What Rhymes with 1 July?
Not 'employment contract audit', but maybe it should. 1 July is the date when a number of employment related thresholds are indexed which may affect employers' compliance with workplace laws in the 2017/18 financial year.
Set out below are the key changes that employers should be aware of. We have also included a printable and easy to follow checklist to assist in reviewing your workplace arrangements and a key threshold table to print out and keep close by.
High Income Threshold and Maximum Compensation for Unfair Dismissal (UFD)
As of 1 July 2017, the high income threshold will increase to AUD142,000 per annum.
In order to have access to the unfair dismissal jurisdiction, an employee must either be covered by an award or enterprise agreement or earning less than the high income threshold.
This means that from 1 July 2017, where a dismissal is found to be unfair:
- employees earning AUD142,000 or more who are not covered by an award or enterprise agreement will not be eligible to bring an unfair dismissal claim
- the maximum financial compensation that can be awarded will be AUD71,000 (equivalent to 6 months' salary calculated at the high income threshold)
Employers should take care when calculating whether their employees are earning above or below the high income threshold by considering the following table.
National Minimum Wage (Before Statutory Superannuation)
The national minimum wage and modern award minimum wage will increase by 3.3% on 1 July 2017 to AUD18.29 per hour or AUD694.90 per week based on a 38 hour week.
The increase will apply from the first full pay cycle starting on or after 1 July 2017 and is equal to an increase of AUD22.20 per week or 59 cents per hour.
Annual Superannuation Guarantee Contribution
The superannuation guarantee contribution rate remains at 9.5% for the 2017/2018 financial year and is not scheduled to increase until 2021. The maximum contribution base will however increase to AUD211,040 per annum. This means, in the absence of a contractual agreement to the contrary, employers are not required to make superannuation contributions to employees for amounts earned over AUD211,040 per annum from 1 July onwards.
Tax Free Genuine Redundancy Payment and Early Retirement Scheme Limits
Employees are entitled to a tax free payment up to a set limit for genuine redundancies and early retirement schemes. The tax free limit is calculated based on the employee's years of service.
From 1 July 2017, the first AUD10,155 plus AUD5,078 for each year of service will not attract any tax. Any amounts in addition to the tax-free limit should be taxed as an employment termination payment at the increased concessional tax rate of 32.5% from 1 July 2017.
Taxation rate of Employment Termination Payments (ETP) Payments
Maximum FW Act Penalties for Corporations (300 penalty units)
The maximum penalty for a breach of the Fair Work Act 2009 (Cth) is currently 300 penalty units or AUD54,000 for a corporation. Penalty units are automatically adjusted in line with inflation every three years under the Crimes Act 1914 (Cth) and the next scheduled penalty unit increase is not scheduled to take effect until 2018.
However, employers should be aware of the recent amendments proposed under the Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017 (Bill) to introduce new civil penalty provisions for ‘serious contraventions' of the Fair Work Act 2009 (Cth).
If the Bill is passed, the new provisions will attract maximum penalties that are ten times higher than the 2016/17 maximum penalties. The Bill also proposes a substantial increase in the penalties for strict liability contraventions relating to record keeping and false or misleading employee records or payslips. We will keep you updated as the Bill progresses.
1 July Employment Agreement Audit
Employers should consider reviewing the current employment agreements in place at their organisation to ensure that they remain compliant with both statutory and contractual obligations in the 2017/18 financial year.
We have prepared an easy to follow checklist to assist with your review which can be accessed here.
If as a result of your audit, you identify outdated or inaccurate clauses, the employment agreement will require updating.
Employers should consider whether a written variation will be sufficient to remedy the situation or whether a new employment contract would be more appropriate. The time at which an employee is being offered a pay increase is an opportune time to provide an updated contract or written variation.