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Assessment
Manage Payroll Report
Table of Contents
INTRODUCTION..............................................................................................................................4
1 PROCEDURES FOR THE MANAGEMENT OF A PAYROLL SYSTEM........................5
1.1 Security procedures required to ensure that an employees' payroll information is kept
confidential and secure within the workplace...........................................................................5
1.2 Procedures required to ensure employees' claims for allowances are substantiated......6
1.3 Internal control measures and security procedures a Payroll Manager could set up to
minimise the possibility of fraud in the payroll process...........................................................7
1.3.1 Methods for internal control to prevent fraud include:...........................................7
1.4 Statutory obligations and payroll records are kept as determined by government
legislation..................................................................................................................................9
1.4.1 Statutory obligations that relate to the payment include:........................................9
1.4.2 Employment records.............................................................................................11
2 PREPARING PAYROLL DATA FOR PROCESSING.......................................................14
2.1 Industrial Awards and Enterprise Bargaining Agreements........................................................14
2.1.1 What are enterprise agreements?.........................................................................................15
2.1.2 Rights & rules for making enterprise agreements,..............................................................15
2.1.3 Using awards, contracts and legislation to calculate pay....................................................16
2.1.4 Understanding the award or contract...................................................................................16
2.2 Types of documentation/forms/legislation required to process and maintain employee
payroll information............................................................................................................................17
2.2.1 Types of deduction to be aware of when processing payroll data.......................................17
2.3 Leave Entitlements, Allowances, Statutory and Voluntary deductions for a permanent
Administrative/Clerical worker (any level).......................................................................................18
2.4 Timelines for payroll data to be provided to the payroll officer/process for calculation and
processing...........................................................................................................................................21
3 AUTHORISATION AND MAINTENANCE OF PAYROLL PAYMENTS......................23
3.1 Payroll procedures to ensure that an employee's net wages/salary is correctly calculated........23Page 2 of 44
3.2 Company's payroll procedures reconciliation for accuracy........................................................25
Process of reconciling wages, salaries and deductions......................................................................25
3.3 Policies and Procedures Company may use to deal with payroll enquiries...............................26
5 MANAGEMENT OF PAYROLL RECORDS......................................................................28
5.1 Declaration forms necessary to satisfy the ATO's requirements for new and existing
employees...........................................................................................................................................28
5.2 Types of payroll liabilities due to Government and private creditors, how regularly they
should be paid and the necessary documentation..............................................................................30
5.2.1 Payment requirements.........................................................................................................30
5.2.2 Australian Taxation Office legislation................................................................................30
5.2.3 Superannuation guarantee legislation..................................................................................30
5.2.4 Accident compensation legislation......................................................................................30
5.2.5 PAYG Withholding - must be paid on 21st of the month following the pay run...............31
5.2.6 Accident compensation legislation......................................................................................31
5.3 End of Payroll Year procedures in relation to providing PAYG Payment Summaries to
employees and to the ATO.................................................................................................................33
6 REFERENCE LIST..................................................................................................................35
7 APPENDICIES.........................................................................................................................36
7.1 APPENDIX A.............................................................................................................................36
7.2 APPENDIX B.............................................................................................................................37
7.3 APPENDIX C.............................................................................................................................40
7.4 APPENDIX D.............................................................................................................................44
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INTRODUCTION
Managing the payroll is a responsibility that involves high level of security and confidentiality,
as well as a detailed knowledge of organisational and legislative requirements and payroll
processes. A Payroll Manager is responsible to delegate, oversee and undertake the calculation,
process and check payments. Recording and filing relevant documentation, monitoring security
and confidentiality and ensuring timelines are met are also responsibility of the Payroll
Manger. In addition to these responsibilities, a Payroll Manager may also handle human
resource issues such as designing contracts, developing or streamlining payroll policies and
procedures for continued improvement, answering staff queries, training team members in the
organisation's payroll procedures and troubleshooting when required.
To manage the payroll effectively and efficiently, one need to draw on a range of skills
including the ability to coordinate, delegate and prioritise tasks, manage timelines, attend to
detail, minimise errors and resolve difficulties that may arise. The role also requires a sound
knowledge of payroll-related taxation laws, statutory obligations, declaration forms, an
organisation's employment contracts, payment and security policies and procedures and, if
applicable, proficiency in software packages such as Quickpay, Micropay, and Attache.
1 PROCEDURES FOR THE MANAGEMENT OF A PAYROLL SYSTEM
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1.1 Security procedures required to ensure that an employees' payroll
information is kept confidential and secure within the workplace.
Security of payroll information
Security of payroll data and records is essential to ensure confidentiality and must be given a
high priority at all times by payroll processing and management staff. An organisation must
have a series of control measures in place to protect its employee’s information.
Measures that can be implemented to ensure confidentiality include:
R Logging off the payroll system before leaving the computer
R Positioning the computer screen so that unauthorised persons cannot view the display
R Ensuring that confidential information cannot be viewed by unauthorised persons and is
stored securely at the end of each day
R Not discussing the personal details of staff within hearing of unauthorised persons
R Ensuring that only authorised persons are given information regarding staff pay details
R Ensuring data is used only for the purposes for which it was intended.
R Restricted access to electronic and paper-based employees files should be in place
involving password access, locked filing cabinets with keys available to authorise
personnel only, a backup system, files stored in separate locations on-site as well as in
an off-site location
R Maintaining regular reminders about security and confidentiality to those involved, an
audit of security keys from time to time, frequent checks to ensure that only authorised
people have access to these files and that the password is secure. Those working with
such material may be asked to sign a confidentiality form not to disclose the
information with which they are working.
It is important to remember that the internal control systems we follow are not only to ensure
security and confidentiality of payroll data but good internal control protects us and our
organisation, while poor internal control may leave us liable to suspicion or accusation in the
event of an irregularity.
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1.2 Procedures required to ensure employees' claims for allowances are
substantiated
Employees, Claims for allowances must be checked and authorised prior to payment. Many
people incur work related pay expenses for items such as travel, meals, petrol and
accommodation. Therefore employees are able to make a claim for reimbursement that can be
provided in cash by cheque or processed in the employees’ next pay. This will depend on the
organisation’s policies and procedures.
To ensure that claims are substantiated as a true record of expenses, employees may be
expected to complete a claims allowances form relevant to their particular type of claim.
Payroll officer is responsible for formulating, delegating and maintaining procedures to
ensure that:
R The completed form is approved by the employee's supervisor or manager
R Relevant receipts are attached
R Forms are double-checked to verify accuracy
R The form is forwarded to the payroll office
R The claimant keeps a copy
R The claim amount is entered into the next pay run for that particular employee
R Relevant forms are placed in the employee's file.
R Payroll officer prior to payment needs to ensure that:
R changes in pay rates are approved
R attendance sheets approved and checked
R overtime, changes in shifts are approved
R authorisation of overtime, casual pay, annual leave, sick leave , long service leave, etc
R employees’ files should be independent of payroll files
R signed payroll deduction authorisation forms exist
R employees’ must sign to collect pay
R employees’ names should be regularly and spot checked with personnel records
R all payroll transactions are authorised and approved by the appropriate authority
R information used to calculate payroll payments and deductions is up to date and correct
Another responsibility is to regularly review claims forms and claim procedures to improve
accuracy and efficiency, to review the actual allowance to take price rises into consideration.
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1.3 Internal control measures and security procedures a Payroll Manager
could set up to minimise the possibility of fraud in the payroll process
The key to competent, secure and efficient management of payroll is sound internal control
measures. A series of control measures should be in place to safeguard an organisation's
finances. Secure procedures of checks and balances will limit the opportunity for fraud of funds
or the loss of money due to careless accounting procedures, and ensure all employees are paid
the correct amounts due to them.
Control measures relating to the management of payroll must also ensure that payroll data
complies with legislations such as the Workplace Relations Act 1996 (Cwlth), Superannuation
Guarantee Act, and the Corporations Act, ATO regulations, the Australian Accounting and
Auditing Standards and the Australian Securities and Industries Commission requirements.
1.3.1 Methods for internal control to prevent fraud include:
R Maintain adequate supervision of the time clock or time sheet/book.
R Careful calculation of the pay procedure.
R Keep a history card for each employee - name, date of birth, dependents, award rate,
deductions, date commenced etc.
R Separate the payroll duties between as many staff members as possible.
R Arrange work so that as many people as possible take part and the work of any one
person is checked in some way by another. In this way, it takes more than one person to
commit fraud.
R All payroll registers should be serially numbered to prevent loss or addition of extra
entries.
R Authorisation of the payroll calculations before the payments are paid
R Use of pre-numbered cheques.
R Signature or identification of each person collecting his or her pay is essential.
R Strict control over any unclaimed monies or leave of absence records.
R Careful calculation of the pay procedure
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Other important control measures to avoid fraud in an organisation may include:
R Establishing policies and procedures that enable the payroll service to be efficiently and
accurately administered
R Ensuring the overall management of the payroll is efficiently coordinated, and that
appropriate tasks are delegated and overseen to ensure accuracy
R Establishing a system whereby all activities associated with providing a payroll service
are regularly monitored and reviewed
R Reconciling amounts paid with what should have been paid—at the end of the pay
period, reconcile the totals of gross salary, tax deducted, net salaries, superannuation
etc. With what has been paid to the ATO and to employees
R Separating the duties of those involved in payroll services to safeguard against theft,
overpayment, underpayment etc. And verify accuracy, e.g. Ensure a witness is present
when removing cash from a safe, have a dual checking system in which a supervisor
must verify and sign a claim form
R Ensuring that those amounts in addition to salary and wages—such as allowance claims
pay increases, time off, annual leave, deductions—follow the organisation's procedures,
an example is: check that all authorisations is included and filed appropriately so that
it can be referred to later if an amount is queried.
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1.4 Statutory obligations and payroll records are kept as determined by
government legislation.
Statutory obligations are obligations that do not arise from a contractual relationship but are
created under a law. The payroll system must meet all of the statutory obligations. Payroll
manager must be aware of what these are and what records to keep and the time period that
legislation specifies to keep them for.
1.4.1 Statutory obligations that relate to the payment include:
R Pay As You Go (PAYG) tax,
R Superannuation
R Payroll tax
R Medicare levy
R Higher Education Contribution Scheme (HECS) fees
R Insurance
R Union fees
R Child support (please refer to APPENDIX A)
R Outstanding debts deemed by court orders.
Payroll Manager must also ensure that voluntary deductions are taken from the relevant
employee's pay and sent to the appropriate payee, for example health insurance and home loan
repayments. The appropriate documentation must be completed each time a remittance is made
to the appropriate organisation such as the ATO, Superannuation fund etc.
Systems established to ensure statutory obligations are met and records are kept include
R The type of payments the organisation is responsible for such as superannuation
contributions, the payment obligation of each employee
R Where the records and forms (sent to the organisation by the relevant body) are stored
such specific file location at an organisation
R when payment is due, e.g. monthly
R Check that hours are correct prior to submitting to external payroll provider
R Payroll is always processed on time due to statutory requirements
R Total wages for pay period is reconciled and irregularities corrected or referred to
appropriate people for reconciliation
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R Confirm salary sacrificing requirements of staff. Split payments into bank accounts.
This satisfies arrangements for payments in accordance with organisational and
individual requirements.
R Produce, check and store payroll records in accordance with organisational policy and
security procedures. The finance records are generally stored with the chief financial
officer.
R Follow security procedures for processing payroll and maintaining payroll records. A
password is required to electronically submit hours by your payroll department or
payroll provider.
R Respond to payroll enquiries immediately
R maintain adequate documents and records (timesheets, time cards, leave applications)
R keep records then archive and destroy after seven years.
Payroll manager must record and file any notification notices relating to payroll matters that
they receive from relevant bodies, such as an increase in the superannuation guarantee from the
ATO, a notice from an employee requesting an increase in their superannuation contribution or
the deduction of union fees, a court notice requesting specific amounts be deducted from an
employee's pay (referred to as garnishing wages).
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1.4.2 Employment records
Employer’s record keeping obligations are dealt with the Fair Work Regulations 2009 (the
Regulations).
General requirements are that records must:
R Be kept for a period of 7 years;
R Be in a form that is readily accessible to an inspector;
R Be in English and stored in a legible form; and
R Contain the name of the employee and employer;
R The nature of their employment (full-time or part-time, temporary, permanent or
casual);
R Pay; overtime hours; averaging arrangements; leave entitlements;
R Superannuation contributions; termination of employment (where applicable);
R commencement date; the Australian business number (ABN) of the employer;
R Individual flexibility arrangements and guarantees of annual earnings.
Overtime
If overtime or penalty rates may be paid under an instrument or contract of employment – the
number of overtime hours worked, or the start and finishing times of overtime worked.Any
agreement between the employee and employer to average working hours over a period of
time.
Averaging of hours
If the employee agreed in writing to average their hours of work, a copy of the agreement must
be kept.
Remuneration
The basis on which the employees’ rate of pay is determined; details of any bonuses or
incentive payments; the period to which the payment relates; the gross and net amounts paid to
the employee during that period; dates of payment and any deductions made from the gross
amount paid to the employee.
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Leave entitlements
Any leave taken, and the balance of leave from time to time;
If the employee agreed to cash out leave, the employer must keep a copy of the written election
by the employee, the date and rate of payment for the forgone leave.
Superannuation contributions
The amount of the contributions made; the period over which the contributions were made; the
date when the contributions are made; the name of the fund or funds to which contributions are
made; the
Record of the employee’s fund election
Individual flexibility arrangement
If the employee agreed on an individual flexibility arrangement, a copy of the agreement must
be kept.
Guarantee of annual earnings
Where employer provides or revokes a guarantee of annual earnings, a copy of the guarantee
must be kept.
Termination of employment
Include whether the employment was terminated by consent, by notice, summarily, or in
another specified manner, and the name of the person who terminated the employment.
Transfer of business
The old employer must transfer to the new employer all records concerning the employee that,
at the date of transfer or assignment, the former employer is required to keep under the
Regulations.
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Pay slips
The pay slip must contain the following information:
R The name of the employee and employer;
R The date on which the payment was made;
R The period to which the pay slip relates;
R The ordinary hourly rate of pay (if applicable);
R The number of hours worked and the amount of the payment at that rate (if applicable);
R The annual rate of pay (if applicable)
R The gross and net amounts of the payment;
R Details of any payment made as an incentive payment, bonus, loading, penalty rate or
other separately identifiable entitlement;
R The abn of the employer;
R All deductions made from the employee’s gross pay; and
R Any superannuation contributions made on the employee’s behalf
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2 PREPARING PAYROLL DATA FOR PROCESSING
2.1 Industrial Awards and Enterprise Bargaining Agreements
Unlike awards, which provide minimum standards and conditions of employment for
employees in an entire industry, enterprise agreements usually apply only to one employer. The
terms and conditions set out in an enterprise agreement override any corresponding provisions
set out in any applicable award.
Enterprise bargaining is wage and working conditions being negotiated at the level of the
individual organisations. Once established, they are legally binding on employers and
employees. An Enterprise Bargaining Agreement (EBA) consists of a collective industrial
agreement between either an employer and a trade union acting on behalf of employees or an
employer and employees acting for themselves.
On the one hand collective agreements, at least in principle, benefit employers, as they allow
for improved "flexibility" in such areas as ordinary hours, flat rates of hourly pay, and
performance-related conditions. On the other hand collective agreements benefit workers, as
they usually provide higher pay, bonuses, additional leave and enhanced entitlements (such as
redundancy pay) than an award does.
An award is a ruling handed down by either the Australian Industrial Relations Commission or
by a state industrial relations commission which grants all wage earners in one industry the
same conditions of employment and wages.
Federal awards in Australia have been stripped back in what they are allowed to contain in
order to promote the Enterprise Bargaining Agreement system. Awards in Australia are part of
the system of compulsory arbitration in industrial relations.
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2.1.1 What are enterprise agreements?
Enterprise agreements set out conditions of employment for a group of employees at one or
more workplaces. They differ from contracts because they're governed by workplace relations
law and will override an award. Enterprise agreements are made under the new Fair Work Act
2009. Before the Fair Work Act 2009 (refer to APENDIX B), workplace agreements were
made under the Workplace Relations Act 1996.These agreements included Individual
Transitional Employment Agreements (ITEAs), Australian Workplace Agreements (AWAs)
and collective agreements. ITEAs and AWAs were a type of agreement that was made between
an employer and an employee and lodged with a government agency. ITEAs and AWAs can no
longer be made or lodged. ITEAs and AWAs that have been validly lodged continue to operate
until terminated or replaced. For more on Awards and Agreements please refer to APENDIX C
2.1.2 Rights & rules for making enterprise agreements,
All enterprise agreements must be lodged with Fair Work Australia and are subject to the no-
disadvantage test (NDT) (please refer to APPENDIX D) until 31 December 2009. From 1
January 2010, all enterprise agreements are subject to the better off overall test (BOOT) (please
refer to APPENDIX D). Enterprise agreements must comply with the Australian Fair Pay and
Conditions Standard until 31 December 2009. From 1 January 2010, all enterprise agreements
need to comply with the National Employment Standards (NES).
R Employer must give the employee who'll be covered by the agreement notice of their
right to appoint a bargaining representative to help them negotiate their agreement
within 14 days the agreement-making process started.
R Employers must then give another 21 days after providing the last of the above notices
before holding a vote to decide whether the agreement is or is not approved.
R Employers must ensure that the employees who are to be covered by the agreement are
given a copy or access to the agreement and any other incorporated material for the 7-
day period before voting starts.
R Employer must also notify their employees who are to be covered by the agreement,
by the start of the access period, of voting details, ie. time, place and method.
R Employer must take all reasonable steps to ensure that the terms of the agreement, and
the effect of those terms, are explained to employees.
It's against the law to force an employee to approve, vary or terminate an enterprise agreement,
The FWO will investigate any allegations of illegitimate pressure applied to an employee.
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2.1.3 Using awards, contracts and legislation to calculate pay
Information specific to each employee must be collated and entered into their payroll file. This
includes:
R The industrial award, contract, enterprise/workplace agreement or certified agreement
under which they are employed which outlines their annual pay rate and conditions of
employment, including salary packaging benefits, sick leave entitlements etc.
R Superannuation payments including the superannuation guarantee and voluntary
contributions
R Deductions such as child support, HECS fees.
R Ensure your team has the appropriate data and latest information for calculating gross
pays and annual salaries, for example PAYG Withholding Tax Tables.
2.1.4 Understanding the award or contract
Payroll Manger needs to be aware of the employment conditions for all employees. For
example are they employed under: a federal or state industrial award, for example, the Printing
Industry Award, the Clerks (Commercial, Social and Professional) Award. Some organisations
may have a range of awards their employees are employed under a certified agreement
arranged between a union and an employer, a workplace agreement arranged between an
employer and an individual under the Workplace Relations Act 1996, an oral or written
contract between an employer and an employee. Payroll Manger is responsible to have up-to-
date information on file, for example the most current award or contract, have read it and
understood what employees are entitled to. What is the stated pay rate? Is there a leave loading
on annual leave? Is commission subject upon achieving a sales target?
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2.2 Types of documentation/forms/legislation required to process and
maintain employee payroll information
Payroll Manger must ensure that all employees have completed
R A tax declaration form that requires personal details and information about the types of
deductions to be made, for example HECS fees, and ensure the organisation's copy is filed
appropriately.
R A withholding declaration to claim items such as a dependent spouse rebate or family tax
benefit.
Be aware of all the deductions that relate to each employee and check that they have been
correctly entered into the employee's payroll file and that the associated documentation has
been completed correctly and filed appropriately.
2.2.1 Types of deduction to be aware of when processing payroll data
Statutory deductions - include Medicare levy, PAYG Withholding and Higher Education
Contribution Scheme (HECS))
Voluntary deductions - those deductions an employee chooses to have deducted from their
salary. Examples include health insurance premiums, life insurance premiums and union fees).
The calculation of each deduction will depend on the procedures relevant to each deduction;
for example, PAYG Withholding is determined by the amount earned. It is important when
completing each deduction that the appropriate government and employee documentation is
used, for example:
PAYG Withholding requires the completion of the Tax File Number Declaration by the
employee and the Withholding Declaration by the employer. Health funds have standard
deduction forms the employee is required to complete and sign before a deduction can be
requested from an employer.
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2.3 Leave Entitlements, Allowances, Statutory and Voluntary deductions for
a permanent Administrative/Clerical worker (any level)
Clerks' (South Australia) Award
This is a consolidated award of the industrial relations commission of South Australia
published pursuant to the provisions of the fair work act 1994
Maximum ordinary hours
The maximum number of ordinary working hours of employees other than part-time
employees will be an average of 38 hours per week to be worked on one of the following basis:
R 38 hours within a work cycle not exceeding seven consecutive days; or
R 76 hours within a work cycle not exceeding 14 consecutive days; or
R 114 hours within a work cycle not exceeding 21 consecutive days; or
R 152 hours within a work cycle not exceeding 28 consecutive days.
Leave of absence and public holidays
Annual leave
An employee (other than a casual employee) is entitled to 4 weeks annual leave for each
completed year of continuous service. Payment must not be made or accepted in lieu of taking
annual leave, except in the case of termination of employment. The annual leave prescribed by
this clause is exclusive of the public holidays named in this Award that fall on a Monday to
Friday inclusive. If any such holiday falls within an employee's period of annual leave, the
period of leave will be increased by one day for each holiday. Accrual of annual leave
entitlement 152 hours per annum for each completed year of continuous service:
Payment for annual leave Prior to proceeding on annual leave, an employee is entitled to be
paid for the period of leave at the ordinary rate of pay applicable to the employee. Upon
termination of employment, an employee must be paid for leave accrued which has not been
taken. (Upon termination of employment, if the period of service in any year (including the
first 12 months) is not exactly divisible into complete years, a full-time employee accrues 12
2/3 hours annual leave for each completed month of service in the incomplete year. A part-time
employee accrues such annual leave on a pro rata basis).
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Annual leave loading
An employee is also entitled to payment of a loading equivalent to 17.5% of leave at the
ordinary rate of pay applicable to the employee at the time that payment is made.
Personal leave – injury and sickness
Permanent employee who has a personal leave credit Is entitled to take personal leave if the
employee is too sick to work; or Who is on annual leave, is entitled to take personal leave if
the person is too sick to work for a period of at least 3 consecutive days. Personal leave so
taken does not count as annual leave.
Accrual of personal leave entitlement
An employee's entitlement to personal leave accrues as follows:
For the first year of continuous service - at the rate of 1.46 hours for each completed 38
ordinary hours of work to a maximum of 76 hours.
For each later year of continuous service, at the beginning of each year:
R A full-time employee accrues 76 hours.
R A part-time employee accrues pro rata hours in accordance with the following formula:
76/38 average weekly ordinary hours over the previous 12 months
Bereavement leave
Permanent employee, on the death of a spouse parent parent-in-law sister or brother child or
stepchild household member, is entitled, on reasonable notice, to leave up to and including the
day of the funeral of the relative. This leave is without loss of pay for a period not exceeding
the number of hours worked by the employee in 2 ordinary days work per occasion. Proof of
death must be provided by the employee to the satisfaction of the employer, if requested.
Parental leave
An entitlement to parental leave is subject to the employee having at least 12 months of
continuous service with the employer immediately preceding in the case of maternity leave, the
expected date of birth or otherwise the date on which the leave is due to commence.
An employee who becomes pregnant is, on production of the required medical certificate,
entitled to up to 52 weeks of maternity leave.
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A male employee is, on production of the required medical certificate, entitled to one or two
periods of paternity leave, the total of which must not exceed 52 weeks, as follows:
R An unbroken period of up to one week at the time of the birth of the child.
R A further unbroken period of up to 51 weeks in order to be the primary care-giver of the
child - extended paternity leave.
Personal leave to care for a family member
Permanent employee with responsibilities in relation to a member of the employee’s family
who need the employee’s care and support due to personal injury or for the purposes of caring
for a family member who is sick and requires the employee’s care and support or who requires
care due to an unexpected emergency, is entitled to up to 10 days or 76 hours in any completed
year of continuous service to provide care and support for such persons when they are ill.
Public holidays
Public holidays will be allowed to full-time and part-time employees without loss of pay.
Public holidays are the days (or subsequent days) on which the following holidays are
observed: New Years Day, Australia Day, Good Friday, the Day after Good Friday, Easter
Monday, Anzac Day, Adelaide Cup Day, Queens Birthday, Labour Day, Christmas Day,
Proclamation Day, or any other day which by proclamation may be declared a public holiday
or may be substituted for any such holidays.
Trade union training leave
Permanent employees will be allowed leave without loss of pay to attend training courses
conducted or sponsored by their Union.
ALLOWANCE
Meal Allowances
Any employee who on any day is required to remain at work or to return to work after the usual
finishing time will, when that additional work necessitates taking a meal away from the
employee’s place of residence, be supplied with a suitable meal by the employee’s employer or
be paid a meal allowance of $14.35.
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Vehicle allowance
When an employee is required by an employer to use the employee’s own motor vehicle in the
performance of the employee’s duties, the employee must be reimbursed the vehicle allowance
of 74 cents per kilometre travelled.
Statutory deductions - Medicare levy, PAYG Withholding and Higher Education
Contribution Scheme HECS.
Voluntary deductions -health insurance premiums, life insurance premiums and union fees
voluntary superannuation contributions.
2.4 Timelines for payroll data to be provided to the payroll officer/process for
calculation and processing
It is essential that payroll data is provided for processing within designated timelines to ensure
that:
R All employees are paid in full, with entitlements to leave, allowances and so on
R All deductions are distributed to appropriate authorities to meet timelines that may be
imposed by those authorities
R Timelines imposed by other statutory authorities are met, for example, ato and
superannuation guarantee
R Key dates for business activity statement (bas) lodgement and end-of-financial-year
processes are met.
The timeframe within which the payroll is prepared and authorised must be adhered to, as not
only is it a legal obligation for employers to pay their employees on time, some awards contain
a penalty clause for late payment.
Payroll officer should be aware of the financial calendar that includes:
R Pay dates
R When payment summaries need to be prepared at the end of the financial year
R When each employee has taken sick or annual leave
R The time period before an employee leaves the organisation after resigning to ensure
that their pay is finalised and includes all necessary entitlements
R The ATO submission dates for various taxes to be paid.
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Manager of payroll services, has a key responsibility so as to ensure that the payroll data is
prepared correctly and double-checked for accuracy before payment is authorised, in
accordance with the organisation's policies and procedures and within designated timelines.
Procedures should enable payroll processors and others involved in handling the payroll to
carry out their role and tasks efficiently and know whom to contact if they notice any
discrepancies or have any queries
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3 AUTHORISATION AND MAINTENANCE OF PAYROLL PAYMENTS
3.1 Payroll procedures to ensure that an employee's net wages/salary is
correctly calculated
The authorisation of payroll is an essential internal control requirement, minimising the risk of
inaccurate payroll data being processed and confirming that payment is in line with actual work
performed. All payroll transactions should be validated, verified and authorised by the
appropriate person
Payroll officer/processor prior the payment needs to ensure that:
R the hourly rate is correct,
R the hours worked are correct
R changes in pay rates are approved
R attendance sheets approved and checked
R overtime, changes in shifts are approved
R authorisation of overtime, casual pay, annual leave, sick leave , long service leave,
bonuses
R employees’ files should be independent of payroll files
R signed payroll deduction authorisation forms exist
R employees’ must sign to collect pay
R employees’ names should be regularly and spot checked with personnel records
R all payroll transactions are authorised and approved by the appropriate authority, for
example, the payroll manager
R information used to calculate payroll payments and deductions is up to date and correct
R industrial awards, contracts and government legislation to calculate gross pay and
annual salaries
R the correct superannuation contributions (compulsory and voluntary) have been made
R the correct tax has been deducted (compare the deduction against earnings).
R Employees’ files should be independent of payroll files
R Signed payroll deduction authorisation forms should exist
R Authorisation of overtime, casual pay, annual leave, sick leave , long service leave,
bonuses
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Payroll Manager must supply payroll officer with accurate and up-to-date information.
This includes:
R all relevant information relating to new employees, such as completed tax declaration
form, pay rate, deductions
R any changes to the information already supplied from existing employees, an example
an employee wishes to increase their personal superannuation contribution
R information that affects employees' pay including sick leave, overtime payments,
bonuses, resignations etc.
Payroll Manager must also ensure that all letters, forms and other documentation that notify a
change to be made to an employee's next pay run, is passed on to the appropriate person. This
includes information relating to items such as the payment of a higher duties allowance,
bonuses, a pay increase, commissions, resignations and date of last day at work.
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3.2 Company's payroll procedures reconciliation for accuracy
Process of reconciling wages, salaries and deductions
It is important that payroll data is reconciled on a regular basis to ensure accuracy of wages,
and accuracy of deductions made to statutory and voluntary authorities and to detect errors or
omissions made. If all procedures have been handled correctly, totals should balance.
By comparing amounts paid with what should have been paid at the end of the pay period,
reconciling the totals of gross salary, tax deducted, net salaries, superannuation etc. with what
has been paid to the ATO and to employees. Automated payroll systems have their own
reconciliation checks that are performed each time a pay run is processed. Wages and
deductions can be reconciled on a monthly basis that happens at a general ledger level. It
includes checking what has been paid through the bank with the costing of the general
ledger. Employee earnings and deductions records are reconciled with Payment Summary.
Many of the errors that might occur are generally human ones, that is an incorrect amount is
entered into the payroll file. Be aware of the types of errors that may occur and their
consequences.
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3.3 Policies and Procedures Company may use to deal with payroll enquiries
Dealing with enquiries
Enquiries can be made in person, by email, fax, telephone or mail and can come from current
or ex-employees or from outside parties such as an employee’s superannuation or health fund.
No matter what the source and nature of the enquiry, payroll officer needs to:
R maintain a professional and confidential approach at all times
R listen without interrupting until the employee has said everything s/he wants to say
R ask questions to clarify the employee’s problem
R use positive body language
R use a friendly tone
R respect the employee
R apologise where necessary
R promise to rectify the error
R take the time and trouble to explain the misunderstanding
R be understanding
R have a clear understanding of the level of authority
R respond in an informed and positive manner
R comply with privacy legislation
R know when to forward an enquiry.
R documenting all enquiries in a records book
R make an appointment with the person making the enquiry (if necessary)
Knowing where to find information is a key component in being able to respond to enquiries.
The first source of information should always be the organisation’s policies and procedures.
Establishing a system for dealing with all enquiries, whether they are from employees, the
finance department, management or external agencies, will ensure that they are dealt with
appropriately and promptly and any dissatisfaction or disputes are settled within an appropriate
time with the minimum of fuss, especially as many of the queries may have legal implications.
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The type of queries that can be handled by the payroll officer receiving the enquiry may
include.
R Personal payroll information such as 'How much annual leave do I have left?’
R Procedures such as 'I want to increase my superannuation contribution. What do I do?’
R Dispute such as ‘why isn't my travel allowance included in this pay?'
It is worthwhile holding regular training/information sessions on topics such as organisation's
policies and procedures for overtime, salary sacrificing, claiming allowances, granting a pay
rise etc. The more knowledge payroll officers have, the better able they will be to respond
quickly and appropriately.
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4 MANAGEMENT OF PAYROLL RECORDS
4.1 Declaration forms necessary to satisfy the ATO's requirements for new and
existing employees.
There are two types of declaration forms that may need to be completed by an employee:
Tax File Number (TFN) Declaration
A TFN Declaration requests an employee to state their TFN and whether they wish to claim the
tax-free threshold. Employees who do not have a TFN, or do not know it, need to obtain an
application form for a TFN from the ATO and complete and lodge it immediately. An
employee who does not supply their TFN will be taxed at the highest marginal rate of 48.5 per
cent.
New employees or employees who have not worked for the organisation for 12 months since
making their declarations are required to complete a new TFN Declaration. TFN Declaration
forms are available from the ATO or newsagents, or can be downloaded from the ATO
website.
Withholding Declaration
Employees must provide their employer with a Withholding Declaration if they want to claim
entitlement or make changes relating to:
R The family tax benefit
R Dependant spouse, zone or special tax offset
R The tax-free threshold
R Their residency status
R Their accumulated HECS debt.
Both TFN Declaration and Withholding Declaration forms for new and existing staff have to
be processed according to ATO requirements. Preparing and maintaining salary records is a
key responsibility of the payroll manager who must ensure that all records are up to date,
comply with legal requirements, check that all payroll staff understand and apply the
regulations covering salary documentation.
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From time to time circumstances change for employees, and they must complete either another
tax declaration form or a Withholding declaration to ensure the ATO and their employer have
their correct personal details.
Changes relate to:
R A name change
R A change in employment status, e.g. From part-time to full-time
R Ensure that the a Payroll is checked and authorise payment in accordance with
organisational policies and procedures
R The finalisation of HECS fees
R Claims for dependants
R Change in residency status, e.g. A non-resident becomes a resident.
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4.2 Types of payroll liabilities due to Government and private creditors, how
regularly they should be paid and the necessary documentation
4.2.1 Payment requirements
All payments to authorities required to meet payroll obligations are to be made in accordance
with relevant legislation and your organisation's policy and procedures, including:
4.2.2 Australian Taxation Office legislation
R Employers are required to make payments for
R Fringe Benefits Tax,
R PAYG Withholding,
R HECS and
R Medicare Levy Define all of this
4.2.3 Superannuation guarantee legislation Employers are required to pay contributions to a complying superannuation fund on behalf of
each employee. The obligations under superannuation guarantee legislation are based on each
financial year and must be remitted to the relevant superannuation fund. Some organisations
choose to pay their superannuation levy to the appropriate superannuation fund once a year, in
which case this is due on 28 July, while others pay after each pay run, which may be
fortnightly, monthly or quarterly. The minimum rate is 9% of gross salary.
4.2.4 Accident compensation legislation
Each state has its own accident compensation legislation although it may have a different name
and a relevant authority that administers the requirements of the Act, for example in South
Australia it is known as WorkCoverSA
Calculations to these authorities are based on an employer’s payroll, industry classification and
claims history. Instalments are payable monthly, quarterly, annually or in advance.
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4.2.5 PAYG Withholding - must be paid on 21st of the month following the pay run
PAYG Withholding is the new name for Group Tax. Withholding means the process by which
an organisation deducts amounts to others and sends those amounts to the ATO. The PAYG
legislation classifies withholders as large, medium and small. The ATO determines how and
when withholding payments are to be made according to these classifications; for example, an
organisation classified as a large withholder is required to:
pay an amount deducted in any period commencing Saturday and ending Tuesday on the
Monday following the period
pay an amount in any period commencing Wednesday and ending Friday on the Thursday
following the period
pay the total amount of their PAYG Withholding liability electronically (to pay electronically,
organisations can use direct credit, direct debit or BPAY®) to the ATO on or before the due
date for notification and payment.
4.2.6 Accident compensation legislation
All calculations must be checked for accuracy, currency and compliance with the relevant
legislation and regulations.
The way you distribute payroll deductions will be determined by the agency to whom you are
making the payment; for example, PAYG Withholding must be paid electronically by using
either:
Direct credit
Direct debit
Bpay®.
It is important that systems are established to meet any statutory obligations; for example,
taxation legislation has a number of obligations in relation to record keeping when payments
are made to employees.
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Examples include:
R Pay as you go PAYG-Employers must obtain Tax File Number Declaration Forms
from all their employees.
R Superannuation contribution- Employers must make sufficient superannuation
contributions to a complying superannuation fund or retirement savings account for
most employees, including full-time, part-time and casual staff.
R Fringe Benefit TAX - Employers need to keep records that show the taxable value of
each fringe benefit provided to each employee.
Group tax is the PAYG Withholding tax that every employee who earns over $6,000 a year
(the tax-free threshold) must pay. Payroll officers ensure that the correct amount of PAYG tax
has been deducted from each individual's gross pay, then, using the organisation's payroll
register, calculate the total PAYG tax that the employer is liable to pay. This total is then
transcribed onto a Business Activity Statement form and, together with payment, is sent to the
ATO by the 21 s' of the following month.
Payroll Manager should ensure that:
R procedures are in place for double-checking both the individual's tax deduction and the
employer's total for accuracy
R any discrepancies are noted, the appropriate person is advised promptly and any errors
rectified
R An important task for employers is to prepare payment for their employees and
complete the related documentation for the ATO. Your role may be to oversee that the
correct procedures are followed and obligations are met within designated timelines.
R copies of the form are kept for the organisation's records
R processes allow for completion by the due date.
From time to time tax rates change. These changes are publicised on the ATO's website and in
the PAYG Withholding Tax Tables available from the ATO and newsagents. If your
organisation uses a computerised package, the software company will provide a disk with the
current version of the tax rate.
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4.3 End of Payroll Year procedures in relation to providing PAYG Payment
Summaries to employees and to the ATO
Preparing employee payment summaries
An important task for employers is the prepare payment summaries (previously known as
group certificate) for their employees and complete the related documentation for the ATO.
Your role may be to oversee that the correct procedures are followed and obligations are met
within designated timelines.
Procedures may include:
R Totalling the gross salary and tax paid by each individual during the financial year
period
R Reconciling the total amount of tax paid by the organisation with the cheque butts
which detail the tax paid to the ATO during the financial year period
R Identifying and resolving any discrepancies
R Preparing a PAYG summary statement showing the correct amount of tax paid for the
financial year by the organisation.
R Including a copy of all payment summaries with the summary statement and sending
them to the ATO.
PAYG payment summaries
PAYG Payment Summaries must be issued to ALL employees who have received salary
payments. This includes income earned from full-time, part-time or casual employment during
the income year. A payment summary must be provided to an employee by an organisation
even if no tax instalments were deducted:
R By 14 July each year
R Within seven days of making an eligible termination payment
R In the event that a terminating employee requests that one be issued
R Upon request in writing from an employee.
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Prior to issuing payment summaries to employees, a reconciliation of the payroll must be
completed to ensure that all data has been entered and calculated correctly.
This verifies the accuracy of payments made to:
R Employees and creditors
R The ATO
R Superannuation funds
R Any other institutions for which employee deductions were made
Two copies of the Employee Payment Summary are to be given to employees. One is their tax
return copy and the other is their personal record copy. Employees must retain payment
summary information for five years.
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5 REFERENCE LIST
www.fairwork.gov.au
www.eric.sa.gov.au
www.safework.sa.gov.au
www.industrialcourt.sa.gov.au
www.ato.gov.au
www.workcover.com
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6 APPENDICIES
6.1 APPENDIX A
Organisations’ legal obligations under child support legislation.
As an employer of a child support customer you have a number of obligations under child
support legislation.
R You must advise your employee, in writing, how much child support has been deducted
each pay period (e.g. on their pay slip);
R You are required to keep appropriate records of the child support you deduct and remit;
R You are required to respect your employee's privacy - you cannot tell anyone (other
than the employee in question) that you deduct child support from your employee's pay.
CSA will not discuss your employee's personal affairs with you;
It is illegal to discriminate against any employee or potential employee because of their child
support responsibilities. Discrimination includes charging employees a deduction fee for
making child support deductions that are made under a statutory obligation;
R You cannot make a deduction of child support that leaves an employee with a net pay
(after tax instalment deductions and deductions of child support) of less than the PEA
(unless deductions are made under a Section 72A Notice);
R You must make sure you deduct the right amount. CSA will tell you the right amount to
deduct from your employee's pay. You cannot change this even if your employee, their
solicitor or anyone else asks you.
Payments to CSA are due on the seventh day of every month. If you pay late, then the money
will be late getting to the other parent and the children of your employee.
If you do not meet your obligations, the law imposes penalties.
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6.2 APPENDIX B
Making enterprise agreements under the FW Act
If an employer wishes to enter into a new collective agreement they must notify employees of
the right to be represented as soon as practicable and not later than 14 days after the
‘notification time’.
The ‘notification time’ is the time when:
R The employer agrees to bargain, or initiates bargaining, for the agreement;
R A scope order in relation to the agreement comes into operation;
R A low-paid authorisation in relation to the agreement comes into operation; or
R A majority support determination is made.
The notification must take the form of the ‘notice of employee representation rights’ prescribed
in the Fair Work Regulations 2009 and must be given to each employee who will be covered
by the agreement who is employed at the notification time.
Once bargaining is complete and a draft agreement has been made certain steps must be
taken to ensure the agreement is valid.
Employers must ensure that:
R the terms of the agreement, and the effect of those terms, are explained to the
employees; and
R the explanation is provided in an appropriate manner (e.g. appropriate for young
employees or employees from culturally diverse backgrounds).
R Employees must endorse the agreement by voting for it. A vote must not occur until at
least 21 days after the day on which employees were given notice of their
representational rights.
During the 7 day period before voting for the agreement, the employer must ensure employees
are given a copy of:
R the agreement; and
R any other material incorporated by reference in the agreement.
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R Employer’s must also notify employees of:
R the time and place at which the vote will occur
R the voting method that will be used.
Once an enterprise agreement is made, a ‘bargaining representative’ (usually the employer or a
union) for the agreement must apply to FWA for approval of the agreement.
The application must be lodged with Fair Work Australia within 14 days of the agreement
being made.
The application must be accompanied by:
R a signed copy of the agreement; and
R any declarations that are required by the FWA Rules or regulations to accompany the
application.
To approve an enterprise agreement, FWA must be satisfied that:
R the agreement has been made with the genuine agreement of those involved;
R the agreement passes the No-Disadvantage Test (the BOOT test after 1 January 2010);
R the group of employees covered by the agreement was fairly chosen;
R the agreement includes a nominal expiry date (not more than four years after the date of
FWA approval);
R the agreement provides a dispute settlement procedure; and
R the agreement includes a flexibility clause and a consultation clause.
Bargaining representatives
During the bargaining process either side may be represented by a bargaining representative.
The following may be bargaining representatives:
R an employer who would be covered by the agreement;
R any union who has a member that would be covered by the agreement (unless the
member has specified in writing that he or she does not wish to be represented by the
union);
R any union that has applied for a low paid authorisation that relates to the agreement; and
R any person appointed in writing as a bargaining representative by either an employer or
employee who would be covered by the agreement.
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A union that is a bargaining representative for a proposed agreement can apply to FWA to be
‘covered’ by the agreement. A union is automatically a bargaining representative for an
agreement if it has a member in the workplace whose industrial interests it is entitled to
represent, and the member does not appoint another person. A union need not be involved in
bargaining in order to be covered by the agreement. Provided a union is a bargaining
representative and notifies FWA, FWA must order that the union is covered.
Enterprise Bargaining
The process which employers and employees use to negotiate a set of rules and conditions for
their workplace and which results in an enterprise agreement. Other terms to describe
enterprise bargaining include: workplace bargaining, collective bargaining, over award
bargaining and company bargaining.
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6.3 APPENDIX C
Awards and enterprise agreements
Awards
When you accept the job your employer should inform you which award or enterprise
agreement you are working under. This should be included in your letter of offer. See also:
Letter of offer
Awards and enterprise agreements are legal documents. They outline the minimum
entitlements you must receive for working in a particular industry or for doing a certain job.
Some of these entitlements include:
R Hours of employment
R Pay rates
R Penalty rates like overtime
R Casual loadings
R Meal allowances
R Leave entitlements
R Employment protection.
Awards and enterprise agreements also set out your general responsibilities as an employee as
well as the responsibilities of your employer.
Your employer must pay you at least what you are entitled to under the award or agreement
that applies to your job.
If you are employed under a contract your employer must pay you at least the minimum wage
and entitlements as set out in the appropriate award.
Displaying awards in the workplace
Your employers should exhibit a copy of the relevant award in your workplace so you can see
what your wages and entitlements are.
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Adult award rates of pay
The majority of awards and agreements stipulate an age at which all employees must be paid
the full adult rate of pay. Typically, this is 21 years of age but can be younger under some
awards.
Most awards make provision for adult and junior wages. Minimum rates for juniors tend to be
lower than those for adults. They are often differentiated by age group. See also: Junior Rates
of Pay.
Junior rates of pay
Junior rates of pay are based on the age of an employee and are usually set as a percentage of
the adult rate. Junior rates of pay are found in many awards and agreements.
Job classification
Your job classification should be written on your letter of offer. Jobs are classified into
categories which correspond with the amount of training, skill, competencies, knowledge or
experience required to do them. Each job classification has a specific rate of pay related to it
which is set out in awards and agreements. An example of a job classification is: Junior shop
assistant under 16 years of age.
Benefits of an award
You may prefer to work under the conditions of an award because:
R Awards provide minimum conditions of employment and rates of pay that apply across
an industry or occupation
R Awards must contain provisions that set ordinary hours of employment, pay equity
between males and females, redundancy entitlements, sick leave, part-time, casual
employment and grievance and dispute resolution procedures
R The rates of pay and conditions of employment are legally enforceable
R Rates of pay and conditions of employment cannot be reduced by the employer
R Minimum rates of pay are subject to review through national wage case decisions.
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Enterprise agreements
If you are employed under an enterprise agreement your work contract would have been
negotiated voluntarily between your employer and the employees or the union on behalf of the
employees. Enterprise agreements set out the minimum conditions of employment for
employees engaged in particular types of work in one particular enterprise. Agreements may
cover some or all of the employment conditions under the appropriate award.
Enterprise agreements must comply with all workplace laws and, in general, employees should
not be worse off under the agreement compared to awards.
An enterprise agreement:
R Has terms that override any award provisions
R Must comply with all employment laws requiring minimum entitlements to parental,
annual and long service leave
R Must be in writing and signed by, or on behalf of, the parties and the parties to the
agreement must be named
R Must state the employees who will be covered by the agreement
R Must be for a set term of not more than three years but can continue in force beyond
that term until terminated.
Benefits of an enterprise agreement
R Employees may prefer to be covered by an enterprise agreement because:
R it is a collective agreement that can identify and address the particular needs of a
business
R the rates of pay and conditions of employment must not be less than those contained in
an award and can provide greater entitlements
R employees can be represented in negotiation by a union or it can be negotiated by a
nominated committee of employees
R if the conditions of an enterprise agreement are breached an application for remedy of
the breach or recovery of entitlements can be made.
Enterprise bargaining
Enterprise bargaining is the process which employers and employees use to negotiate a set of
rules and conditions for their workplace, which results in an enterprise agreement. Another
term to describe enterprise bargaining is ‘workplace bargaining’.
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Fixed-term contract
A fixed-term contract:
R Is an employment contract with a defined end date
R May be linked to a specific date or completion of a project
R May apply to employees covered by awards or agreements in certain circumstances
R Is more commonly used for employees not covered by awards or agreements, such as
senior management.
Individual contract of employment
An individual contract of employment:
R Would apply where an employee is not covered by other types of employment
contracts, awards or agreements
R Is where most conditions of employment and the rate of pay are negotiated between the
employee and employer
R Is not required to be registered with any industrial court, but if the contract is broken an
application for a breach of contract may be made in the courts under ‘common law’
R Contains some conditions of employment such as annual leave, long service leave and
parental leave, specified by legislation and these minimum entitlements still apply to
the employee
R Cannot provide lesser entitlements than those contained in an award or agreement if the
employee’s employment is covered by an award or agreement but can add to or provide
additional benefits.
Award-free employees/ contracts
Not everyone is covered by an award. Some employees have the terms and conditions of their
contract of employment mutually agreed upon with the employer. However, employment
contracts are still covered by some employment laws which provide minimum entitlements
such as annual and long service leave, occupational health and safety and workers
compensation.
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6.4 APPENDIX D
THE NO DISADVANTAGE TEST & THE BETTER OFF OVERALL TEST
The No Disadvantage Test
The new NDT differs in important respects from both the old No Disadvantage Test which
applied to ‘pre-reform’ agreements and the ‘Fairness Test’ which applied between 2007 and
2008. Every new agreement must be assessed for compliance with the NDT by FWA. The
NDT assesses an employee's terms and conditions of employment under a workplace
agreement against conditions that might otherwise apply to that employee under a relevant
Award or NAPSA.
Enterprise agreements do not commence operation until they are assessed as passing the NDT
and they then come into effect 7 days after approval by FWA.
If FWA determines that an agreement does not pass the NDT then the employer will usually be
given the opportunity to vary and re-submit the agreement. It will not come into effect until it
passes the NDT. If it still fails the NDT after this time the agreement is invalidated and the
employer will be liable to compensate the employee for any shortfall in wages that occurred as
a result.
The Better Off Overall Test
The BOOT will be applied to new enterprise agreements made from 1 January 2010. An
agreement will pass the BOOT if FWA is satisfied that, as at the test time, each award covered
employee (and prospective award covered employee) to be covered by the agreement would be
better off overall if the agreement applied than if the relevant modern award applied. This will
ensure that, over the period of operation of the agreement, employees would be better off
overall than they would be under the modern award over the same period.
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