Modern Award Review TOIL Decision Means More Paperwork for Employers

7th October 2015

The Full Bench of the Fair Work Commission has decided to make employers retain a record of every instance in which an award covered employee takes time off in lieu of overtime payment (TOIL). The full bench decision (ironically entitled ‘Award Flexibility’) settled on a new model award clause regulating the arrangements that will be imposed in all modern awards. The decision will dramatically increase the employment paperwork and affect cash flow of thousands of employers throughout Australia.

The decision followed an earlier more favourable decision in July where the Commission agreed that in the interests of workplace flexibility all award covered employees would be able to elect with the consent of their employer, to take time off work at ordinary rates of pay in lieu of overtime payment. This was welcomed by employers at the time as sensible and a fair result for everyone. However, in order to access time off work at ordinary time rates of pay the Commission is requiring employers to record each and every agreement including signatures, the times overtime was worked, and a statement of the right to cash out the accrued TOIL at overtime rates any time the employee wishes to do so. The Commission has even created its own model form to record the transaction. How nice.

Implications for Employers

There would be thousands of employers throughout Australia that currently provide employees with the opportunity to take time off work in lieu of overtime at either ordinary time rates of pay or inclusive of the equivalent penalty rate time. Most would include a term of the employment contract or policy setting out the arrangement. The paper work would be limited to the payroll record of accruals. This decision will require employers to record every single instance including obtaining signatures from the employee. This must be maintained for 7 years along with all other payroll records.

Secondly, the model clause allows employees to effectively ‘cash out’ accrued TOIL before taking it whenever they desire. The employer becomes a de facto cash bank for the employee. The decision makes managing the cost of overtime difficult as employers must balance the administrative burden and uncertainty of TOIL against the cost of paying overtime in every instance.

The Next Steps

The Commission has not decided on an operative date for the model clause to be inserted in modern awards. It is providing interested parties an opportunity to make further submissions as to whether the model clause should be inserted in each particular modern award. Directions in relation to the next phase of these proceedings will be issued shortly. The matter will be listed for further hearing before the Full Bench of the Commission at 9.30 am on Thursday 10 December 2015 in Sydney.

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