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Episode 5 | Employsure Essentials Podcast.

Views: 1993Posted 28-11-2017

Episode 5 of our podcast series, Employsure Essentials, puts expert adviser Harry Hilliar in the hot seat to discuss overtime payments. Our host, Scott McGrath, discusses the complex topic with Harry and covers some of the key points of confusion such as how overtime works with salaries and what happens when employees work longer hours on the weekend.

Scott: Hello and welcome to this episode of Employsure Essentials. Today I am going to have a chat with Harry Hilliar, one of our expert advisers on all things overtime. As Harry says, there is a lot of confusion out there, particularly around how salaries interact with overtime payments and how some employers manage it depending on the industry and depending on their Award. There’s a lot to consider, so let’s get into it.

Scott: Hi Harry thanks for coming in today

Harry: Pleasure to be here Scott.

Scott: So today we’re going to have a bit of a chat about overtime let’s start with the basics. Is there a definition of it? I mean – is it clear?

Harry: Yeah absolutely there is a definition in the National Employment Standards for the maximum weekly hours of work for a full time employee, and that’s set at 38, so any hours that an employee works in excess of 38 will generally be considered overtime now obviously that’s where it gets a lot more complex in terms of how that time is treated and how it’s paid for.

Scott: Okay great, before we get to how it’s treated and how to manage it, how does an employer know if their staff are entitled to overtime? Is it in the Employment Standards? Or is it an Award?

Harry: The national Employment Standards don’t provide a lot of guidance so it’s really going to come out of the Modern Award so as is always the case, it’s crucial for an employer to be aware that whether or not a Modern Award applies to their employees and how that Modern Award will impact obligations in relation to overtime.

Scott: Is that everyone? I mean, is that every industry, every employer? Or does it come down to – every workplace is different?

Harry: Every workplace is indeed different, there are a number of industries and occupations that are going to be covered by a Modern Award and the Modern Award system and there’s a number of employees and industries out there which are what we call Award-free which means they are not covered by a Modern Award, obligations are much more streamlined, much more simple.

Scott: Okay, but still it comes down to that individual space too I suppose.

Harry: Yeah so I suppose, it’s never going to be you know one rule. Even in a single business, you know you can have multiple Awards in a single business, some employees can be covered, some can not be, you know it’s a very, very tricky area.

Scott: Okay, and just to hopefully not to confuse things any more there but what about when we talk about in terms of penalty rates? I mean, if I run a bar on a Sunday afternoon and I’ve got staff that have done 12 hours, if that’s overtime. Does it stack? If I can use that word? Do penalty rates go on top?

Harry: It is a common question we get from clients, you know if my employee is working overtime on a Sunday do they get quadruple time? Fortunately it’s the case that we consider overtime different to ordinary time. Ordinary time is within that 38 hours as I said earlier and generally we can incur penalty rates if worked at certain times of the day or week and overtime is outside of that time so the penalties that would have applied on ordinary time will not apply on overtime. Fortunately it’s one or the other. Scott: No one’s getting quadruple time then.

Harry: Not yet

Scott: Not yet, that’s a good point. Okay so do employers need to notify staff then? If I want to sit here, because I’m such a studious worker, if I want to just sit here until 11.30 tonight and bill the employer for 6 hours of overtime, I mean, is that fair? Does that sound good?

Harry: Look again, a pretty common question we get through, look it’s simply the case that overtime will most commonly need to be at the employer’s direction so just sitting there in the office or in the workshop until all hours of the morning and to be expected to be paid for it simply isn’t going to be the case. Overtime if it’s going to be worked will most commonly need to be at the direction of the employer however in some cases it could be that the employee could show that they have been given so much work and the expectation is so high that it was reasonable to expect that they would have to work some extra hours so it can get a little bit tricky but the general rule is that it must be at the direction of the employer.

Scott: Yeah okay, and even if it’s a little bit tricky there, there’s got to be a reason doesn’t there? There’s got to be a pretty valid reason for someone to be doing a fair bit of overtime?

Harry: Oh yeah absolutely, they’ve got to be able to show that there was really no other option given the expectations that were placed on them about completing the work they had.

Scott: Okay great and what about, if we look at recording overtime payments, do you need to keep records? Does it need to be separately recorded? Or what’s the technical rules around that one?

Harry: Yeah so look the Fair Work regulations tell employers what sort of records they need to keep regarding employees and absolutely working overtime the hours of overtime that are worked is right up there in terms of an employee record that an employer needs to record and hold onto so in that regard where you have employees working overtime  it’s quite critical that you’re making a note of that and keeping a record of that, preferably in a payslip, preferably also in a time sheet to ensure you’re compliant on that one

Scott: And I mean the penalties have just gone up for failing to keep those records and more than that the compliance is certainly there so people need to be getting that right don’t they.

Harry: Absolutely

Scott: Okay Harry, a favourite game of mine is hypotheticals so lets give it a crack. I run a construction company and all of my employees are on a salary, job runs a bit over, do I have to pay everyone overtime?

Harry: Look a common question we get from our clients is – Where an employee is on a salary – do they get overtime? Do they get additional payments? What’s important in this regard is that we remember that the Modern Award system, if a Modern Award that applies to the employee is treated as a safety net so in the construction industry we’ll have the Building and Construction Award, which will set out a number of obligations about allowances and penalty rates and overtime now what we need to make sure is that over the life of the employment relationship our employees are receiving at least what they would have received had they been paid on the base Award wage with all penalties, all allowances, all loading all overtime, all other entitlements factored in so it’s all well and good to pay a salary but if that salary isn’t sufficiently compensating an employee for the entitlements that they should be receiving under the Award, it’s not going to be sufficient, and you will be underpaying them so what a lot of employers will do is factor in a certain amount of overtime hours into a salary so they can build an expectation with employees of needing to work the extra time but if you’re just playing a bit of guess work you’re opening yourself up to a bit of risk there.

Scott: Yeah so get that advice I suppose is the best piece is just to make sure you’re really across your workplace, your situation, and as you said before you could have a couple of different Awards covering any workplace, so just making sure that you’re getting it right.

Harry: Absolutely so it’s a very complex one and it takes up a lot of our time so yeah definitely one to get advice on.

Scott: Okay Harry we’ve covered a lot today so let’s rattle off a top tip – What does every employer need to be doing? What should they be doing to make sure they’re getting this overtime process right? Harry: Look I was talking earlier about salaries and as I said it’s a very common practice for employers to avoid overtime payments through above Award wages, or salary packaging, whatever it may be, my top tip is, if you’re going to enter into one of those arrangements it’s absolutely critical that you record it in writing, and you explain, in a written agreement, what the employee is been compensated for and how that arrangement works, the simple fact is that having a verbal agreement is never going to be good enough and if you are using a salary packaging arrangement or whatever it may be there must be a written agreement offsetting those certain entitlements under the Award. In the absence of it, you know a savvy lawyer or a union representative can cause all sorts of problems so absolutely critical that you keep those arrangements in writing.

Scott: Okay so know your obligations and get it in writing. Good advice, Harry thanks for your time.

Harry: Not a problem at all.

Scott: Well there’s the essentials, Harry covered a lot there but ultimately employers need to be aware that not only is every workplace different but over time can also be vary between employees based on Awards and individual contracts, so employers need to be sure that they’ve set clear guidelines and employees know what to expect, as always if you need advice on this or any other topic phone Employsure on 1300 651 415. I’m Scott McGrath, looking forward to your company next episode

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