Kicking a goal for employees: increase in minimum wage
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Here’s some tasty morsels to sink your teeth into for FY15:
- minimum wage 3% increase;
- superannuation guarantee rise to 9.5%;
- SuperStream changes commence;
- changes to salary sacrifice caps;
- modern award transitional arrangements – almost over; and
- high income threshold: unfair dismissals and application of awards.
Each new financial year, changes that affect workplace relations come into force as of the 1st of July. For the bleary-eyed world cup watchers, these changes might not quite excite you in the same way as the Socceroos v Netherlands match, but the impact of these changes on your business will last longer than England in the World Cup. We recommend having a quick read of our highlights below.
For more detailed information we’ve included links to the relevant websites.
Kicking a goal for employees: increase in minimum wage
From the 1st July 2014, the lowest paid employees will score from the Fair Work Commission’s decision to increase the national minimum wage by 3%. This equates to an increase of $18.70 per week, taking the minimum wage from $622.20 to $640.90 per week.
This change will apply to employees who are in the national system (i.e. covered by the Fair Work Act 2009(Cth) (Fair Work Act)) and not covered by an award or agreement.
Employees who are in the national system and covered by a modern award, will also have their minimum rate increased by 3%.
This change will not apply to employees who are covered by the State systems. They will have their minimum rate set by the relevant State tribunal, and you should be aware of any changes that might be coming as a result of these decisions.
As for the impact on your business, if an employee is paid above the award rate for their classification there is no requirement to increase their salary by 3%. To avoid being red-carded, we suggest all employers check the wages paid to staff at or near award level. The website of the Fair Work Ombudsman has a handy PayCheck Plus tool for this purpose.
Failure to comply with the new minimum wage from 1 July 2014 can have significant consequences for an employer, including:
- claims for underpayment of wages to the Fair Work Ombudsman, the Federal Court or the Federal Circuit Court;
- actions for breaches of the Fair Work Act, which can result in fines of up to $51,000 per breach; and
- detection of breaches by a Fair Work Inspector conducting a random workplace compliance audit – leading to enforcement action.
Superannuation guarantee increase
Compulsory employer superannuation contributions will increase by 0.25% to 9.5% on 1 July 2014.
The Government has announced that the rate will remain at 9.5% until 30 June 2018 (the year that Russia hosts the next World Cup!) and then increase by 0.5% each year until the contribution rate reaches 12%. The increased amount applies to any ordinary time earnings paid to an employee from 1 July 2014 (where the new minimum rate applies, the 9.5% will be calculated on that amount).
What you need to do to avoid being red-carded
Update your payroll and accounting systems to apply the appropriate increase to the super guarantee rate.
SuperStream changes commence
Starting 1 July the Government has introduced a new online payment system to make the super payment process easier for employers. The new system is called ‘SuperStream‘ and its use will be mandatory for all employers making super contributions, APRA-regulated super funds and self-managed superannuation funds receiving contributions.
Employers with 20 or more employees have from 1 July 2014 to 30 June 2015 to move across to the new system.
Employers with less than 20 employees can start implementation from 1 July 2015 but have until July 2016 to comply.
Employers have options for complying with the SuperStream requirements – either use software that conforms to SuperStream or use a service provider who can meet SuperStream requirements on your behalf.
For more information about SuperStream, refer to this information section on the Australian Taxation Office (ATO) website.
Changes to salary sacrifice cap
From 1 July 2014, the annual cap for salary sacrifice superannuation contributions for employees will increase.
The general concessional (before tax) contributions cap for 2013-14 was $25,000, except for persons over 60 who could contribute up to $35,000.
From 1 July 2014:
- the higher cap of $35,000 will also apply to people who are 50 years or over; and
- the general concessional contributions cap will rise to $30,000.
So if your employees are over the age of 50, they can now consider putting more into super and taking advantage of any associated tax benefits.
For more information refer to the ATO website.
Modern award transitional arrangements – almost over
The 1st July 2014 will also signify the end of some transitional arrangements in modern awards. The transitional arrangements provided a phased move from pay or conditions in the pre-Fair Work Act awards to the modern awards introduced in 2010, usually where there was a significant difference between the two.
The following transitional arrangements in modern awards will cease to operate from the beginning of the first full pay period on or after 1 July 2014:
- minimum wage rates including piecework rates and industry allowances;
- casual or part-time loadings;
- Saturday, Sunday, public holiday, evening or other penalties; and
- shift allowances/penalties.
Note that some awards will still have transitional arrangements which will only change from 31 December 2014:
- redundancy provisions (for example in the Clerks Private Sector Award);
- accident make up pay (also in the Clerks Private Sector Award, amongst others); and
- location allowances.
This means that if you have award employees you should check the Fair Work website to verify the appropriate pay scale and conditions for your employees and make any necessary changes to their pay on the first full pay period after 1 July 2014.
High income threshold: unfair dismissals and application of awards
From 1 July the ‘high income threshold’ that applies to unfair dismissal claims and awards has increased to $133,000 (from $129,300).
This means that :
- claims for unfair dismissal – an employee who is not covered by an award or agreement must be earning under $133,000 to be able to make an unfair dismissal claim. This does not apply to claims for dismissal on unlawful grounds or for adverse action claims, nor does it apply to an employee who is covered by an award or agreement; and
- for award/agreement employees whose guaranteed salary is greater than the high income threshold, the terms of the award of agreement no longer apply to them. However, they still have the ability to make unfair dismissal claims as part of their award or agreement.
World class quick tips:
Some other key regulatory changes which come into effect on 1 July are:
- new ASX Corporate Governance Principles and Recommendations (3rd edition) (available here and see our previous blog); and
- new ASIC requirements for responsible entities and platform operators holding scheme property or other assets or IDPS property. For custodians see ASIC Class Order ASIC Class Order 13/761, RG166 and RG133 and our previous blog.
Finally, as if FIFA anticipated the soporific effect that these changes would have for you – most world cup matches will now be played at the slightly more civilised hour of 6am – giving you extra sleep to better focus on these important changes!
This blog is a guide to keep readers updated with the latest information. It is not intended as legal advice or as advice that should be relied on by readers. The information contained in this blog may have been updated since its posting, or it may not apply in all circumstances. If you require specific or legal advice, please contact us on 1300 132 90 and we will be happy to assist.
P: 1300 132 090
Digital advice: ASIC provides guidance on AFSL compliance
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One of the biggest innovations in recent years within the Financial Services industry is the introduction of digital or ‘Robo’ advice – that is, the provision of automated financial product advice using algorithms and technology without the direct involvement of a human adviser.
In response to queries from market participants, ASIC has released RG 255: providing digital financial product advice to retail clients (RG255).
Unlike the fintech industry it is seeking to assist, ASIC’s latest Regulatory Guide is far from cutting edge. RG 255 is really just a summary of existing ASIC Regulatory Guides designed to group some of the issues that businesses providing digital advice to retail clients need to consider – from initial AFS licence conditions through to ensuring ongoing compliance.
There are a few key takeaways from RG 255 that the industry will find useful. In particular:
- How ASIC will consider an AFS licence application for digital advice and criteria it will look for;
- How the ‘organisational competence’ obligation applies to digital advice licensees;
- Factors to consider when outsourcing the technology component;
- Risks associated with cyber security, and methods to maintain your cyber integrity;
- Guidance on stress testing of algorithms; and
- How AFS licensees could meet the best interest duty when providing scaled advice.
Far from being prescriptive, ASIC has taken a consultative approach in developing its guidance in RG 255 and recognises that the activity of digital advice is fluid and rapidly evolving. ASIC has invited the industry to consult with it on other ways (other than those outlined in RG 255) that they may achieve compliance in what is a rapidly changing environment.
ASIC mystery shopper exercise results in the banning of Responsible Managers
ASIC often reminds industry that it undertakes surveillance activities but it is not often that the regulator provides details of these activities and the resulting enforcement action. However, the recent banning of two Responsible Managers from The Sharemarket College (TSC) did provide a working example of ASIC’s surveillance activities.
Posing as potential investors, ASIC undertook its surveillance on TSC and during that surveillance, TCS shared with ASIC’s investigators stories of its own success when trading on the share market. One particular story it shared was a real investment portfolio it operated with a capitalisation of $100,000, which was achieving returns of 60 per cent per annum. The TSC made representations to ASIC’s investigators that results like this could be achieved by enrolling in TSC training courses.
ASIC’s investigation established there was no investment portfolio and that the claims were false and misleading. ASIC also found that TSC had made similar claims about the investment portfolio and the returns achieved to members of the public.
As a result, ASIC has banned two Responsible Managers of TSC for a period of three and four years respectively for the following:
- Making misleading or deceptive statements in relation to financial products and services;
- Acting outside their AFS licence conditions by providing personal advice when they were only authorised to provide general advice;
- And failing to maintain competence to provide financial services authorised under it AFS licence.
How CompliSpace can help
Australian Financial Services Licence holders are inundated with a raft of corporate governance obligations and an ever-growing compliance burden, which can easily distract focus away from core business activities.
CompliSpace delivers industry specific web-based policies, programs and procedures that can be quickly tailored and configured to suit an organisation’s needs and are kept up-to-date with legal and regulatory changes by our team of specialists.
Our team of compliance professionals and lawyers combine extensive expertise with practical technology-enabled solutions to simplify the complexity of the regulatory environment and allow our clients to focus on allocating resources toward improving financial performance.
Please contact James Cozens to discuss your AFSL requirements further.
This blog is a guide to keep readers updated with the latest information. It is not intended as legal advice or as advice that should be relied on by readers. The information contained in this blog may have been updated since its posting, or it may not apply in all circumstances. If you require assistance or advice please contact us on (02) 9299 6105 and we will be happy to assist.
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