Award Interpretation: 3 decisions to make when calculating a breach of minimum shift engagement
One persistent and challenging matter that constantly frustrates payroll teams is the uncertainty around Award interpretation. Many businesses are generally confused about how to interpret their applicable award and are often unsure whether their interpretation is correct. This has generated a high level of uncertainty for payroll teams around both compliance and ensuring that their employees are receiving their correct entitlements.
The minimum shift engagement clause is an interesting example of a clause requiring interpretation and is found in many awards including; the General Retail Industry Award (GRIA), the Poultry Processing Award, and the Clerks Award.
Minimum shift engagement in the GRIA
Section 10 of the award – Part-time employees
Clause 10.9: The minimum daily engagement for a part-time employee is 3 consecutive hours.
An example scenario
A part-time employee is rostered to work on a Saturday from 12:00pm until 5:00pm. The employee has worked two hours and has been feeling unwell so has requested to take sick leave for the remainder of the shift. If this occurs, the employer has 3 key decisions to make when calculating pay entitlements for the minimum shift engagement.
3 decisions to make
Do you pay part-time employees for the minimum engagement period (3 hours) even if less than 3 hours are worked?
If the full 3-hour minimum is paid, what is the pay rate for the unworked time?
Do paid leave hours count towards the 3-hour minimum engagement?
For this scenario let’s assume for decision one the company pays the employee for the entire 3 hour minimum engagement, and focus on decisions two and three.
Decision 2 – What is the pay rate for the unworked time?
Based on our scenario, the employer has two options as shown below. They have to make the decision to pay the unworked hour at the minimum ordinary rate or because it’s a Saturday pay the applicable Saturday penalty rate of 125%.
Decision 3 – Do paid leave hours count towards the 3-hour minimum engagement?
The next decision that needs to be made in this scenario is if the employee chooses to use paid sick leave, does the paid sick leave count towards the 3-hour minimum shift engagement.
The visualisation below depicts two options for the employer. Yes, paid leave does contribute to the 3-hour minimum engagement or no, paid leave does not contribute to the 3-hour minimum shift engagement. If option B is chosen the employee in this scenario would receive both the 1 hour of unworked pay at the decided rate plus paid leave.
What do these decisions mean?
Award interpretation is difficult but it’s not impossible. There is obviously not one way of making these decisions, but ultimately the employer and their legal teams are responsible for choosing the best way to interpret this and other clauses. The different options will change the pay and entitlements that employees receive so it’s important for both the employer and employee that these clauses are considered and decisions on interpretation are made.
These decisions, although complex to make, are not impossible to work through. PaidRight envisions a future where all industries including retail no longer compete on compliance, rather compliance is a given and both employees and employers are confident that their company is paying correctly. Would it be possible for an industry standard to be put together with an agreed set of decisions.
PaidRight (https://www.paidright.io/) is currently undertaking some research to develop some new tools aimed at supporting Payroll and Finance teams. These tools will help Australian businesses understand and interpret the award they work with so they can have confidence that they’re paying their employees correctly.
To develop the product, we’re speaking with people in finance and payroll teams to understand current processes, pain points and opportunities for improvement within existing processes and systems related to pay. In exchange for your participation, we’ll donate $150 to a charity of your choice.