Introduction
There has been a lot of talk in recent years about the nature of casual employment, and this culminated during 2020 as a result of the ‘Casual and Part-Time Employment Common Issues Case’, involving proposed changes to casual employment.
This appears to have caused a lot of uncertainty with employers as to what they need to do. This article seeks to provide some clarification around two key areas affecting casuals; conversion rights and casual overtime payment method.
Casual Conversion
Most employers are aware that some Award(s) contain ‘casual conversion’ requirements. This requirement is usually found under the heading ‘Casual Employees’ with a subsection dedicated to the ‘Right to request casual conversion’.
In my blog entitled New IR Reforms Explained (ifreelancework.com.au), I provide further background and context relevant to this situation.
The casual conversion clause has historically referred to the casual employee as a ‘regular casual employee’, defined as a ‘casual employee who has in the preceding 6 or 12 (varies by Award) months worked a pattern of hours on an ongoing basis which, without significant adjustment, the employee could continue to perform as a full time or part time employee’.
The casual conversion clause has historically provided a specific process whereby a regular casual may request conversion to full time or part time, according to the pattern of hours they have worked. The Employer may accept or refuse the request; however any refusal must be based on certain factors.
The problem has been that there are 85 Awards that do not contain this clause, and some Awards allow the request after 6 months, and others after 12 months. It’s understandable that this would lead to some general confusion.
In response to an application from the ACTU seeking greater protections for casual employees, during December 2020, a Full Bench of the Fair Work Commission (FWC) announced its Decision in the ‘Casual & Part-Time Employment Common Issues Case’. The Decision has the effect of inserting a model casual conversion provision across all 85 Modern Awards which do not already contain such clause. The model clause provides that:
employers must provide casual employees with written notice of their casual conversion rights within 12 months of their commencement of employment;
casual employees, other than irregular casual employees, have the right to elect to convert to full or part time employment after 12 months of service; and
an employer must consider any such request and can only refuse a request upon reasonable business grounds.
As an aside, other proposed changes in the Bill include:
casual employees employed under the General Retail Industry Award, Fast Food Industry Award, Hair & Beauty Award, Hospitality Award and Registered & Licenced Clubs Award to receive overtime payments where they work in excess of 38 hours in any given week; and
casual employees to receive overtime payments as follows:
o Retail Award: where hours exceed 9 hours on any day except that a casual employee can be required to work 11 hours on any one day in a week without attracting overtime;
o Fast Food Award: where hours exceed 11 hours on any day;
o Hair & Beauty Award: where hours exceed 10.5 hours on any day; and
o Hospitality and Registered & Licenced Clubs Awards: where hours exceed 12 hours on any day.The Fair Work Amendment (Right to Request Casual Conversion) Bill 2019 seeks to amend the Fair Work Act 2009 to provide the above right to request conversion from casual to full‑time or part‑time employment.
Despite the contentious nature of the Bill, it looks set to be accepted into legislation, and this is speculated to occur around August 2021.
Casual Overtime and Payment Method
If you recently looked at your Award and found that the overtime calculations for casuals were different to how they used to be, then you are not alone.
As of November 2020, changes were implemented to the way casuals should be paid overtime. Applying to most Modern Awards, you may need to check the Awards that apply to your workplace. This will ensure the correct procedure for paying casual staff overtime.
The following are payment methods regarding how casuals should be paid from the first full pay cycle following 29 November 2020:
The Fair Work Commission approves the following methods for calculating overtime rates casuals depending on the Modern Award of the Business. This means, that depending which Award your industry or employees are covered under, will depend on the calculation options as exampled below:
THE CUMULATIVE METHOD
Overtime entitlement and casual loading apply to the permanent minimum hourly base rate. For example; Base Rate X Overtime Penalty and Casual Loading (100% x 175%)
THE SUBSTITUTION METHOD
Overtime is calculated on the permanent minimum hourly base rate, excluding casual loading. For example; Base Rate X Overtime Penalty (100% x 150%)
THE COMPOUNDING METHOD Overtime entitlement is calculated with the casual loading included with the permanent base rate (casual loaded rate). For example: Casual Loaded Rate X Overtime Penalty (125% x 150%) Is your business affected by these changes?
Business Owners must review their Modern Award to determine if overtime rates have change for their casuals, considering the following:
If you employ staff on a casual basis you may be affected;
If your Modern Award is listed in the table below as being affected;
Casuals working overtime is a common occurrence;
The above criteria all depend on if your Award is affected by these changes.
Which awards are affected?
This is a link to a list of all Awards and the possible effect of this Decision. Click on your Industry/Occupation Award(s) and see what determination has been made.
Summary
There is a lot for business owners to take in; what with the IR Reforms underway and the changes to casual conversion and casual overtime calculations. Businesses are best advised to start to do the following as this relates to casuals:
Know what obligations you must follow in terms of casual conversion;
Gather data on your casuals’ work patterns over the last 12 months and determine whether they meet the definition of ‘regular casual employees’;
Check applicable Awards and determine which overtime calculation method applies to your Awards, and notify your casuals as to how they will be paid overtime in the future;
Ensure you have contracts of employment for casuals which clearly the nature of the employment relationship;
Notify your Bookkeeper/Accountant of any payroll processing changes; and
Start considering whether your current casual employees are the calibre of employee that you want to convert to permanent; and if not, consider how you might address this through performance management or other actions.
It’s enough to make your head spin keeping up with these changes, right?
Many employers, who utilise casuals as ‘true blue’ casuals, will wonder what the fuss is all about. But the reality is that thousands of casual employees are used in a pseudo-permanent capacity, yet they do not have the certainty of employment beyond the current shift, or leave entitlements when they really need them.
Then there is the very real situation where casuals prefer to remain as casuals because they value the increased hourly rate above certainty and other entitlements.
Don’t navigate this situation alone. If you require assistance, please consider iFreelance as your HR partner. I can assist by carrying out due diligence on your casuals and advising you of your options and how to best manage the various situations you may face.