An enterprise agreement can include 'loaded' rates of pay. Sometimes employers add loaded rates that are too low to compensate for the award entitlements they replace. This may cause the agreement to fail the ‘better off overall test’ (BOOT).
'Loaded' rates are higher than standard pay rates. Employers may choose to use loaded rates if a benefit under the relevant award is not in the agreement.
Employers may combine benefits from awards such as:
- shift allowances
- weekend and public holiday penalties
- annual leave loading
Employees must be better off working any pattern of hours that the agreement allows.
How to avoid this problem
To avoid this issue, you may include a ‘reconciliation’ term in an agreement. This means you will audit the employee benefits.
If you add this term to your agreement, you must specify 2 things:
- You will carry out a reconciliation in a regular and consistent way.
- If your audit shows a loss ('shortfall'), you will pay the employee. The amount you pay must be more than the loss, not equal to it, so the employee is ‘better off overall’.
We provide examples and models that show the correct way to calculate loaded rates to pass the BOOT.