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Employee entitlements: Allowances

July 12, 2016

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It seems like a new underpayment matter makes its way into the news every day, from the exploitation of migrant workers to the payment of below-award ‘training’ rates. For most of us, these stories seem like fiction, as things that happen to other people.

But underpayments come in many forms. You may diligently check award rates, keep up with minimum wage increases and apply various penalties and loadings, but there’s one thing that often catches businesses out: allowances. They seem so insignificant in the grander scheme of things, but they can still cause underpayment issues to the most reputable of businesses.

Which allowances do I need to pay?

Allowances are award specific so they are unique to each industry. If your business has employees in more than one award, you should ensure you are familiar with the applicable allowances of each one.

Some common allowances found in many awards are:

  • Leading hands allowance: this allowance is payable to employees who are in charge of other employees, and is often calculated based on the number of individuals under their supervision
  • Laundry allowance: this allowance is payable to employees who are responsible for laundering their own uniforms or special clothing which is required by the employer to be worn while at work
  • Motor vehicle allowance: this allowance is payable to employees who use their private vehicle when performing work-related duties and is usually calculated on a per-kilometre basis
  • First aid allowance: this allowance is payable to employees who have first aid certification and are designated as first aid officers in the workplace
  • Meal allowance: this allowance is usually payable when an employee has worked overtime without sufficient notice
  • Tool allowance: this allowance is payable to employees who must provide their own tools or equipment

Higher duties allowance

An allowance which often catches employers out is the ‘higher duties allowance’ which is found in many awards, including those for retail, children’s services, hospitality and nursing. HR Assured has encountered many businesses, large and small, who were completely unaware of the existence of this provision and are now facing large underpayment claims.

The higher duties allowance is not a set dollar amount, but rather a principle – that an employee working at a higher classification than their own should be paid at the higher classification’s wage rate. Some awards apply time restrictions to this principle, restricting it to work performed over a certain amount of days, or determining that higher duties work for more than a certain number of hours should be paid at the higher rate for the entire shift. You should check your applicable award to determine if a higher duties allowance is payable.  

How much do I have to pay in allowances?

Some allowances are calculated as a percentage of the ‘standard rate’ which will be the minimum wage of a particular classification under the award. As such, the allowance amount payable will increase with the minimum wage increases on 1 July every year.

Other allowances are concrete figures, but we recommend against complacency: these amounts are regularly adjusted to represent increases in the consumer price index, and businesses are often surprised to learn that the amount they’ve must pay for a particular allowance has increased significantly.

What does this mean?

While failing to pay, or underpaying allowances will only result in a small underpayment, it is an underpayment nonetheless, and you may face significant penalties.

We recommend that you familiarise yourself with all applicable awards and the relevant allowances contained within them, and regularly check up-to-date versions of the award to ensure you are aware of all increases or changes. Alternatively, HR Assured clients can call the telephone advisory service at any time for relevant information about payable allowances.

For more information on allowances payable to your employees and what this means for you, clients should contact the HR Assured team. If you’d like more information about the benefits of becoming an HR Assured client contact us today for a free initial consultation.