Flat Hourly Rates

 

Are you paying your employees correctly?

 

The practice of using a flat hourly rate of pay by employers has become increasingly popular. So, how do you ensure you are paying your employees correctly?

 

What is a flat hourly rate?

A flat hourly rate of pay is used when employees are paid the same rate for all hours worked, regardless of when they are worked. It does not increase for overtime hours worked or hours that attract penalty payments. The flat rate must pass the Better Off Overall Test (BOOT) which determines if the employee is better off by being paid the flat hourly rate than being paid as per the clauses of the relevant award.

A flat hourly rate must be agreed between the employee and the employer by using an Individual Flexibility Arrangement (IFA) or a set-off clause in the employment contract. Flat hourly rates are generally used for ease of administration and accounting – a flat hourly rate makes it easier to calculate the pay of your employees during each pay period.

What happens when flat rates go wrong?

The flat rate being paid to the employee must put the employee in a better position than they would have been had they been paid under the clauses of the award. If not, your company could face a hefty fine. Recent Fair Work cases of employers incorrectly paying flat hourly rates to employees, or, even worse, intentionally concealing rates of pay, illustrate just how important it is to ensure that you are keeping correct time and wages records and following all legislation requirements regarding pay.

Keeping track of your rates of pay, and the national and state minimum wages will ensure that your employees are being paid correctly and you are protecting your company from breaching legislative requirements.

For more information on flat hourly rates and minimum wages contact us on (08) 9316 9896 or enquiries@processworx.com.au.

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