Start-ups ignorant of ‘complex’ pay rules

Start-up businesses are struggling to understand government legislation around employee pay, leaving many open to damaging fines, an SME consultancy has warned.

SME Assistance Group said that the Fair Work Ombudsman had fined 33 businesses that underpaid their employees in 2009 and 2010, with the average fine standing at $33,000.

The consultancy claims that it regularly hears from small businesses that are unsure over changes to the government’s awards scheme. Changes that came into force in July, on as transitional basis, increased the minimum wage and set out new conditions for aspects such as casual loading.

Carolyn Tate, a director at SME Assistance, told smartcompany.com.au that small firms were being hit hardest by the changes.

“It’s so ridiculously complex now that many businesses have no chance in hell to get it right,” she says. “If you can afford an HR advisor, you’re fine. But that’s just 5% of businesses in Australia. The rest have to contact Fair Work Australia, but they say they can’t give you legally-binding advice.”

“Small businesses need to get off their backsides and find out the information on this. You’ve got to forget the old system and get your head around the new system.”

“The fine is a very good deterrent for businesses that stick their heads in the sand and want to ignore the issue. The government wants to make an example of them with the fines.”

Tate advises start-ups to visit an industrial relations advisor, as well as an accountant, when setting up a business, to get advice on pay legislation.

“If you still don’t understand it all, and I don’t blame you if you don’t, then you will need professional advice,” she says.

“Small businesses think that they can sneak under the radar with just a few employees, But that ended in 2006 when an employee could lodge a complaint about pay via the internet. Employees used to walk away and get another job, unless they were in a union. But now it only takes one member of staff to lodge and application on a Sunday afternoon over a cup of tea.”