Author: docandrewsgc

Does a HR Standard have to be long and complex?

One of the dilemmas when creating HR standards is the battle between simplicity and complexity. The South African National HR Standards are relatively simple, conveying the main messages for each standard on one page. The Cost-per-hire (U.S.) standard runs to 43 pages, the recent Workforce Planning Standard (Australia) for 31 pages.

In addition, 99% of organisations have less than 100 employees – we shouldn’t develop standards just for the 1%. The main problem here is that HR content contributors usually work for larger organisations.

So the challenge is out there: summarise the key information requirements of a HR Activity in an informative, readable way – that also articlulates “what we can expect to see”.

Example:

Industrial Relations Standard

Strategic Objectives:

  • To maximise long term organisational, team and individual performance outcomes by creating and maintaining a productive working environment, noting the influence this will have on delivering a superior customer experience.
  • To recognise and minimise the negative impacts of direct and indirect industrial grievances, complaints and disputation (adapted from Dolenko).
  • To recognise that employees and the employer may have both complementary and sometimes competing interests (Dolenko) [a pluralist perspective].
  • To successfully negotiate workplace terms and conditions in an environment free from: the abuse of power, discrimination, bullying and harassment.
  • To consistently resolve workplace disputes in a timely manner at the lowest possible level, through appropriately staged interventions.
  • To recognise the role, influence and effect of third parties in the employment context.

Operational Objectives:

  • To provide a (robust) framework for conflict resolution (SABPP)
  • To recognise and accommodate the operational role of staff representatives in industrial matters.
  • To promote the effective communication and exchange of information on workplace issues through appropriate communication and consultation, undertaken at the right level and at the right time (adapted from Dolenko).

Compliance Objectives:

  • To meet the mandatory compliance requirements found in employment law, wage and salary regulations, and other relevant sources.

 

Questions:

1. Can we simplify this further?
2. What have we missed?
3. What outcome-based measures and metrics follow from each statement?

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Annual Wage Review 2015 – Expert Panel (fail)

On 8 June 2015 the Minimum Wage Panel of the Australian Fair Work Commission ruled that from the first pay period after 1 July 2015:

–  the national minimum wage for award or agreement free employees will increase to $656.90 per week, stated as being $17.29 per hour; and

– modern award minimum wages will increase by 2.5%.

The decision is available here: https://www.fwc.gov.au/documents/decisionssigned/html/2015FWCFB3500.htm

Comment One – hourly rate fail

Again the Expert Panel has issued a decision with an incompatible hourly and weekly wage.

No payroll department can make that decision work in the way that it was announced, since an hourly wage of $17.29 does not equate to $656.90 per week for a 38 hour working week.

[It comes to $657.02, a difference of 12 cents. Even if we round it to the nearest 10 cents for the weekly rate (as the decision foreshadows) it still does not come to $656.90 per week].

A payroll system usually rounds to four (or preferably five) decimal places at the hourly rate.

In order to obtain a weekly rate of $656.90 the hourly rate would need to be $17.2868.

Comment Two – annual salary fail

Let’s assume we have a weekly rate of $656.90 per week for a 38 hour working week.

What is the equivalent annual salary?

There is no guidance provided in the decision of the Expert Panel and the question is unanswered in many industrial awards. The Fair Work Act does not provide an answer.

So, the minimum annual rate can vary by industry and potentially by employer.

It will vary depending on the multiplier/divisor used to convert a weekly rate to an annual salary.

In Australia, this generally varies between 52.0 and 52.2.   The Fair Work Ombudsmen will suggest, in the absence of an explicit obligation, 52.1667 (or 313 divided by 6).   The source of this recommendation is a clause from the previous (and now replaced) Workplace Relations Act 2006 Regulation 2.7.5.
Link: http://www.austlii.edu.au/cgi-bin/sinodisp/au/legis/cth/consol_reg/wrr2006329/s2.7.5.html?stem=0&synonyms=0&query=313&nocontext=1

Suggestions for the Expert Panel:

1. Quote the hourly rate at four or five decimal places and make sure it is compatible with the weekly rate.

2. Make sure the minimum annual salary is explicit.

Weekly 53 pays in a year; or Fortnightly 27 pays in a year

Weekly 53 pays; or Fortnightly 27 pays per year

In most years there are 52 weekly pays, or 26 fortnightly pays.

However, in some years there are one additional payday (the years vary depending on which day is your payday).

Explanation:

The calendar cycle repeats every 28 years (hat dip to the U.S. Govt Accounting Office for that one).

During the cycle there are 7 leap years.

You can work out how many weeks (or fortnights) there are in total.

Divide the result by 28 – the years in the calendar cycle.

The results accumulate until there is an extra payday; the results fit within a possible range.

The one extra payday occurs within the range specified.

Days – Fortnightly Pay

366        365                               Total             Paydays
7                21         Days             Fortnights    per year
2,562    7,665    10,227.0         730.5            26.0893

Excess per year 0.0893, which accumulates.

11 Years = 0.9823 paydays

12 Years = 1.0716 paydays

So, fortnightly paid staff have one additional payday every 11 or 12 years. The long term average (for 10 x 28 year cycles) is 11.2 paydays.

Days – Weekly Pay

366        365                              Total            Paydates
7                21      Days               Weeks         per year
2,562   7,665   10,227.0          1461.0         52.1786

Excess per year = 0.1786, which accumulates

5 Years = 0.893 paydays

6 Years  = 1.072 paydays

Since there are five ocassions this occurs every 28 years the average occurence is every 5.6 years.  Three occasions occur when the payday (eg Wednesday) is the same day as the first and last days of the year (ie both Wednesdays).  Two occasons occur due to the impact of leap years when the last day of the year is the day after the regular payday (ie Thursday for a regular Wednesday payday).

So, weekly paid staff have one additional payday every five or six years. It follows a pattern of: 5-6-5-6-6 years that repeats in the 28 year cycle (but starts differently depending on where you begin counting).

Working days per year for Monday to Friday workers

For a Monday to Friday worker there are either 260, 261 or 262 working days in a year. In a 1981 study the General Accounting Office (GAO) demonstrated this calendar cycle repeats over a 28 year period.

There are 7 times 260 working days, 17 times 261 working days and 4 times 262 working days over the 28 year cycle.

The year will have 260 working days when the first day of the year starts with a weekend (either a Saturday or a Sunday) and the last day of the year also ends on a weekend.

The year will have 262 working days when the first day of the year starts with a weekday and the last day ends on a weekday, and it’s a leap year.

Other combinations will give 261 working days per year.

[This cycle also gives us the payroll divisor of 52.1786 to convert a weekly wage to an annual salary].

Gold Coast Unemployment – Age Demographics

Gold Coast Australia – Unemployment by Age Demographic
Source: ABS Regional Survey – data cube RM1

Age Group – Month/year – Unemployment percentages (current month)(last 12 months average)(series average):

15 – 24 – Jan 15 – 12.0%; Last 12 months 14.6%; Series 11.6%.

25 – 34 – Jan 15 – 4.7%; Last 12 months 5.0%; Series 5.3%

35 – 44 – Jan 15 – 2.7%; Last 12 months 4.0%; Series 4.5%

45 – 54 – Jan 15 – 1.8%; Last 12 months 3.1%; Series 4.4%

55 – 64 – Jan 15 – 1.0%; Last 12 months 4.8%; Series 4.7%

65 and

over * – Jan 15 – 4.4%; Last 12 months 4.0%; Series 5.9%

* Limited Data (n= 38)
Note: The sample size is > 190 months across the range apart from the [65 and over] group where limited data [n=38] is recorded due to problems with sample size.

Youth Unemployment – Gold Coast (.au)

Youth Unemployment on the Gold Coast (Australia)

In the latest regional data for January 2015, Gold Coast youth unemployment (15 – 24 years) was reported at 12.0%, down from 12.3% in December 2014. The moving average for the year ended January 2015 was 14.6% against a series average of 11.6% (n=196).

Highs & Lows (15 – 24 years old)

Highest Monthly totals: 19.9% in February 2010; 19.5% in March 2001.
Lowest Monthly totals: – 2.5% in Nov 2007; 3.5% in August 2008.

Seasonality
In terms of seasonal trends the monthly figures will be higher in the period February to June, as the labour market absorbs school leavers and graduates. The July to December period is when official figures are historically lower.

Employment Growth Projections

Employment growth* on the Gold Coast in the next three years is likely to be better in retail, health care and social assistance, and education and training.
__________________________________________________________________

* Employment Growth Projections by industry, accessed at http://lmip.gov.au/default.aspx?LMIP/EmploymentProjections on 26 Feb 2015.

Gold Coast Labour Market Profile & Unemployment

Australia – Gold Coast Labour Market Profile & Unemployment

Gold Coast Region – Employment Statistics
Source: ABS Regional Survey Data: 6291.0.55.001 – Labour Force, Australia, Detailed.
Period: October 1998 to January 2015 (n=196)
Release Date: 19 February 2015

ABS Gold Coast Region

Unemployment rate – January 2015 – 4.6%
Unemployment Rate – twelve month moving average – 6.0%
Unemployment Rate – series average from Oct 1998 – 5.9% (n=196)

Gold Coast Labour Force

Employed – January 2015 – 301,586
Unemployed – January 2015 – 14,612
Labour Force – 316,198

Gold Coast Participation Rates

Participation Rate – current month – 67.4 %
Participation Rate – 12 month moving average – 67.3 %
Participation Rate – series average – 64.7 %

Gold Coast Youth Unemployment – Jan 2015 – [15 – 24 year olds] (Original)

Youth Unemployment Rate – 12.0 %
Youth Unemployment – last 12 months – moving average – 14.6 %
Youth Unemployment – series average – 11.6 %

Participation Rate – January 2015 – 74.5 %
Participation Rate – 12 month moving average – 74.7%
Participation rate – series average – 75.7 % (n=196)

Gold Coast – Historical: High & Lows

Unemployment Rate – highest recorded – Oct 1998 + March 2001 – 9.9 %
Unemployment Rate – lowest recorded – Jan 2008 – 2.2 %

Gold Coast Seasonality – Average Unemployment Rate by month

Month          Jan    Feb   Mar   April    May    June    July    Aug   Sept   Oct    Nov    Dec
Average %    5.6     6.4    6.5     6.2     6.3      6.1      5.6    5.9    5.9     5.7    5.5     5.5
Category:     low    high  high    high   high     –         low     –         –         –     low    low

High = equal to or above 6.2%; Low = equal to or below 5.6; Normal above 5.6 but below 6.2.
______________________________________________________________________________________________

Definitions

Labour Force: The labour force is defined as the number of people employed plus the number unemployed but seeking work.
Moving Average: The moving average is calculated as: the sum of the previous twelve monthly results divided by 12.
Participation Rate: The labour force participation rate (%) is the labour force (employed and unemployed) as a percentage of the usually resident civilian population aged 15 years and over (ABS 2011). Individual participation choices can be influenced by a range of social and economic factors, including education and training, availability of childcare, workplace culture, workplace policies and procedures, and employer attitudes (DIIRD 2008).

Source: ABS 6291.0.55.001 Labour Force Detailed – status by Region (ASGS, SA4), sex and age; Table 16 and Data cube RM1

http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/6291.0.55.001Jan%202015?OpenDocument

Australia – Annual Wage Review & Annual Hours

Australia – Annual Wage Review & Annual Hours

The Annual Wage Review 2013 – 2014 Decision [2014] FWCFB 3500 at paragraph [622](a) provides for the … ‘national minimum wage of $640.90 per week …  ‘.

Paragraph [620] of that decision makes it clear that this for a 38 hour working week… .

Since there are not exactly 52 weeks in every year, and more working days in some years than others a multiplier/divisor is used in calculating the annual wage rate from a weekly rate (the multiplier) or for calculating the weekly rate from an annual rate (the divisor), which takes account of leap years and/or working day cycles.

Minimum Annual Wage (Australia)

If the multiplier/divisor is not expressed in a Modern Award, or specified in an industrial agreement, the Fair Work Commission advises employers to use 313/6 (52.1667 to four decimal places).

Example – Modern Award

The Banking, Finance and Insurance Award 2010 [MA000019] provides for both the annual salary and the hourly rate, based on a divisor of 52.0.

Example – Industrial Agreement

Westpac Bank in its collective agreement uses a divisor of 52.0 for one group of employees while for others it specifies 52.2.

What divisor/multiplier should an employer adopt when a modern award is silent? The Fair Work Commission currently uses 52.1667 (313/6) for its default position, based on provisions found in the former Workplace Relations Act Regulations 2006 [Regulation 2.7.5].

Internal Consistency Test

In this context internal consistency means that we can move upward from an hourly rate (five decimals) to a weekly, fortnightly, monthly or annual rate (each of which is at least four decimals) and we can follow the path back downward from an annual rate to a monthly, fortnightly, weekly and hourly rate of pay – with the corresponding answers being the same on each leg of the journey.

 In Figure 1 the horizontal numbers divide down from the annual salary and the vertical numbers multiply up from the hourly rate.  The difference (Diff) should be equal to zero to ensure internal consistency. The answers should be the same whether we start with an annual wage or a weekly rate.

[External consistency refers to a consistent application of a multiplier/divisor such that the same result is achieved between firms and between industries.  For example, this would occur where a minimum annual salary was uniform in all parts of the country].

[Figure 1]

Annual Hours

With a divisor of 52.1667 the implied annual hours are 1982.3333 per annum.

Conclusion

In the absence of specific industrial obligations the default position at the federal level is:

As at 1 July 2014 – Australia:

Minimum Annual Wage

$33,433.62 (rounded)

Minimum Weekly Wage

$ 640.90

Weekly hours

38

Divisor/multiplier (weekly/annual)

52.1667 (rounded)

Divisor/multiplier (fortnightly/annual)

26.0833 (rounded)

Annual Hours

1982 (rounded)

 

Conversion factors – to obtain a weekly salary from an annual salary

Conversion factors – to obtain a weekly salary from an annual salary

Discussion: Since there are not exactly 52 weeks in every year, and more working days in some years than others, a divisor is used in payroll systems for calculating the weekly rate from an annual wage which takes account of leap years and/or working day cycles. The formula to be used might be mandated or you may have a choice, depending on your industrial legislation. The divisor range generally varies from 52.0 weeks to 52.25 weeks. The higher the divisor the lower will be the weekly wage.

Options & Explanation

Option 1 – divide the annual salary by 52 weeks. This method ignores the fact that there are slightly more than 52 weeks (52.1429 weeks excepting leap years). This formula results in the highest weekly rate.

Option 2 – divide the annual salary by 52.1429 weeks (sometimes expressed as 365/7, 365 days per year/7 days per week, 52.1428, or rounded to 52.14). This method recognises that there are more than 52 weeks in a year. A variation of this formula is 365.25/7 = 52.1786 or rounded to 52.18.

Option 3 – divide the annual salary by 52.1667 weeks (sometimes expressed as 313/6; 52.1666, or rounded to 52.167 or 52.17). The origins of this method lie in the working days last century (Sunday being a day of rest): thus 365 days less 52 Sundays = 313 working days, over 6 days per week. This was the default method in the Australian federal industrial jurisdiction when the conversion factor was not specified in the industrial award*. A problematic attempt to explain the logic of using this factor was made by Commissioner Bacon in the Australian Industrial Relations Commission in 2002**.

Option 4 – divide the annual salary by 52.1775 weeks. This method is favoured by those that appreciate scientific method but is somewhat rarely used for payroll purposes (at least in Australia).  This method is based on the Gregorian calendar, a refinement to the Julian calendar, amounting to a 0.0011% correction to the calculation of the weeks in a year. This method is more exact – based on a year of 365 days, five hours, 49 minutes, and 16 seconds – the decimal equivalent being 52.1775.

Option 5 – divide the annual salary by 52.1786 weeks. There are two ways this can be calculated.

a) The days’ method: over 4 years there are 1,461 days (3 x 365, plus 1 x 366) divided by 7 days to obtain weeks; divide the result by 4 (to get an annual rate) = 52.1786 weeks per year.

b) The working days’ method: in the United States a General Accounting Office (GAO) study published in 1981*** demonstrated that over a 28-year period (the period of time it takes for the calendar to repeat itself) there are, on average, 2,087.1429 working hours per calendar year (assuming a 40 hour week). This average results from the fact that there are usually 4 years with 262 workdays, 17 years with 261 workdays, and 7 years with 260 workdays. The divisor using this calculation is 52.1786. The alternative calculation is to take the Working Days average for the 28 year cycle – 260.8929 divided by 5 = 52.1786.

This method aligns with the Julian calendar of 365.25 days, or 52.1786 weeks.

Option 6 – divide the annual salary by 52.20 weeks (sometimes expressed as 261/5). The calculation for this option is as follows: 365 days each calendar year less 104 weekend days = 261 working days; ÷ 5 working days per weekly pay period = 52.20. A variation of this option would be: 365.25 days less 104 weekend days = 261.25 divided by 5 working days = 52.25.

* In Australia, on 3 June 2010, the Minimum Wage Panel issued its Annual Wage Review 2009–10 Decision to vary modern award minimum rates to take effect on 1 July 2010. Annual rates, where there was no calculation method in the modern award, were then adjusted by using the formula: $26.00 x 313/6.

The Fair Work Ombudsmen will suggest, in the absence of an explicit obligation, 52.1667 (or 313 divided by 6). The source of this recommendation is a clause from the previous (and now replaced) Workplace Relations Act Regulation 2.7.5.

Workplace Relations Act Reg 2.7.5

** AIRC – C2002/2532 at P. 1: “… The above divisor was introduced into the award during the review required by the Workplace Relations and Other Legislation Amendment Act 1996. The divisor and apparently the annual wage rates are based on the fact that each year consists of 52 weeks and one day. Thus (provided only one leap year is included) each 6 years comprises 313 weeks and not 312 weeks (ie 6 x 52 weeks). That is, this award reflects the fact that an additional week accrues each 6 years. Expressed another way (provided only one leap year falls in the 6 years) one year in each 6 is comprised of 53 weeks. Thus, on average, each year is not comprised of 52 weeks but is comprised of 52.1667 weeks”.

*** https://www.opm.gov/policy-data-oversight/pay-leave/pay-administration/fact-sheets/computing-hourly-rates-of-pay-using-the-2087-hour-divisor/