The Six Payroll Changes In 2020 That Employers Need To Be Aware Of

A new series of significant changes to employment legislation and awards will be coming into effect in 2020. According to Tracy Angwin from the Australian Payroll Association, small businesses will be required to comply with these changes or be faced with the consequences enforced by the Fair Work Ombudsman.

Individual awards and legislation related to employee entitlements change on a regular basis. Organisations must comply with award-based, State-based, and Federal legislation at the same time, which makes it among the most legislated and complex business administration areas.

The most important change for small businesses will be coming into effect on March 1 2020, when new payroll practices will be introduced that are aimed at non-compliance of awards and reducing wage theft.

To date, employers have relied on a system of trust when dealing with their employees. In some of their awards, the new annualised salary clauses will change that completely, with their more stringent overtime control and record-keeping requirements.

The six changes made to employment legislation and awards to look for in 2020 include the following:

Starting on January 1 2020, employers will be required to pay super on the gross rate of pay of employees – including on any of their salary that has been sacrificed.

It will not be possible any longer for employers to only pay super on an employee’s reduced salary who has a salary sacrifice agreement. It is one of two changes being made to the superannuation guarantee that will be affecting employees who use a salary sacrifice arrangement starting in January 2020 and forward.

  • Salary sacrifice is not allowed to contribute at all to mandatory contributions.

Starting on January 1, employers will also no longer be able to use salary sacrifice to make up part or all of their required SG contributions. That is the second part of the SG changes. This ensures that any ‘salary sacrificed’ part of an employee’s salary cannot be placed into a superfund to contribute towards the required 9.5 per cent of super contributions that an employer is required to contribute. It is recommended that employers review their salary sacrifice arrangement for any potential impacts involved with complying with the new law.

  • Starting on March 1 2020, it will be required for employers to provide written notice to employees of their annualised salary as well as their maximum regular working hours beyond the 38-hour week.

Under the 22 modern awards, when an employee works more than the 38-hour workweek, employers are required to make sure they do not earn less than the overall minimum wage. Thatis the first part of the recent decision made by the Fair Work Commission to change the annualised salary provisions of the 22 modern awards starting in March 2020.

  • Employers are required to keep records of their starting, finishing and break times of all their employees.

That means that any excessive hours that are worked in each pay period or roster are required to be paid as overtime to employees if they are not paid by their annual salary above or at minimum wage for the total hours they work. It is important to note that records are required to be signed, or acknowledged to be correct, by the employee for each pay cycle or roster.

According to Angwin, the biggest concern is how practical the new model clauses are, and how they will impact company culture. They might feel as if they are being micro-managed, and that runs the risk of trust being eroded regarding overtime work hours that are established between staff and employers.

  • Starting on March 1, employers are required to pay employees each year for overtime they have worked if that overtime is not covered by their salary.

If it is found by an employer that an employee has been paid less on the annualised wage agreement compared to if they had been paid under the award, then the difference must be paid to the employee. Any shortfalls are required to be paid within 14 days. The process must take place every 12 months, including when a contract is terminated.

  • Under this proposed SG amnesty, employers will be required to self-correct on any superannuation that is unpaid.

In November, the House of Representatives passed the SG Amnesty bill and has moved over to the Senate. The bill is likely to pass and will provide employers with a one-off amnesty to self-correct unpaid super contributions that they have, and will give six months to employer starting on the date of the royal assent to comply with the Australian Taxation Office. Once the amnesty period is over, there will be higher penalties applied of us to 200 per cent. According to Angwin, those who have not come clean on their unpaid superannuation should be acting on this sooner instead of later. That will give them additional time to maximise on this opportunity and be able to navigate with any unseen complexities related to this change.

It is critical for businesses to hire an experienced payroll professional or use an outside managed payroll service, who is able to keep current on any upcoming changes to employee awards and government legislation.

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