Ensuring compliance with modern award regulations can feel like a daunting task for employers across Australia. The many award classifications, changing requirements, and extensive information can easily make a compliance audit feel overwhelming.
Despite these challenges, conducting regular audits is required for any business. Recent cases like Woolworth’s $1.2 million fine for underpayment highlight the significant consequences of letting discrepancies go unaddressed, especially for shift-based industries. The stakes are more than financial: non-compliance also damages employee trust and company reputation.
Don’t let these pitfalls discourage you. This guide walks you through the process of modern award compliance audits to help your business remain on the right side of Australia’s extensive employment laws.
Understand your modern award obligations
Modern awards outline the terms and conditions of employment for different industries and occupations in Australia. They exist to regulate the impact of employment on workers’ lives in the following ways:
- Basic pay rates ensure employees are paid at least the minimum wage rates specified by their modern award.
- Penalty rates apply when an employee works outside of regular business hours, including after-hours shifts, weekends, and public holidays.
- Overtime rates apply when an employee works beyond the normal or rostered hours of work defined in their modern award.
- Allowances compensate employees for specific conditions or for work performed outside of their regular responsibilities.
- Break arrangements specify the frequency, duration, and timing of meal and rest breaks, including some longer breaks for certain shift schedules.
Modern awards are not static documents. They evolve to reflect changes in workplace practices, the state of the economy, and social shifts. The Fair Work Commission (FWC) regularly reviews and updates modern awards so they’re fair and relevant.
To keep up with these frequent changes, be proactive and regularly audit your business’s compliance to modern award obligations.
How often to conduct a modern award compliance audit
The Fair Work Ombudsman actively monitors compliance through random inspections and specific campaigns. Therefore, maintaining compliance with modern award pay rates and conditions requires a company’s regular attention.
Here are some best practices for establishing a consistent audit schedule to protect your business and employees from the risks of non-compliance:
- Emphasise fair employment practices in your business.
- Keep detailed records of hours, pay rates, and allowances.
- Stay up to date with changes by subscribing to FWC updates.
- Train staff on modern award obligations.
- Consider third-party help when conducting audits.
Key timeframes that align with regulatory updates and inspections dictate how often you should conduct audits.
Annual audits
At minimum, businesses need to perform a thorough modern award compliance audit once per year. This frequency is not arbitrary; rather, it’s tied directly to Australia’s legal framework. The FWC assesses modern award pay rates every year, which can result in changes across all modern awards.
The four-year review cycle
Every four years, the FWC undertakes a complete review and update of all modern awards. The FWC has conducted or will conduct modern awards reviews in 2020, 2024, 2028, and so on.
Given this four-year cycle, a more in-depth audit is usually recommended on the same schedule. Businesses should pay close attention to any major changes that may affect them.
More frequent reviews
Even though annual audits are the minimum and four-year reviews are vital, conducting more frequent reviews is valuable.
Quarterly and bi-annual compliance checks help catch discrepancies early, which can reduce the risk of prolonged non-compliance and the associated consequences.
Your internal modern award review
Modern award compliance isn’t just about meeting legal requirements. It’s about fostering a fair and equitable environment for your workers. Consistent audits insulate your business from penalties but also represent a commitment to your employees’ rights and well-being.
By staying proactive with compliance to your modern award obligations, you uphold important ethical standards and promote a positive workplace culture for everyone.
Keep in mind that issues of non-compliance can occur for many reasons:
- Human error in data entry or payroll processing.
- Misunderstanding award or agreement obligations.
- Failing to update rates following annual wage increases.
- A mismatch between employee contracts and modern awards.
- Misusing annualised salaries without proper safeguards.
Non-compliance is rarely intentional. Still, deliberate compliance is a vital part of running an ethical business.
What to look for in a modern award compliance audit
A comprehensive modern award compliance audit requires reviewing several key areas.
1. Legal updates
Review changes to modern awards since your last audit. This may include updates to modern award pay rates, levels, or classifications issued by the Fair Work Commission.
2. Modern award categories
Assess your obligations as they apply to each aspect of modern awards. This could mean:
- Ensuring base pay rates meet or exceed the minimum standards.
- Verifying that the correct rates are applied for work outside regular business hours.
- Confirming the right calculations and payment for overtime work.
- Checking adherence to mandated break schedules.
- Applying any relevant loadings if your employees are eligible.
3. Employee classifications
Examine each employee’s responsibilities and qualifications to make sure they match the appropriate classification within their modern award. Employees should receive compensation that corresponds to their correct classification.
4. Payroll practices
Using your payroll records, confirm your employees currently receive their accurate award rates and entitlements. This includes checking for correct calculations of superannuation contributions.
5. Record keeping
Make sure all required employment records are up-to-date, easily accessible, and organised. These records must include hours, pay rates, entitlements, and superannuation contributions.
How to conduct a modern award compliance audit
These basic steps help you tick all the boxes in a modern award compliance audit and adhere to the standards that protect you and your workforce.
1. Gather official resources
- Obtain the latest versions of modern awards from the FWC.
- Consider whether multiple awards apply to your workforce because of varying roles.
- Access recent FWC decisions that could impact your compliance.
2. Collect internal documentation
- Gather payroll records, employment agreements, and leave records.
- Compile records of company policies, employee handbooks, and training data.
- Make sure all collected documents thoroughly reflect your employment practices.
3. Compare official laws with your internal records
- Cross-reference pay rates with the minimum wages stipulated in relevant awards.
- Ensure compliance with hours of work laws, like breaks, shift lengths, and rostering.
- Verify correct payment of any overtime and penalty rates.
- Check that the right allowances, loadings, and entitlements are provided to your employees.
- Confirm compliance with any leave entitlements according to awards or agreements.
4. Address areas of non-compliance
- Identify any discrepancies or areas of concern.
- Develop a plan to rectify issues, which may include back payments.
- Implement structures to bring your practices in line with award requirements.
5. Develop your prevention plan
- Identify whether you need more frequent audits.
- Evaluate current staff training to reduce non-compliance risks.
- Change your policies where necessary.
- Consider tools like Deputy that simplify award compliance and record keeping.
6. Document your audit findings and report
- Craft a comprehensive report of your findings, remediation action, and prevention plans.
- Share your results with stakeholders and leadership teams.
- Create a timeline for follow-up audits and compliance checks.
What to do if you identify non-compliance to modern awards
The best thing to do is be proactive to prevent underpayments or non-compliance, but if you do identify an issue, it’s important to:
- Develop a sustainable remediation plan that addresses discrepancies swiftly.
- Consider your communication strategy, both internal and external.
- Evaluate whether to self-report to the Fair Work Ombudsman.
Keep in mind that using award compliance software can assist you at any stage. It may simply be that you need to audit more frequently, offer clearer guidance on break timing, or revise your rules about who is eligible for overtime.
No matter the reason for non-compliance, addressing the issue promptly may be viewed favourably if penalties are later considered.
Essential resources for a modern award compliance audit
Keeping pace with modern awards can be tricky. These resources can be valuable in staying informed about Australia’s employment standards.
Modern award fact sheet and the National Employment Standards
On this page, you’ll find details on what modern awards entail, who they cover within the national workplace relations system, and when they apply. This resource can help you navigate and comply with employment laws.
FWC awards page for locating occupation-specific documents
This resource offers essential information on who awards cover to help you identify which award applies to which industry or job type. Utilise the “Find my award” tool to easily determine relevant awards.
Comprehensive tool for accessing Australia’s range of awards
A document search feature can help you easily search and view specific awards. Here, you can download a comprehensive spreadsheet or browse an A-Z list of current modern awards.
Deputy’s pay rate library for calculating compliance rates
This guide to our pay rate library demonstrates how Deputy simplifies pay rate calculations for better accuracy and streamlined compliance with modern award requirements.
When in doubt, don’t hesitate to seek professional tools and assistance to ensure you’re meeting your obligations as an employer.
Manage modern award compliance with Deputy
Modern award compliance audits are necessary for running a business in Australia. Navigating the complexities of the process and the requirements involved can be challenging, but you’re not alone in the process.
At Deputy, we offer software that simplifies award compliance, from wage calculations and record keeping to meal and rest breaks. Choose the hassle-free way to schedule shifts, calculate pay, and preserve employee well-being while monitoring compliance with laws and regulations.
Discover how to streamline modern award compliance during every shift with Deputy’s Award Interpretation software or book a demo with one of our experts today to see it in action.