Employers First- WorkChoices FAQs

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Employers First™ responds to members’

WorkChoices FAQs

Employers First™ staff have identified some of the key “Frequently Asked Questions” about the new WorkChoices laws in a large number of calls from members to the Employers Hotline™.

An analysis of the calls reveals not only concerns about how the reforms will be implemented, but also carefully thought out queries seeking advice about how individual businesses will be affected, what they need to do next and how to take strategic advantage of the benefits the new laws offer.

This edition of Employers Adviser™ brings you some key member FAQs and our responses – with the aim of helping organisations and businesses across NSW adapt to the new system as seamlessly as possible. Not all your questions can be included here. The answers are general only, and all members are urged to contact the Employers Hotline™ or seek specialised advice from our Employee Relations Advisers for customised advice specific to their circumstances.

Note also WorkChoices and Super Choice later in this edition.

Q: Will the new laws affect my business and, if so, in what way?

This will depend on whether the new law (the Workplace Relations Amendment (WorkChoices) Act) applies to you and the way in which the conditions of employment for your employees were regulated before the start date (27 March 2006). Generally, the Act applies to you if you are a ‘constitutional corporation’ (see below). In such a case, how you will be affected will depend on whether any of your employees are engaged under:

a state award

a state agreement (enterprise agreement)
a federal award
a federal collective agreement (certified agreement)
an Australian Workplace Agreement (AWA).

But you may also be affected if any of your employees are not covered by any industrial instrument (award or agreement under the state or federal systems).

Q: The new laws apply to a range of organisations that are “constitutional corporations”. Is my business a constitutional corporation?

The term simply refers to any foreign, trading or financial business that is registered and regulated under the federal Corporations Act (because that Act and other relevant laws are enacted under the corporations power given to Federal Governments in the Australian Constitution). Trading or financial corporations will usually be incorporated bodies carrying out commercial activities to earn revenue. Foreign corporations are those incorporated outside Australia, regardless of whether they engage in trading of financial activities. So your business is a constitutional corporation if it operates as a registered company under the Act and if it engages in ‘significant’ or ‘substantial’ trading or financial activities. This excludes partnerships, unincorporated associations and sole traders, all of which normally operate outside the Corporations Act. Some incorporated bodies that may have charitable or educational purposes and do not consider themselves as engaging in ‘trade’ may still be engaged in sufficient trading or financial activity, according to court decisions, for them to be considered a constitutional corporation. If you fall into this uncertain territory, you may need independent legal advice.

Q: What is the Australian Fair Pay and Conditions Standard, and how does it affect my business?

The AFPCS is a set of five minimum terms and conditions of employment guaranteed by the new laws. They are:

Basic rates of pay and casual loadings – which will prescribe a Federal Minimum Wage to be determined by the new Australian Fair Pay Commission. It will also cover classification structures, casual loadings, rates of pay, coverage provisions and frequency of payment provisions through an Australian Pay and Classification Scale (which will be either preserved from an existing award or made under the new laws).
Maximum ordinary hours of work – which sets out the maximum ordinary hours to be worked, namely 38 hours per week (or an equivalent average over a period that the employer and employee agree in writing). Employees may be required to work additional ordinary hours as long as they are ‘reasonable’ taking into account the employee’s personal circumstances and health risks, the employer’s operational requirements, the amount of notice given and other factors.
Annual leave – which sets out the guaranteed minimum entitlements for employees (other than casual employees), namely a basic entitlement of accrued annual leave (which will be cumulative and unlimited) at the rate of one thirteenth of the nominal hours worked over each four-week period of continuous service. Leave will accrue on a pro rata basis to be credited monthly. Shift workers will be entitled to accrue additional leave equal to one fifty-second of the number of nominal hours worked as a shift worker over a 12-month period. For shift workers, leave will accrue on a pro rata basis but will be credited annually. Employers will be able to direct employees to take annual leave when there is a ‘shut down’ and to require an employee to take up to a quarter of their leave if they have accrued over two years of annual leave entitlement. There are provisions here also for the manner in which annual leave payments will be made, when leave can be taken and the amount of leave employees will be able to take. (For ‘cashing out’ of annual leave see below).
Personal leave – which includes personal/carer’s leave (sick leave and carer’s leave) and compassionate leave for employees other than casual workers (who may access unpaid leave in some cases). Sick leave is paid leave taken by an employee because of personal illness or injury of the employee. Carer’s leave is paid or unpaid leave taken by an employee to provide care and support to a member of the employee’s immediate family or household who requires care or support because of personal illness or injury or because of an unexpected emergency. They are entitled to accrue paid personal/carer’s leave at the rate of one twenty-sixth of the hours worked over a four-week period, to be credited to the employee on a monthly basis. Payment should equal the amount they would reasonably have expected to be paid if they had worked during that period.
Sick leave is not payable if they are receiving workers’ compensation entitlements for the same injury or illness. Unpaid carer’s leave is available to all employees up to a maximum of two days for each occasion, but only where they do not have access to paid leave. Notice of carer’s leave should be given as soon as practicable and you may require medical evidence or a statutory declaration. Compassionate leave of two days per occasion is accessible in cases involving death or personal illness or injury posing a serious threat to life. The taking of leave will generally not affect continuity of service.
Parental leave – which includes maternity leave, paternity leave, pre-adoption leave and adoption leave. It is available to all employees other than casual employees who have not been engaged by you on a regular and systematic basis for at least 12 months. Generally, employees must have at least 12 months’ service, and a maximum of 52 weeks is envisaged. ‘Ordinary’ maternity leave is an unbroken period of unpaid leave taken by a female employee for the birth of her child, while ‘special’ maternity leave may apply in cases of pregnancy-related illness, or termination within 28 weeks of the expected date of birth. An employee with medical evidence that she should not continue with work because of risks to her health may be transferred to a safe job. If not practicable, she may have access to paid leave.

Males may qualify for ‘short’ paternity leave, being unpaid leave of up to one week taken within the week starting on the day their spouse begins to give birth, or ‘long’ paternity leave, which is unpaid leave taken after birth in cases where they have to be the child’s primary care giver. Adoption leave may be ‘short’ (up to three weeks unpaid from placement) or ‘long’ (being unpaid leave where the employee is the primary car giver). An employee is entitled to a period of up to 2 days unpaid ‘pre-adoption’ leave to attend interviews or examinations required to obtain approval for adoption, unless they could take other leave such as annual leave. There are notice requirements for the taking, and variation, of parental leave.

Importantly, an employee who returns to work after a period of parental leave is entitled to return to the position they held immediately before the start of the leave. If the employee’s former position no longer exists and they are qualified to work for you in another position, you must employ them in that position or a position nearest in status and remuneration to their pre-leave role. In the case of maternity leave, if the employee began working part time or was transferred to a safe job because of her pregnancy, she is entitled to return to the job held immediately prior to the transfer. Replacement employees must be notified of the temporary nature of the engagement and the rights of the employee on leave to return to work.

Q: Under what circumstances will my employees now be able to cash out annual leave? How much leave can they cash out?

Employees will be able to ‘cash out’ and forego an amount of annual leave that will not amount to more than one twenty-sixth of the nominal hours worked by the employee during a 12-month period (approximately 2 weeks), as long as:

there is in place a binding workplace agreement containing provisions that allow the employee to forego the entitlement to the amount of annual leave and receive pay in lieu of the amount of annual leave
the employee gives you written notice that they wish to forego the amount of annual leave
the employee is authorised by you to forego the amount of annual leave.

Payment in lieu of foregone annual leave must be made within a reasonable period of time. A business must not require an employee to cash out an entitlement to annual leave or exert any undue influence or undue pressure on an employee in relation to the making of a decision whether or not to cash out an entitlement to annual leave.

Q: What are the new unfair dismissal exemptions? Do they affect my business?

There are major changes in this area of the new law. You should firstly keep in mind that there is a distinction between unfair dismissal and unlawful dismissal. In cases of unfair dismissal, the courts look at whether the employee was given a ‘fair go’ in the way they were dismissed. They focus on whether you had a valid reason for terminating them, and then if the employee was given procedural fairness, in order to decide if the dismissal was harsh, unjust or unreasonable. Unlawful dismissal, on the other hand, refers to termination for a prohibited reason (such as temporary absence for illness, union membership or non-membership, filing a complaint against the employer, refusing to sign a workplace agreement etc or because of discrimination on the grounds of race, sex, age, religion, marital status etc). Termination that amounts to an unlawful dismissal is still prohibited and is unaffected by the new law.

However, the capacity to make a claim under the federal unfair dismissal laws has now been taken away for employees of businesses with fewer than 100 employees. Whether your business qualifies will depend on the number of full-time, part-time and long-term casual employees you have at the date of dismissal. If businesses deliberately restructure into smaller units, they will not be exempt.

For businesses with over 100 employees, there are some new restrictions. Employees with less than six months’ service will not have a right to claim (see qualifying period below), and seasonal workers will be excluded. Also, with unfair dismissal claims the Australian Industrial Relations Commission (AIRC) will now have to look at whether the employee’s conduct or capacity may have put the safety or welfare of other workers at risk.

Finally, there is a further exemption against unfair dismissal for any employer, regardless of size, if termination occurred for genuine operational reasons.

If a claim is made in such a case, the AIRC will decide if the operational reasons were genuine.

Q: What is the difference between a qualifying period and a probationary period?

An employee serving a probationary period is excluded from:

making an unfair dismissal claim
claiming the employer failed to give notice of termination, consult a trade union or notify the CES about the termination.

The period of probation must be determined in advance and it must be 3 months or less or, if the period is more than 3 months, it must be reasonable, having regard to the nature and circumstances of the employment.

An employee cannot make an unfair dismissal claim unless they have completed the qualifying period of employment. The qualifying period (whether it is six months, less than six months, longer than six months or no period at all) is determined by written agreement between the employer and employee. Where the period is longer than 6 months it should be a reasonable period having regard to the nature and circumstances of the employment.

Both the probationary and the qualifying period exclude an employee from bringing an unfair dismissal claim. But the qualifying period does not exclude an employee from claiming the employer failed to give notice of termination, consult a trade union or notify the CES about the termination.

Employees serving a probationary or qualifying period may still make an unlawful termination claim.

Q: Are there new record keeping requirements under WorkChoices?

Yes. The requirements have increased with WorkChoices although you have six months to get used to it before you may be penalised. You must keep the following general records for each employee for at least seven years:

the name of the employer
the name of the employee
the date of birth of the employee
the name of each award or agreement relevant to the employee
the classification of the employee
whether the employment is full-time or part-time
a specification of the number of hours to be worked by the employee per week
whether the employment is permanent, temporary or casual
the date on which employment began.

Importantly, the number of hours worked by some employees every day must also be kept. You are exempted from keeping daily hours worked records for employees who do not earn overtime, unless they earn less than $55,000 per annum. This amendment was introduced on 18 April after the government gave in to complaints that many managers and executives are paid a grossed up annual salary that is not dependant on hours worked, and that keeping such records would be of no benefit.

For hours worked, you must keep the following for seven years:

daily starting and finishing times
the total number of hours worked by the employee each day
the employee’s nominal hours and any variations.

For additional hours worked, if you and an employee agree in writing to an averaging of their hours of work, you must keep a copy of that agreement.

The pay records you must keep must contain the following:

the basis on which the rate of pay is determined
the gross rate of pay expressed as an hourly rate
details of any incentive-based payment, bonus, loading, penalty rate or other entitlement
the period to which the payment relates
the total remuneration (gross and net) received during that period
the dates on which the employee was paid
the deductions (if any) made from that remuneration and the name of the fund or account into which the deductions were paid.

The pay slip records you must keep have been specified as well. Pay slips must be provided to an employee in writing within one day of the period to which the pay slip refers has been made. A pay slip must be issued for every remuneration payment to an employee. The pay slip must include:

the name of the employer
the name of the employee
the classification of the employee
the date on which the payment was made
the period to which that pay slip relates
if the employee is paid at an hourly rate of pay, the ordinary hourly rate; the number of hours in that period for which the employee was employed at that rate; and the amount of the payment
if the employee is not paid at an hourly rate of pay — that rate expressed as an hourly rate
the gross and net amounts of the payment
any amount paid that is an incentive-based payment, bonus, loading, monetary allowance or penalty rate etc
the details of each amount deducted from the gross amount, including the name and number of the fund or account into which the deduction was paid
if the employer is required to make superannuation contributions, the amount of each contribution and the name of any fund to which that contribution was made.

The annual leave records you must keep must contain the following:

the rate of the employee’s accrual of annual leave
the date on which they were credited with annual leave
the balance of their entitlement to annual leave from time to time
the amount of annual leave taken
the amount paid to the employee while on annual leave.

If you and an employee agree for them to forego some annual leave, you must keep:

a copy of the employee’s written election to forego the leave
a record of the rate of payment for the amount of annual leave foregone and when the payment was made.

If an employee is a shift worker, you must keep a record of the following:

the periods the employee was a shift worker;
the date on which the employee was credited with additional annual leave.

The personal leave records you must keep must contain the following:

the rate of the employee’s accrual of personal leave
the date on which thee were credited with personal leave
the balance of their entitlement to personal leave from time to time
the amount and type of personal leave taken
the amount paid to the employee while on personal leave.

Where an employee is entitled to leave other than annual or personal leave, you must keep the following records:

the amount and type of leave taken (including whether the leave is paid or unpaid)
details of the accrual of that leave
the date on which the employee was credited with that leave
the balance of their entitlement to that leave from time to time
the amount paid to the employee while on that leave.

The superannuation records you must keep must contain the following:

the amount of the contributions made
the period over which the contributions were made
the dates on which the contributions were made
the name of any fund to which the contributions were made
the basis on which the employer became liable to make the contributions, including a record of how and when the employee chose the fund to which contributions are to be made.

The termination of employment records you must keep must contain the following:

whether the employment was terminated summarily or by consent, by notice or in some other manner

the name of the person who acted to terminate the employment.

There are also requirements under the Regulations for records to be kept about the transmission of business or the succession or assignment of your business.

Contact the Employers Hotline™ on (02) 9264 2000 if you need to know more.