A Federal Court judgment regarding historical entitlements of salaried staff under the General Retail Industry Award (GRIA) will be far-reaching and add further complexity and red tape to salaried employment across all industry sectors, Australia’s leading business groups said today.

In a joint statement, the Australian Chamber of Commerce and Industry (ACCI), Business Council of Australia (BCA), Australian Industry Group (Ai Group), Australian Retailers Association (ARA) and National Retail Association (NRA) said the consequences of the decision will be higher costs, an increased compliance burden and reduced productivity.

The decision makes it clear how difficult it is for employers to provide employees with flexibility,  whilst meeting the burdens of time and wage recording and award conditions. It also highlights the onerous nature of requirements to keep detailed records of hours worked and award entitlements, even in circumstances where an employee may be paid an annual salary that significantly exceeds the value of entitlements.

Examples of the compliance burden highlighted by the judgment:

  • Salaries, including at senior levels, cannot be used to offset award entitlements on an annual basis, as has been a longstanding practice across most industries. The judgment determines salaried team members need to be paid in a similar manner to waged team members instead of allowing for the smoothing of entitlements across the year.
  • Where an employer pays a senior employee on a salary basis which exceeds their monthly entitlement under the relevant award, the employer is required to keep a separate record of each penalty, allowance or overtime amount due under the award, even though their salary exceeds their award entitlements and there is no practical impact on the amount of pay received by the employee (e.g. because the award entitlements are below the rate they are actually receiving).
  • If a team member takes leave and the employer rosters them back at work on the following days, the leave days will now be treated as worked time, meaning that overtime rules might be triggered by reference to the time on leave.
  • The relevant span of ordinary hours needs to be assessed on a day-by-day and store-by-store basis for every retailer around the country. This is despite the Fair Work Commission previously providing clarity that the span of ordinary hours is determined by reference to a retailer as a whole, with consistency applied each day. This judgment ignores the significant practical and industrial implications of ensuring compliance with this, including the changes in trading hours that are driven by things outside of a retailer’s control, often with very little warning.
  • The decision casts doubt over the ability of employers to continue the common practice of paying employees annual salaries at above award rates on the assumption that the arrangement can satisfy entitlements under a Modern Award. Instead, the decision suggests that the component of a salary paid in a particular pay period can only satisfy award obligations that arise under that same pay period.

The peak bodies are calling for sensible but meaningful steps to simplify Australia’s increasingly unworkable workplace relations system. This includes simplifying Australia’s complex system of awards and addressing unrealistic record keeping requirements that are clearly out of step with modern working arrangements.

BCA Chief Executive Bran Black said the judgment will impact salaried arrangements across multiple sectors.

“This case shows just how complex our workplace laws have become. Employees want flexibility to self-manage their workload not a return to daily timesheets, while employers need clarity and simplicity, not more legal complexity,” he said.

“The decision will concern businesses large and small. It has significant consequences for the many employers who use annual salaries. It is another blow for employers trying to streamline complex requirements and provide consistency for both workers and businesses.”

“The impact of this and other recent decisions means that employers are bogged down in endless compliance requirements rather than focusing on building business, servicing customers and creating jobs.”

ACCI CEO Andrew McKellar added that it runs counter to government ambitions to improve productivity and provide job stability and further reflected the mounting difficulties employers face in navigating complex industrial laws.

“We believe this judgment will have implications for millions of workers under a wide range of industry awards including retail, hospitality and clerical positions across many sectors of the economy.

“Requiring senior employees to clock on and clock off, measure breaks and be given no discretion to decide when they need to work extra hours creates a heavier regulatory burden for businesses already drowning in red tape.

“Australian business is looking for a green light to grow. Unfortunately, this sends a message that workplace relations remain a huge impediment to growth. Labour productivity is flatlining and the effective implications of this decision, alongside other recent changes in industrial relations only serve to jeopardise it further,” Mr McKellar said.

The Australian Industry Group CEO Innes Willox said, “The decision highlights the burning need for genuine simplification of the notorious minefield of technicalities and impractical rules that constitutes our workplace relation system.

“All too often our laws are proving too complex and confusing for even the country’s largest employers to successfully navigate. Small employers running the gauntlet of employing people in Australia without the assistance of armies of workplace relations advisors and lawyers are understandably often overwhelmed by the challenge.

“Recent years have seen the Government implement an avalanche of new workplace relations obligations, a suite of radical new powers and entitlements for unions to enforce the rules and terrifying new penalties for those that misapply them. What we haven’t seen are tangible steps to address the complexity that is the root cause of much non-compliance.

“Sadly, the decision will undoubtedly cause many employers to reconsider the viability and utility of continuing to provide annualised salaries to employees. This will frequently be to the detriment of employees who value the certainty of a stable above award salary rather than receiving fluctuating hourly pay arrangements.

“In many industries, it is common for employers to allow well paid employees to work flexible hours, typically to suit their own circumstances, without keeping the kinds of records that the decision contemplates. This is particularly the case in the context of working from home arrangements that many employees enjoy but which provide employers with limited visibility and control over precisely when employees are working. Given the decision, many employers will undoubtedly need to reconsider their ability to continue to offer these kinds of arrangements.

“At the very least, the decision will necessitate many employers returning to ‘bundy-clocks’ and undertaking much stricter monitoring and the kind of surveillance of staff that we know many workers and unions will resent.

ARA CEO Chris Rodwell said the case will deeply impact the retail industry, Australia’s single largest private sector employer, and plainly demonstrates the challenges businesses face in complying with the profoundly complex General Retail Industry Award.

“This once again highlights how compelling the case for award simplification is. Both employees and employers should be better able to understand the award to avoid compliance issues.

“With 994 different pay rates across almost 100 pages, the GRIA is incredibly difficult for employers to understand. The expectation that smaller mum-and-dad operated businesses, who lack legal and HR resources, can use the award appropriately is entirely unreasonable.

“This complexity has been the driver for our case in the Fair Work Commission to clarify, simplify and modernise the GRIA. If it requires teams of lawyers and HR experts to interpret the GRIA, it’s clear the system is broken, and it is setting up businesses to fail.

“It’s important to stress this isn’t simply about retailers. Employees deserve clarity, too. Workers have the right to understand their pay and conditions clearly and simply. We will continue to advocate for solutions that will make the retail award easy to understand while delivering choice and flexibility to employees,” he said.

The BCA, ACCI, ARA, Australian Industry Group and NRA were not parties to the FWO case.