Dealing with the countless demands of running a business, business owners often have little opportunity to consider whether they have the correct documents and procedures in place to protect their business from claims and actions by employees.
However, employing staff can be a veritable minefield and addressing the most common employment mistakes, especially if buying a business, can avoid greater losses of time, productivity and costs down the track.
1. Award identification and compliance
The introduction of the Modern Awards in 2010 was intended to simplify the award identification process, however identifying the correct award remains a source of frustration and confusion for some businesses.
Despite the common misconception amongst businesses that there is no award that applies to them, the vast majority of businesses are covered by at least one Modern Award.
It is critical for businesses to identify the award or awards that apply to all staff within their business to ensure that base rates of pay, overtime, penalties and allowances are being paid correctly. Failure to pay correct rates can lead to large underpayment claims and potential prosecution by the Fair Work Ombudsman (‘FWO’) seeking the imposition of pecuniary penalties, which can be many times greater than the initial underpayment.
2. Failure to have an employment contract
An employment contract is an essential part of the employment relationship. A well-drafted contract ensures that both employer and employee understand their rights and obligations and can limit an employer’s liability for unforeseen employee entitlements and costs arising from disputes. A properly drafted contract can also protect a business from liabilities arising from misidentifying the applicable award.
3. Correct classification – full time, part time, casual, independent contractors
The incorrect classification of persons as casual rather than permanent employees, or as contractors rather than employees, often becomes a source of significant liability for businesses. A casual employee engaged on a regular and systematic basis, may actually be a permanent employee with a right to leave entitlements. Similarly, incorrectly classifying an employee as a contractor may result in FWO prosecution for sham contracting with associated penalties, wrongly believing the business is entitled to the unfair dismissal protections for small businesses and unbudgeted PAYG and superannuation liabilities.
Robertson Hyetts can provide assistance in identifying the correct awards, drafting contracts of policies and responding to the FWO in relation to complaints, audits and litigations. Speak to our employment law team, Jessica Duff and Tessa Mead today on 03 5434 6666.