1st July 2015 new 2.5% Award pay rise or freeze and more?!
Did you know that on the 1st July 2015 your staff may be legally entitled up to a 2.5 % pay rise? Note the industrial general Award increase was 2.5%. It is important to refer to the specific Awards below some payments are up to 3%.
Furthermore, employers can cash out their excessive annual leave, which may significantly improve your bottom line. With a 4 year Medicare freeze will you freeze wages and hurt morale, immediately increase patient fees or look at other more positive options?
The budget has a number of important changes that could seriously impact your practice. Here we cover the four most important ways to address these changes by providing practice solutions for you. Regardless of if you pay your staff above the Award, on the 1st July 2015 wage rates should be increased by up to 2.5% p.a. Staff wages represent up to 60% of the total overheads of a practice. These changes are accompanied by two more challenges for employers in medical practices.
Firstly, for practices that predominantly receive the Medicare Benefit Schedule rebate, the rebate has been frozen from 2015 until 2018.
Secondly, there have recently been changes in industrial laws, including the 15th December 2014 General Practice Registrar arrangements. These challenges represent an important opportunity to engage positively your staff to enhance recruitment and retention, which will aid in improving the sustainability of your practice. If you are unsure about where to start, our newly revised employment kit provides practices with a better employment package template for key staff in the short and long-term. These templates are developed to provide a solid career structure, which includes employer paid training.
1. New national wage increase up to 2.5% p.a from 1st July 2015.
A 2.5% new Award rate increase for the Medical, Nursing and Health Support Staff Awards is effective from 1st July 2015, even if you pay them above the Award unless you have a valid employment contract
Regardless of the budget, it is more than likely a four year freeze on increasing the Medicare rebate for General and medical practices will continue .
Practices and staff have three options:
1. Cash out of excessive annual leave entitlements
Employers and employees can cash out of excessive annual, which may significantly improve your bottom line. This will also help out your staff who do not want to or have difficulty in taking time off. As a rule though, we do encourage staff to take annual leave, which aids in the prevention of employee burn out.
Annual leave is calculated on the most current wage rate when leave is applied for. Accordingly, if annual leave continues to accrue from year to year the value of the accrued leave can accumulate and will therefore be more expensive if paid out in later years. Please note that this Fair Work Decision has not been amended in the Awards. We expect this to occur in the next few months.
The Fair Work Commission has released its Full Bench decision on changes to modern awards in relation to paid annual leave. The decision was issued as a part of a four yearly review of modern awards. Cashing out The Full Bench approved the insertion of a standard clause relating to cashing out of annual leave, incorporating four safeguards into 120 modern awards:
- A maximum of two weeks’ paid annual leave can be cashed out in any 12 month period (in the case of part-time employees, this is based on the weekly ordinary hours of the employee)
- Specific requirements relate to the record keeping and content of any agreement relating to cashing out accrued annual leave
- If the employee is under 18 years of age, the agreement to cash out a particular amount of accrued paid annual leave must be signed by the parent or guardian of the employee
- General protections of the Fair Work Act against undue employer influence and misrepresentation still apply.
2. Reduce your reliance on medicare by Improving the quality and type of services you offer.
Improvements in the type and quality of services that you offer will reduce the need to rely on bulk billing. The use of high dollar value Medicare item numbers for preventative services will also benefit the general health of your patients. For some simple ideas see
Federal Health Minister offers your GP a lifeline!
3. Restructure your practice
For some simple ideas see
Why restructure your practice
4. Freeze staff wages or reduce staff hours and increase productivity;
If the above suggestions are simply not an option then unfortunately freezing staff wages or reducing hours may be an option as long as you are paying staff above the Award rates. Wages represent 60% of a practice’s overheads. Sometimes, a wage freeze is the only solution. Note that in our forecasting models based on data from over 24 years and 1200 practices, we see up to a 30% drop in practice earning and or profits over the next 3 years unless changes are implemented or the current standards of service or quality are compromised. Clearly, compromising your standards is not in the patients or practices interest.
The 3 % increase can be absorbed into over award payments if you have documented your employment arrangements correctly. Clients who have correctly implemented our latest “Employment Kit” update (see below) released last year should have this option available.
2. New changes to the Award – our employment templates will help you immediately comply
These are the latest Awards commencing 1st July 2015
1. Medical Practitioners Award 2010
2. Nurses Award 2010
3. Health Professionals and Support Services Award 2010
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The main points include:
1. A 2.5% increase in new Award rate increases for the Medical, Nursing and Health Support Staff Awards effective from 1st July 2015 even if you pay them above the Award, unless you have a valid employment contract ;
2. Requirement to confirm employment terms to ensure your employment agreements are legally binding (seek legal advice from a lawyer), regardless of whether you have a signed employment contract. They key points are detailed below. This is important if you wish to avoid an underpayment of wages claim and any related fines. These fines can be up to $51,000 per breach.
If you are thinking of absorbing future wage increases or ensuring your will not be hit with a claim for underpayment even if you are paying your staff above the Award, make sure you have properly implemented the employment laws. See below for more information.
To quote the Health Professionals and Support Services Award 2010.Note all other Awards above are similarly affected:
(a) be confined to a variation in the application of one or more of the terms listed in clause 7.1; and
(b) result in the employee being better off overall than the employee would have been if no individual flexibility agreement had been agreed to.
Clause 7.4 The agreement between the employer and the individual employee must also:
(a) be in writing, name the parties to the agreement and be signed by the employer and the individual employee and, if the employee is under 18 years of age, the employee’s parent or guardian;
(b) state each term of this award that the employer and the individual employee have agreed to vary;
(c) detail how the application of each term has been varied by agreement between the employer and the individual employee;
(d) detail how the agreement results in the individual employee being better off overall in relation to the individual employee’s terms and conditions of employment; and
(e) state the date the agreement commences to operate.
Clause 7.5 The employer must give the individual employee a copy of the agreement and keep the agreement as a time and wages record.
Clause 7.6 Except as provided in clause 7.4(a) the agreement must not require the approval or consent of a person other than the employer and the individual employee.
Clause 7.7 An employer seeking to enter into an agreement must provide a written proposal to the employee. Where the employee’s understanding of written English is limited the employer must take measures, including translation into an appropriate language, to ensure the employee understands the proposal.
Clause 7.8 The agreement may be terminated:
(a) by the employer or the individual employee giving four weeks’ notice of termination, in writing, to the other party and the agreement ceasing to operate at the end of the notice period;…”
3. Tax Warning on GP Registrar arrangements commencing 15th December 2014.
We have reported that a new GP Registrar agreement applies from 15th December 2014 see http://thebusinessofhealthcare.com.au/2014/12/20/breaking-news-david-should-i-fire-my-young-gp-registrar/ The new agreement means training places can add an additional $70,000 p.a.in income if you structure your arrangements correctly. The new rule is all registrars must be employed regardless of what term they are in. It is important to note that we have noticed many practices and their advisers are recommending that registrars can be employed by their service entity.
A big warning against this: the Tax Office does not allow practices that use a service trust or company to directly employ registrars in the service trust or company. Please contact us for a no obligation free consult to assess if you have a problem.
Do you have legally binding and sustainable employment arrangements? As stated above and to re-iterate: if you do not have signed and up to date employment contracts, your staff may be entitled, from 1st July 2015, up to a 2.5% p.a. pay increase even if you pay them above the Award.
Practices should have updated their payroll software programs to reflect and pay these changes. Currently wages represent 60% of a practice’s total overheads so it is a significant investment. Freezing staff wages can significantly hurt morale, however any significant cost increases will have to be met by either reducing quality or increasing patient fees. Share this article with your staff and patients see http://wp.me/p4FHeU-4 Good staff employment contracts are good for staff morale. Generally, staff prefer to work with practices that are open and transparent. This can only build trust and prevent any further feelings that they have been taken advantage of in these unprecedented and changing times.
4. The new and revised 2014/15 Health and Life Employment Template Kit
As described in this news alert, there are quite a number of significant and sensitive changes.
The new terms provided in our employment kit will help identify, train and reward your key staff plus offer flexible working arrangements without significant risk to the practice. It is a win win for everyone. This solution will enable you to continue to reward your staff on merit and provide high quality services thereby minimising patient fee increases. In order to achieve this objective we have updated our employment kit to include:
If you have any queries, before making any changes, please contact us at no obligation, by email at firstname.lastname@example.org on 1800 077 222. Do you want to purchase an Employment Template Kit or Upgrade see our Employment Kit Offer .
The content of the employment kit includes useful job descriptions and a quote for the kit. Email us at email@example.com to order. We strongly recommend you consider reconfirming your employment agreements in order to implement these changes at your next 6 monthly staff performance appraisal. We continue to provide this unique and exclusive template in Australia. Please note we are not lawyers. It is important you seek independent legal advice before implementing any ideas from this article or related links referred to. The purpose of this article is so you can ask better questions from your advisers.
This will enable you or your practice to save thousands of dollars on expert advice and time. Most importantly, this process will only add to your staff morale and recruitment and retention strategies. This may be a perfect solution for your practice if your staff are concerned about their future wages or working conditions.