HEALTH & LIFE’S BEST PRACTICE NEWS ALERT Current circulation:
6994
DATE: ISSUE NO:
3rd October 2006 130
Welcome to Health & Life’s free email newsletter service. Tell a friend that we would be happy to add their email address to the distribution list. This service is to provide Health and Life’s clients and those who attended our presentations with up to date information on key financial and practice management issues that may affect your practice. Please do not use this as a substitute to seeking professional advice. Writer in charge: Mr David Dahm CPA, BA Acc, FTIA, FFin, FAAPM,GLF.
The NEW Employment Laws! Part II
Problem: The New Industrial Relation Laws may affect up to 70% of practices in Australia Part I – covered in Best Practice News Alert no. 129 1. Key areas it will impact on your practice – commentary 1.1. Are you affected? - Corporate trustees of trusts affected 1.2 Wage increases are now frozen 1.3 New Record Keeping Requirements after 24th September 2007 penalties apply! 1.4 Ordinary hours – timesheets from practice managers? Part II – In this edition we cover: 1.5 Cashing out of annual leave – it is allowed? 1.6 Staff replaced with employees prepared to work under AWA’s or collective agreements 1.7 Unfair Dismissal Laws 1.8 Super Choice legislation now applies to all State Award Employees 1.9 Payroll Tax Audits are on! - Update 2. What should I do next?
The NEW Employment Laws! Part II Problem: The New Industrial Relation Laws may affect up to 70% of practices in Australia th
The new Workchoices legislation was introduced on the 27 March 2006. This is part two of a two part series which analyses extracts from the Workchoices legislation and assesses the practical opportunities and problems the legislation will have on your practice. We do not intend to provide a “blow by blow” detail of the new laws. The legislation is still a moving target and we seek to address some of the key issues that practices need to start to consider today. This is a commentary on the legislation and its impact. Please seek additional professional advice and attend industry seminars in order to keep up to date. For further information, contact WorkChoices Infoline 1300 363 264 or https://www.workchoices.gov.au or us at Health and Life 1800 077 222.
The NEW Employee Laws! Part II
1.5 Cashing out of annual leave – is it allowed? Employers can now cash out their employees up to 2 weeks annual leave. The major benefit of this is not having to pay casual rates for replacement staff while permanent staff are on holidays as well as greater continuity. A possible downside is employee burnout. Employees may request to cash out up to two weeks of their credited annual leave entitlement every 12 months (or the pro-rata equivalent for part-time employees). An employee cannot cash out any portion of annual leave unless a term in a workplace agreement expressly permits cashing out. A request to cash out annual leave must be in writing. An employer must not require an employee to cash out an entitlement to annual leave, or exert undue influence or undue pressure on an employee in relation to a decision about whether or not to cash out a period of annual leave. 1.6 Staff replaced with employees prepared to work under AWA’s or collective agreements Ultimately practices that develop Australian Workplace Agreements (“AWA’s”) or Collective Agreements(“CA”s) with their practice staff will ensure staff entitlements are preserved. There is an incentive for practice staff to negotiate an AWA or CA. Below are examples of entitlements that could be preserved. These conditions may not exist in 3 years time when the Australian Fair Pay and Conditions are finalised as they are not part of the four minimum conditions. It would not be unreasonable to expect both employees and employers will be more attracted to employ staff that are under an AWA or CA rather than under a State Award.
Agreements could be used to incentivise the workforce. Staff bonuses could apply to encourage Chronic Disease Management programs that attract a higher Medicare rebates, achievement of immunization targets, billing consumables, multi-skilling or reducing patient debtors. An employee may forgo overtime in exchange for a more favourable hourly rate, and flexible working hours. This could significantly simplify payroll procedures. Protected conditions are terms that require an AWA or CA are about: • • • • • •
• • •
rest breaks; incentive based payments and bonuses; annual leave loadings; observance of public holidays or payment in respect of those days; days to be substituted for public holidays; monetary allowances for: o expenses incurred in the course of employment; or o responsibilities or skills that are not taken into account in rates of pay for employees; loadings for overtime or shift work; penalty rates; other conditions prescribed by State regulation.
1.7 Unfair Dismissal Laws Under WorkChoices, employers who employ up to and including 100 employees will be exempt from unfair dismissal laws. Practices are advised to still provide three warnings prior to termination if a matter relates to competency. Staff earning greater than $98,200 pa do not have access to the unfair dismissal laws. Staff can secure government funding up to $4,000 to lodge a defence if there is merit in their case. An employee may lodge an unfair dismissal claim with the Australian Industrial Relations Commission (AIRC), if he or she has worked for the employer for six months or more and is employed by a constitutional corporation or employed in Victoria or the Territory. Exclusion from Federal unfair dismissal laws Employees that are excluded from federal unfair dismissal laws include: • • • • •
employees engaged under a contract of employment for a specified period or a specified task; employees on probation; casual employees engaged for a short period; trainees; and employees earning $98,200 or above.
Employees who are dismissed for a genuine operational reason are also not allowed to pursue an unfair dismissal claim. Genuine operational reasons include economic, technological, structural or similar matters relating to the employer’s business. How the AIRC processes claims An application for unfair dismissal must be lodged within 21 days after termination of employment. The AIRC can extend this period.
The AIRC may dismiss an application for unfair dismissal without a hearing if it is clear that: • • • • •
the employer has up to and including 100 employees; the employee is excluded by the legislation from bringing an unfair dismissal claim; the employee has not completed the necessary six month qualifying period; the application is frivolous, vexatious or lacking in substance; or the application was not made within 21 days of termination and does not warrant an extension of that time limit.
The AIRC, in determining an unfair dismissal claim must consider a number of factors including: • • •
whether there was a valid reason for the dismissal such as the employee’s conduct; whether the employee was notified of the reason and given the opportunity to respond; and if the dismissal related to unsatisfactory performance by the employee, whether the employee had been warned before the dismissal.
Protection against unlawful termination Under WorkChoices, it will continue to be unlawful for an employer to terminate an employee’s employment on discriminatory grounds. This is called unlawful termination. Unlawful termination provisions apply to all employees in Australia. Employees who are excluded from making unfair dismissal claims are not excluded from making unlawful termination claims. An employee can apply to the AIRC if they believe their employment was terminated for an unlawful reason, including: • • • • • •
• • •
temporary absence from work because of illness or injury; trade union membership or participation in trade union activities; non-membership of a trade union; seeking office as a representative of employees; the filing of a complaint, or the participation in proceedings, against an employer; race, colour, sex, sexual preference, age, physical or mental disability, marital status, family responsibilities, pregnancy, religion, political opinion, national extraction or social origin; refusing to negotiate, sign, extend, vary or terminate an AWA; absence from work during maternity leave or other parental leave; and temporary absence from work because of the carrying out of a voluntary emergency management activity.
Unlawful termination financial assistance scheme Employees who believe they have been unlawfully terminated may be eligible to receive up to $4,000 of independent legal advice, based on the merits of their claim. They will be eligible for assistance if they have a certificate from the AIRC indicating that their claim has merit and could not be resolved through conciliation. The application for assistance will be assessed by the Department of Employment and Workplace Relations on the basis of financial need. To be eligible for assistance, the person’s income prior to termination must be below $915.70 per week or $47,745 per year.
1.8 Super Choice legislation now applies to all State Award Employees th
From 27 March 2006 if the Workchoices legislation affects you, then your Award based employees (previously exempt) must be offered “choice of superannuation fund” regardless of the Award super provisions. From 1 July 2005, employees have the right to choose which superannuation fund or retirement savings account will receive their superannuation guarantee contributions. This is known as choice of superannuation fund. From 1 July 2006, if you are a corporation who was paying superannuation contributions under a state award you will have to offer your employees a choice of superannuation fund. These awards are now treated as a ‘notional agreement preserving state awards’ under the WorkChoices reforms. If you don’t meet your choice of superannuation fund obligations, you may be liable for the choice shortfall. The choice shortfall is part of the superannuation guarantee charge. Your obligations include: • •
offering choice of superannuation fund to your eligible employees, and acting on your employees’ choice by paying their superannuation guarantee contributions to their chosen fund or to your employer fund if they do not choose a fund.
The choice shortfall applies where you have paid superannuation guarantee contributions to a complying fund for your employee but not to the fund chosen by them. The choice shortfall is roughly 25% of the contributions that are paid to the wrong fund. A choice shortfall may also apply if you have not given your employees a Standard choice form in the required timeframe. The choice shortfall is limited to $500 for a notice period per employee. For example, if the choice shortfall for an employee for a quarter is $1,000, the actual shortfall can be no more than $500. 1.9 Payroll Tax Audits are on! – update This has nothing to do with Workchoices, but does it affect your payroll. In earlier news alert we have been warning readers about payroll tax audits. Please contact us if you misplaced your copy. We can confirm strong audit activity in regional NSW and Victoria. SA has announced similar audits in its recent budget announcement. The bottom line is if your practice has greater than 3 employed full time equivalent GP’s or providers you may have a payroll tax problem, when it is grouped with your practices salary and wages. Payroll tax adds on average an additional 6% on employee on-costs over a monthly threshold ranging from $42k to $105k per month depending which state your are in. In NSW and Tasmania this situation is made worse if practices use a service trust as certain trust distributions are treated as wages. This problem is eliminated or reduced by using/ implementing a service agreement. At Health and Life we have template service agreements that can assist you.
2. So where do you go to from here? 1.
Attend industry seminars such as the AAPM/AMA road shows;
2.
Start planning appropriate AWA agreement structures for your practice;
3.
Contact Health and Life - we have developed AWA template agreements for doctors, practice managers, nurses, receptionists with job descriptions;
4.
Consider upgrading or outsourcing your payroll system. We are Quick Books Accredited Providers and provide MYOB support;
5.
If you have a payroll tax problem contact us about our template service agreements which can help you reduce or eliminate your payroll tax problem;
6.
Consult your accountant and adviser to discuss these issues. For more information about any issues raised in this article. Call us on 1800 077 222 we are happy to receive any feedback and will provide a free initial telephone consult.
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Health & Life Pty Ltd’s Best Practice News Alert is designed as a comprehensive and upto-date Accounting and Practice Management news service to alert readers to the latest in practice and related developments affecting the medical, dental and allied profession as they happen. It is published when there is news to report. No responsibility can be accepted for those who act on its content without first consulting us or obtaining specific advice.
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