1st July 2020 1.75% Award pay rise or freeze?

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Think carefully

Did you know that on the 1st July 2020 your staff may be legally entitled up to a 1.75 % pay rise? Just ensure you have carefully considered the future of the practice. Then make sure you have a current agreement with your amazing staff in writing. You cannot afford to make an irreversible strategic mistake and go broke losing the entire practice. 

Many practices are feeling the pressure of offering pay increases to hard-working staff responding to the COVID-19 pandemic. We thank them all for their great effort and sacrifice.

However, in a time of falling revenue and uncertainty, any decision not carefully considered may make or break a practice. Until a vaccine is being found, there will be significant workflows, and job descriptions changes as new business models and services such as Telehealth are being considered.

These will have an impact on compensation arrangements and employment agreements with your valuable staff. Clear communication and clarity on the way forward will maintain staff morale.

If your practice is paying above the Award rates, there is an option to absorb any wage increase if you have correctly job classified your staff. This is a critical step. The devil is in the detail. We recommend that wage freezing is the last resort option. Correct documentation is critical.

Now is a good time to spend your Cash Boost from the Government and/or any other State Government grants on improving your practice systems and arrangements or reconsidering the real future of the practice. There is no point in throwing good money after a bad idea. We all live in difficult times. 

Commencing 1st July 2020 up to 1.75% pay increase

The industry general minimum pay increase was set at 1.75%. However, it is important to refer to the specific Awards below.

COVID-19 has led to a number of important changes that could seriously impact your practice. Here we cover the four most important ways to address these changes. Regardless of whether you pay your staff above the Award, without current and correctly documented contracts, on the 1st July 2020 wage rates should be increased by up to 1.75% p.a. Please refer to the relevant Awards below for specific details.

In general, staff wages represent up to 60% of the total overheads of a practice. These changes are accompanied by two more other challenges for employers in medical practices.

COVID-19 is putting a lot of pressure on practice revenue and this is forcing a change in workloads and types of work on offer. Practices do not have a choice but to respond in accordance with the law. Job Keeper has complicated this. Some practice have found that this has, in fact, disrupted the positive culture the practice once had.

Now is a good time to review your arrangements, especially before JobKeeper runs out whether your staff are receiving this or not. Important strategic decisions need to be made. To be candid there is no point if the patient survives and the practice dies. 

We have provided some new ideas without freezing wages our webinar on-demand Innovate, Adapt or Merge and our Kicking Covid-19 101 Survival Guide playbook.

These challenges represent an important opportunity to engage positively with your staff to enhance recruitment and retention, which will in turn 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 are legally prepared templates by the national Award-winning legal firm Peripheral Blue Legal. They have been developed with Health and Life to provide staff with a solid career structure, which includes employer-paid training.

Now the detail! 

New national wage increases up to 1.75% p.a. from 1st July 2020

The new Award rate increased for the Medical, Nursing and Health Support Staff Awards is effective from 1st July 2020, even if you pay staff above the Award unless you have a valid employment contract.

From 1st July 2020, the Medicare rebate increased by 1.4% for general and medical practices will continue to not exceed the annual increase in the Fair Work minimum wage which increased by 1.75%.

Some ideas to consider.

Practices and staff, therefore, have four options. Click on the links for smart ways to; 

1) Organised pay structures from cashing out excessive leave and converting permanent casual staff to permanent staff due to the new Fair Work rules; 

2) Look at new ways to boost your income and efficiency in complicated and risky non-core areas;

3) Legally restructure your practice and become more efficient and tax-effective; and 

4) ethically and sustainably improve staff productivity.

Some examples

1. Organised pay structures from cashing out excessive leave and converting permanent casual staff to permanent staff due to the new Fair Work rules

Take it or leave it – leave arrangements and COVID-19 new pandemic leave 

There is a new option for people to be paid out two out of their four weeks’ annual leave – see Fair Works Cashing Out Annual Leave. Also, look at your local State Act’s to cash out long service leave especially in relation to permanent casuals. Seek legal advice first. Just make sure it is in writing. Two weeks in lieu of actually taking leave can only occur if the employee is entitled to a minimum of four weeks leave.

For the practice, this can be a win-win opportunity. Accumulating excessive leave creates a significant liability for a practice. Note that any leave owning for annual, sick or long service leave is based on the employee’s current hourly rate.

For example, a person who started five years ago and has had five annual pay increases and has had no annual leave (which admittedly would be rare) is entitled to be paid at the employee’s current annual employment rate and not at the rate when it should have been taken at the end of each year.

There are many reasons why no annual leave may have been taken, ranging from a lack of back up support staff to annual leave plans falling through.

However, the liability adds up, in either staff burnout or unnecessary financial liability. We have seen significant disputes arise when owners retire or staff are experiencing burnout and seek compensation for this reason alone.



Cashing out of leave as a policy may be a way to ‘meet everyone halfway’ and maybe a good idea to prevent employee burnout. However, taking four weeks of leave annually rather than cashing out is good for staff morale and is also more family-friendly. Clearly smaller practices may have less flexibility in this area due to staffing constraints.

See our article Important coronavirus updates: JobKeeper scheme and unpaid pandemic leave.

2. Look at new ways to boost your income and efficiency in complicated and risky non-core areas

Reduce your reliance on Medicare income. Like Netflix, consider packaged monthly subscription services and outsource high audit risk non-core activities

From 1st July 2020, there are new Medicare Benefits Schedule and Telehealth items numbers for general practice. The new telehealth numbers can generate up to an additional $40,000 to $60,000 per full-time equivalent GP. GP’s can increase their income by 40% per annum if the practice is set up correctly. This is a more sustainable area of practice. GP’s can charge existing patients to follow up with chronic diseases. However, practices need to carefully revise their workflows and systems. 

There are a number of ways to do this. Download our latest free Kicking COVID-19 GP checklist. Register for the General Practice 101 Survival Guide and Checklist and Playbook Guide and see our website or this newsletter for our national webinars on demand that go into more detail. Armchair Medical also has many great ideas for your practice click here.

Outsource increasingly complicated and high audit activity areas. For example, it is critically important to know your numbers before the end of the financial year. Key areas such as bookkeeping and or part of your monthly financial reporting. From 1st July 2019, the tax offices new data-matching of State and Federal information exposes practice to more instant tax audit and significant fines and prosecutions. These include underpayment of permanent casual workers for annual and sick leaveunderpayment of payroll tax for medical and health contractors and underpayment of wages.

It is now impossible to undo or unsay mistakes without avoiding expensive scrutiny by hungry Federal and State tax authorities who need the money to cover a declining tax revenue base due to the pending recession. Get your housekeeping right now before it is too late.

Feel safe your practice is using more accurate, reliable and timely information when making a big a decision.

3. Legally restructure your practice to become more efficient and tax-effective

Carefully review your business model and practice structure for sustainability

Doctors Contracts video shows how to set up your practice so it is medico-legally, taxation, investment and succession planning friendly. Contact us for a free and no-obligation assessment.

4. Ethically and sustainably improve staff productivity

Carefully implement the new Award changes

Peripheral Blue Legal and Health and Life have jointly produced legally prepared employment templates will help you immediately comply.

These are the latest Awards, commencing 1st July 2020;

1. Medical Practitioners Award

2. Nurses Award

3. Health Professionals and Support Services Award

The main points include:

  1.  A 1.75% increase in new Award rate increases for the Medical, Nursing and Health Support Staff Awards, effective from 1st July 2020 (even if you pay staff above the Award), unless you have a valid employment contract.
  2. A requirement to confirm employment terms to ensure your employment agreements are legally binding (we recommend you seek legal advice from a lawyer), regardless of whether you have a signed employment contract. The 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 $54,000 per breach.

If you are thinking of absorbing future wage increases or ensuring your practice 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. We recommend you seek independent legal advice.

Do you have legally binding and sustainable employment arrangements?

As stated above, if you do not have signed and up-to-date employment contracts, your staff may be entitled, from 1st July 2020, to up to a 1.75% 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 by now. 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 possibly reducing practice standards or increasing patient fees. 

Great staff employment contracts are good for staff morale

Generally, staff prefer to work with practices that are open and transparent. This builds trust and prevents any misguided feelings that they may have been taken advantage of.

The new and revised 2020/21 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. 

This 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 minimizing patient fee increases. In order to achieve this objective, we have updated our employment kit to include: see Employment Kit Offer for the full table of content and cost

If you have any queries, before making any changes, please contact us at no obligation, by email at pa@healthandlife.com.au on 1800 077 222. 

Do you want to order an Employment Template Kit or Upgrade? See our Employment Kit Offer. This will enable you or your practice to save thousands of dollars on expert advice and time.

Do you want to order an Employment Template Kit or Upgrade? See our Employment Kit Offer.

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.

The content of the employment kit includes useful job descriptions and a quote for the kit. Email us at pa@healthandlife.com.au to order. 

DISCLAIMER

We strongly recommend you consider reconfirming your employment agreements in order to implement these changes at your next six-monthly staff performance appraisal.

We continue to provide this unique and exclusive template throughout Australia. Please note we are not lawyers. We have had these agreements reviewed by independent lawyers  Peripheral Blue Legal. 

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.

By contacting Health & Life we can assist you. Where necessary refer you to the highly skilled and experienced external lawyers we work with regularly.

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