on whom it is binding. Modern industry awards will be expressed, so far as practicable, to apply to an employer industry. Modern occupational awards will be expressed to apply to an employee occupation.'
Modern awards will not bind an employer bound by an enterprise award in respect of an employee to whom the enterprise award applies.
Award flexibility
To put the intended operation of the clause beyond doubt the AIRC has included the words 'Notwithstanding any other provision of this award' at the start of the model clause.
Consultation
The Commission has included an award obligation upon employers to notify employees and their representatives of significant workplace change and to discuss the change.
'The draft clause is in similar form to the provision introduced by the Commission more than 20 years ago,' the Commission said. 'We propose that the draft clause be a standard one in modern awards.'
Dispute resolution
'The draft dispute resolution clause is designed to be simple, to emphasise the importance of resolution at the workplace, to encourage parties to agree on a process that suits them if the dispute reaches the Commission and, finally, to provide the Commission with the discretion and the power to ensure settlement of the dispute if the dispute is still unresolved,' the statement says.
Casual loading
The casual loading has been set at 25%. 'In some areas transitional arrangements may be necessary to cushion the impact of the change,' the Commission says.
Termination
The Commission has drafted a model termination of employment provision which adds to the NES by containing a provisions for notice by employees and a job search leave entitlement.
Annualised wage and salary arrangements
A number of parties suggested that this provision be included in all modern awards, but the Commission decided not to do so as a matter of course.
'Where there are similar arrangements in a relevant pre-reform award or NAPSA, where there is a consensus, or where there is a case on the merits based on the nature of the industry or patterns of work the situation may be different. Most of the exposure drafts do not contain such arrangements,' the Commission said.
Allowances
To facilitate the automatic adjusting of allowances when minimum wages are changed all allowances should be expressed as a percentage of the key classification rate.
Superannuation
For those awards dealing with superannuation a clause will nominate a default fund or funds should an employee not nominate one.
Annual leave
The AIRC said it had not been practical to develop a single modern clause for annual leave.
Transitional provisions
A number of parties suggested that transitional provisions should not be included in the exposure drafts.
The Commission agreed and said that the number and type of transitional provisions are better dealt with after consideration of the net impact on current terms and conditions flowing from each draft modern award. One possible approach is included in the draft retail award.
'We encourage further comment on whether transitional provisions are needed and if so the form they should take,'it said. 'The drafts do not generally include transitional provisions.'
Comments and submissions
Written comments and other material in relation to the exposure drafts are to be lodged with the Commission by 10 October 2008. Comments can be lodged by post, fax or email.
The Commission said it would assist if comments could be directed to a specific clause in a particular draft where it is practicable to do so. It will also not require that materials be served on other participants in the process.
Modernised awards: clerks to lose $45 a week? 16 September 2008
The Australian Services Union (ASU) has attacked the draft modernised award for clerks, saying Victorian casual clerical workers will lose $45 a week and the AIRC has failed to take the best wages and conditions from around the States.
The AIRC released its first draft of the Clerks — Private Sector Award 2010, one of the first modern awards created, on 12 September 2008.
Loading slashed
ASU Victorian branch secretary Ingrid Stitt said that Victorian office and administration employees are set to lose pay and conditions under the draft award released by the AIRC.
She said that Victorian office workers would have their casual leave loading slashed from 33.3% to 25% and lose their current award entitlement of accident make-up pay.
'The AIRC has failed to take the best conditions from each State and Territory and it means that Victorian workers will be earning less and not have the same conditions.'
The AIRC has said that the same draft award casual loading will apply in all modernised awards.
'This would mean a casual employee who works 30 hours per week stands to lose about $45 every week — or about $2,300 every year,' Stitt said.
'Lowering of standards'
Stitt said the ASU had even greater fears about how the AIRC wanted to apply the Clerks — Private Sector Award 2010.
'The AIRC released information ¡K indicating its preference for most clerical workers to be employed under their industry award and for the new award to only apply to a small number of clerical and administration workers not covered by a specific industry award,' she said.
'The AIRC has again indicated its desire for most office workers to be covered by their industry award, but we know from experience that when office workers are covered by an industry award they are often ignored in favour of other, larger sections of the workforce.
'It is nonsensical to think that the clerical award, which was identified as a priority award and is being painstakingly developed, will only end up applying to a small number of workers.'
'Unless changes are made, we will see the basic standards for all office workers falling as a result of this modernisation process.'
Small business unfair dismissal checklist 19 September 2008
An Unfair Dismissal Code Of Practice Checklist for small business employers is now available.
The Checklist was announced by the IR Minister Julia Gillard and will apply from 1 July 2009.
Under the code (which does not apply to businesses with 15 or more employees) small employers must ask the following questions:
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How many employees are employed in the business? (Include full time, part time and regular long term casual employees as well as the dismissed employee and any other employee dismissed at the same time).
[If under 15 employees, the Fair Dismissal Code applies.]
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Has the employee been employed in this business as a full time, part time or regular casual employee for 12 months or more?
[If no, the employee cannot make an unfair dismissal claim.]
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Did you dismiss the employee because of genuine redundancy as set out in the Code?
If Yes, explain the reason for the redundancy (for example, economic downturn, introduction of new technology therefore requiring fewer staff, or another such reason)
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Do any of the following statements apply?
I dismissed the employee because I believed on reasonable grounds that:
a) The employee was stealing money or goods from the business.
b) The employee defrauded the business.
c) The employee threatened me or other employees, or clients, with violence, or actually carried out violence in the workplace.
d) The employee committed a serious breach of occupational health and safety procedures.
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Did you dismiss the employee for some other form of serious misconduct?
If Yes, what was the reason?
(If the employers answered Yes to any question in parts 3, 4 or 5, they are not required to answer the following questions — presumably because a redundancy or a summary dismissal for misconduct are not susceptible to an unfair dismissal claim.)
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Did you dismiss the employee because of the employee's unsatisfactory conduct, performance or capacity to do the job?
If Yes:
a) Did you clearly warn the employee (either verbally or in writing) that the employee was not doing the job properly and would have to improve his or her conduct or performance, or otherwise be dismissed?
b) Did you provide the employee with a reasonable amount of time to improve his or her performance or conduct? If yes, how much time was given?
c) Did you offer to provide the employee with any training or opportunity to develop his or her skills?
d) Did the employee subsequently improve his or her performance or conduct?
e) Before you dismissed the employee, did you tell the employee the reason for the dismissal and give him or her an opportunity to respond?
f) Did you keep any records of warning/s made to the employee or of discussions on how his or her conduct or performance could be improved? Please attach any supporting documentation.
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Did you dismiss the employee for some other reason?
If Yes, what was the reason?
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Did the employee voluntarily resign or abandon his or her employment?
If Yes, please provide details.
The employer then has to make a declaration:
DECLARATION
I declare that I believe every statement or response in this checklist to be true.
Signature/ Date
Unfair dismissal claims
If the employee subsequently decides to make an unfair dismissal claim and an 'informal' conference held by Fair Work Australia rules that the eight point checklist was followed correctly then the claim is dismissed and the dismissal stands.
'Simple, streamlined process'
According to the guidelines, where a claim of unfair dismissal is made, a 'simple, streamlined process' will apply for both small and larger businesses.
Unfair dismissal claims must normally be lodged with Fair Work Australia within seven days. Fair Work Australia will make initial inquiries and discuss the issues with employers and employees, 'including in informal conferences at mutually agreed locations, with a view to achieving a mediated resolution'.
Non-legalistic
The code says the new system will be 'non-legalistic, the aim being to keep lawyers and contingency fee agents out of the process'.
Legal representation will be allowed only in exceptional circumstances where Fair Work Australia determines that a party is unable to represent him or herself.
Decisions will be able to be made without the need for a full public hearing. Public hearings will only occur where the case involves particularly complex issues. Legal representation may be allowed at this stage.
Compensation limit
If after the Fair Work Australia process the dismissal is found to be unfair, the maximum compensation is six months' pay, with the full amount only available in exceptional cases.
Larger employers excluded
While larger employers are, at this stage, excluded from using the eight point checklist to justify dismissals, it is not clear how the system will apply to them. Obviously HR departments would be foolish not to follow a similar process — at least informally.
Larger employers may also have to justify particular dismissals on the base of policy and practice — matters which it seems do not apply to smaller employers.
Both unions and employer organisations are anxiously awaiting the legislative detail regarding unfair dismissals by all sizes of employer.
22 September 2008
Two new Payroll Tax Revenue Rulings have been issued by the NSW Office of State Revenue, affecting Contractors and the Construction Industry. Both provide interpretation of the Payroll Tax Act 2007, and support of the harmonisation of the payroll tax regimes of NSW and Victoria.
PTA033 — Contractors — Services Ancillary to the Supply of Goods (PDF)
This ruling explains the percentage of a contract which is made up of 'the supply of goods', which then takes that contract outside of the payroll tax system, is 50%.
PTA034 — Contributions to the Construction Industry Long Service Leave and Redundancy Funds (PDF)
This ruling confirms that payroll tax is not payable on contributions made to construction industry long service leave and approved redundancy funds, as long as the payment does not constitute a fringe benefit under the Fringe Benefits Tax Act.
Feature
First Home Saver Accounts — employer obligations
Source: Shirley Murphy, Tax and Superannuation Consultant
16 September 2008
This article examines the question of whether the same tax benefits are possible if an employee wants to sacrifice salary into a First Home Saver Accounts FHSA, as into a superannuation fund.
First Home Saver Accounts
From 1 October 2008, employees may be able to make contributions to a First Home Saver Account (FHSA) to save for a home. There will be two tax benefits from saving through a FHSA: first, the Government will make tax-free contributions; second, earnings on the balance in the account will be taxed at only 15% rather than at the employee's normal rate (which would be the case if the employee saved for a home with a bank).
How FHSAs work
- A person can only open an FHSA if they are aged between 18 and 65, have not previously owned a home in Australia, and provide their tax file number.
- The Government will make a tax-free contribution to a person's FHSA, equal to 17% of the contributions made by the person in a year (but with a maximum Government contribution in a year of 17% of $5,000).
- Contributions cannot be made to an FHSA once the balance reaches $75,000.
- A person must contribute at least $1,000 a year for at least four years, before they can withdraw an amount to purchase a home.
- Amounts can be paid out of an FHSA to purchase a home, as a contribution to superannuation, or as a direct payment to a person who is aged at least 60.
- If a person receives benefits from an FHSA in breach of the rules, additional tax (FHSA Misuse Tax) is imposed to remove the tax benefit. This generally means an additional 31.5% tax, leading to tax liability at the top marginal rate of 46.5%. FHSA Misuse Tax could be imposed, for example, if the person was not eligible to open an FHSA because they already owned a home.
Salary sacrifice into an FHSA?
One of the most effective ways for an employee to reduce tax on salary or wages is to sacrifice some of the salary into superannuation. The consequence is that the employee is not liable to tax on the sacrificed amount, 15% tax is paid on the amount when it is contributed to the superannuation fund, and the superannuation is paid tax-free if the employee is aged at least 60 at the time.
This raises the question — would the same tax benefits be possible if an employee wants to sacrifice salary into an FHSA? The answer is 'no'.
Contributions made by a person to an FHSA will only be from post-tax income. This means that an employee's tax liability will be calculated on the salary they earn, and they will not be able to reduce the taxable amount of the salary by arranging with their employer for an amount to be paid by the employer to an FHSA.
Example
(1) An employment contract says that an employee's salary for 2008/09 is $80,000. The employee arranges with their employer at the beginning of 2008/09 that $20,000 of the 2008/09 income will be paid to a superannuation fund, rather than to the employee. The employee's tax liability is calculated on the reduced salary of $60,000.
(2) An employment contract of a second employee says that their salary for 2008/09 is also $80,000. This second employee arranges with their employer at the beginning of 2008/09 that $20,000 of the 2008/09 income will be paid by the employer as a contribution to an FHSA, held by the employee. Even though the employee only receives $60,000, their tax liability is calculated on the full $80,000.
If an employee enters into an arrangement with their employer for salary to be sacrificed into an FHSA, the tax consequences will be as follows.
- The making of the contribution by the employer is not a fringe benefit and the employer is not therefore liable to fringe benefits tax on the amount of the contribution.
- The employee pays tax on the full salary, even though part of the salary may be contributed to an FHSA, rather than being paid to the employee.
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The employer's obligation to withhold tax and remit it to the Tax Office is calculated on the basis of the full salary. The employee is taken to have received the amount of the contribution as salary, and the employer has PAYG withholding obligations as if the salary sacrifice arrangement between the employee and employer had not been entered into.
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Your questions — Our answers
Q. Re-employment and continuity of service
We wish to re-employ a long-term employee who had previously resigned. The intervening period is approximately three months. We are happy to re-employ this person, however, we are concerned the company may be required to acknowledge the employee's previous service when calculating any future entitlements. What is the legal position in this situation?
A. An employee who resigns of their own volition and is subsequently re-engaged by the same employer would not usually have any previous service recognised when calculating employment entitlements.
This is the case with respect to minimum entitlements under the WorkChoices Standard, ie annual leave, personal/carer's leave, parental leave, state or territory long service leave statutes, or service-based employment conditions under an industrial instrument, such as redundancy pay.
Dismissed and re-engaged
The situation can differ where an employee is terminated by the employer and re-engaged within a specified period, with most long service leave statutes recognising previous service in this circumstance, provided the re-engagement occurs within two or three months (depending on the particular statute).
In this case, subject to the terms of the applicable industrial instrument, previous service would not count when calculating any future entitlements.
Q. Over-award payment and overtime
We employ a number of draughtspersons who are covered under a pre-reform federal award. They work 'as required' with hours of work in excess of 38 hours in a particular week or outside the span of ordinary hours. They are paid considerably more than the APCS minimum rates prescribed under the relevant Australian Pay and Classification Scale (APCS) — but do the overtime provisions of the federal award still apply, with the time and a half and double time penalty rates calculated on this rate of pay?
A. The overtime clause in the applicable award refers to penalty rates to be calculated at the 'appropriate rate of pay'. This term ('appropriate rate of pay') is not unusual in pre-WorkChoices industrial instruments, with 'appropriate rate' referring to the particular wage rate and classification under the relevant APCS, not to the employee's 'actual' rate of pay. The award and the APCS provide the minimum amount of wages the employee must receive, which includes calculations such as penalty rates and annual leave loading.
Provided the employees are receiving a total wage at least equivalent to the amount they would have received if paid at the award rate and entitlements calculated on the applicable award rate, no underpayment would occur.
This is because the award only places an obligation on an employer to pay a level of wage calculated on the minimum entitlements prescribed by the applicable instrument.
An employee's letter of offer (contract of employment) should identify which employment conditions are included in the 'market' wage to help avoid any dispute on this issue.
Records
It should be noted the employer is also required to keep proper time and wage records that detail the number of hours worked and when the hours were worked by each employee over the relevant period, so that an independent authority (eg a workplace inspector) can determine whether an employee is indeed receiving the minimum entitlement under the applicable instrument when investigating an employee's claim for underpayment of wages.
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