Why Award Rates Matter

Modern awards are legally binding and set out minimum pay rates and conditions for different industries and job classifications. They cover matters such as:

Minimum hourly rates

Overtime and penalty rates

Allowances

Break entitlements; and

Rostering rules

Failing to apply the correct award or classification can result in underpayments, sometimes stretching back years.

Here are some of the common myths we hear from our clients, and phrases you might want to avoid:

“We pay above award, so we’re covered.” - Paying above award hourly rates doesn’t automatically offset obligations. An agreement for ‘above award’ wages needs to be properly structured, and registered with Fair Work Australia.

“Small errors won’t matter.” - Even small underpayments can accumulate over time, leading to significant backpay, that may even lead to penalties.

“It’s too complicated, so regulators will understand.” - Complexity is no excuse. The expectation is that employers have systems in place to ensure compliance.

The BOOT Test

While some employers still believe ‘close enough is good enough,’ regulators take a very different view. Employees must receive at least the minimum entitlements, and errors are costly to rectify.

If you think you are paying ‘above the award’ then, as the employer, you must conduct a Better Off Overall Test (BOOT); a safeguard with the Fair Work Commission, to be certain employees are, indeed, better off than if you are paying under the award. And importantly, this is not just a checklist, when you complete a BOOT test, it needs to registered and approved by the Fair Work Commission.

The BOOT test ensures that any enterprise agreement or ‘arrangement’ with employees means they receive, at the very minimum, the same as they would receive under the award.

Key points in the BOOT test:

It’s a line-by-line comparison, comparing the proposed agreement with the minimum acceptable terms in the applicable award.

Covers all entitlements (not just monetary), but also leave entitlements, allowances and penalty rates.

Every employee and every classification is considered.

Ongoing obligations – Passing the BOOT test still requires ongoing diligence and must be reviewed on a regular basis.

If you’d like an in-depth look at the BOOT test information, you can find out more at the Fair Work Commission website: https://www.fwc.gov.au/better-off-overall-test

So, what happens if you’re not paying employees correctly?

Wage theft is a term that has gained momentum in recent years and refers to the intentional underpayment of staff entitlements. However, ignorance is no defence. If you are paying under the award requirements, even without knowing it, penalties are severe.

From 1st January 2025, Wage Theft became a criminal offence in Australia, with significant consequences:

Individuals may face up to 10 years’ imprisonment.

Companies can be fined millions of dollars.

Civil penalties from the Fair Work Ombudsman (FWO) may apply in addition.

For all employers, from start-ups to SMEs to Corporations, the message is clear - even if you operate on a tight budget you cannot afford to get wages wrong. Beyond legal consequences, the reputational damage can undermine the trust of staff, clients and the wider community.

Key Challenges for Employers

Award Coverage and Classification

Many employers struggle to identify which award applies and how to correctly classify staff. For example, support workers may fall under the Social, Community, Home Care and Disability Services Industry (SCHADS) Award, which includes numerous levels and pay points. A misclassification at the outset can trigger long-term underpayments.

Complex Conditions

Awards include detailed rules around overtime, shift penalties, broken shifts, and allowances. These can vary depending on hours worked, client needs or location. A payroll system MUST be set up properly to fully capture all allowances.

Record-Keeping

Without accurate timesheets and rostering records, it is difficult to prove compliance. Poor record-keeping is itself a breach of the Fair Work Act.

Practical Steps to Ensure you Pay Correctly

Conduct a Payroll Audit

Regularly review your payroll processes against the relevant awards. This includes checking classifications, hourly rates, allowances, and overtime calculations. Independent audits can help identify issues before regulators do.

Use the Right Tools

Payroll software can assist, but only if it is configured correctly. Awards are complex, and many systems require manual adjustments to reflect specific entitlements. Don’t assume settings are correct. Get help if you need it.

Train Your Managers

Supervisors who prepare rosters or approve timesheets should understand award requirements. As an example, rules about minimum breaks or consecutive days off are often overlooked.

Stay Updated

Awards are regularly updated, usually with annual increases on 1st July each year. Subscribe to Fair Work updates or work with a professional adviser to stay compliant.

Seek Professional Support

Bookkeepers and payroll professionals with industry experience can provide ongoing guidance and peace of mind.

Remember, paying staff correctly is a legal requirement and a reflection of your organisation’s values.

The best action is a proactive approach - know your awards, keep accurate records, audit regularly, and seek professional advice when needed. By doing so, you not only avoid costly penalties but also build a workplace culture based on fairness and transparency.

Should you need any advice around payroll – WestBAS is here to help.