This is Part One of the article Overtime is not a badge of honour: it is a warning sign! It Overtime and staff burnout is your greatest challenge and opportunity. Three game-changing things you can do to stop it.
Overtime is not a badge of honour: It is a warning sign!
This is part one of our three-part article on how to ethically and legally comply with the new ATO and Fair Work Overtime Award “robo debt red tape” compliance tool. I look at the top 6 common mistakes practices make. The No. 1 Mistake: “We are OK: We pay way above the Award rate!”.
From 1st July 2021 wage theft is deemed to be a crime. Be prepared to do time in Victoria, Queensland is underway.
COVID-19 has put many practice staff under the pressure for longer than expected work hours. In addition to changing job descriptions and hours of work are leading to staff burnout and staff leaving that could lead GP practices’ viability under enormous stress.
A new threat is that The Australian Taxation Office has new payroll disclosure rules commencing on the 1st July 2021. It will be mandatory from 1st January 2022. The ATO’s “softly softly” approach to Single Touch Payroll will not last long. It is important to revisit your payroll data. They are taking a closer look at how you pay your employees. They have a keen eye for unpaid overtime and ‘wage theft’. “Off the Clock” or “fake timesheets” violations are not a great idea.
The remarkable convenience of digitisation of your payroll is a game-changer. It is naive not to think that the Tax Office and Fairwork would not use this as a cheap back door to ensure compliance. Do not be surprised if within the next 12 months you receive a Medicare-like ‘please explain’ letter. Although, it may be a bit too late to do something, I am attempting to give you a 6 month head start.
Even large national law firms that thought they had done the right thing with their high-profiled advisers have been caught. In many big law firms, despite being paid (up to $500,000 p.a.) over the Award, their legal staff had worked so many extra hours it brought them under the minimum wage rate they were entitled to.
The Tax Office and Fair Work are after small to medium enterprises. Smaller practices are less well-resourced. You are not “too small for them to care”. This may provide a false sense of security. Technology and times have changed from my father’s day of hanging up your “shingle”.
Smaller practices are a “low hanging fruit”. They are an opportunity to establish an exemplary case to encourage compliance. Expect automated Medicare-like ‘please explain’ letters for possible non-compliance. Now is not the time to go cheap on the biggest investment (overheads such as wages) and risk your practice. The good news is – there is a way out.
No time to read this?
For those who feel they do not have time to read this article, to manage the Australian Tax Office’s new employment wages reporting requirements, click here for a quick Medical and Healthcare Employment Compliance checklist. You should look at this before completing your End of Year Payroll Checklist.
In the second part of this article, I will explain why exceptional staff quit and how to identify it before it happens. Stay connected, communicate and collaborate with your staff for a solution. The final part is on how to break free from insane workloads and prevent claims of excessive overtime and burnout.
Regular overtime is no longer an option or a badge of honour.
Death by regular overtime
Overtime is potentially a ticking time bomb that needs to be actively managed and stamped out.
For the well-intended, things can go horribly wrong. I am an extreme case. As a young graduate accountant, overtime nearly killed me. I crashed my car into a tree at 5:30 am on a Tuesday morning 5 minutes from work after falling asleep at the wheel. Nine operations later, now you know why I am into promoting safe healthcare.
Excessive overtime can do harm: David Dahm’s car crash (actual photo)
For the $9.00 per hour I was getting paid, it really was not worth it. However, learning the lesson was the best thing that ever happened to me.
Victoria’s recent young doctors class action is unprecedented and is another example of how ignoring this important issue can dramatically and systemically escalate.
Medical mistakes/errors and staff turnover breed a toxic workplace; you feel it and your patients feel it. This makes everyone slightly on edge. In the end, you want people to like what they are doing and not feel their goodwill exploited or taken for granted. It is much harder to recruit and retain people when morale is at an all-time low.
Understandably, staffing shortages do not help. Healthcare workers are ethically and morally torn to do the right thing but at what cost? Is it legal or sustainable?
To all our brave doctors and practice staff, WE GIVE A HUGE THANK YOU at this most difficult time. Every person’s life you touch is precious. For everyone directly and indirectly involved in healthcare, the expectations are becoming insanely and unfairly high.
It is relentless, exhausting and overwhelming. Doing more with less is the norm until you reach that breakpoint where you do more harm than good.
I can only hope this piece may shine a light on how to get your practice to higher ground.
General Practice: under pressure
A new case in point is the General Practice Pfizer vaccination Expression of Interest (EOI) practices need to apply for. For no additional funding for set-up and training, it adds another nail in the coffin.
This is especially for those who had just gotten over implementing the AstraZeneca vaccination rollout.
The Sword of Damocles hangs and infests more than a plague of rats. It is a treacherous minefield; there are weekly changes to ATAGI, unclear MBS and policy procedures, medico-legal issues, pending no jab no job rules and contracting rules. There are copious and endless meetings that continue to haunt underfunded practice owners and staff! It would take a more than full time 24/7 Chartered Accountant, Harvard MBA and Philadelphia lawyer to stay on top.
Only dramatically changing how you work on and not in the practice, and implementing better systems will save the practice the ignominy of an audit or complaint.
Time is running out
I would not blame you if you feel the initial goodwill to help out the country is starting to wear thin as it begins to bite into your own personal wellbeing. This is felt when you feel you are not in control of your own destiny.
The risk of a staff member making a complaint or regulators stepping in is at an all-time high.
The dark side to this story is unspoken and unpaid overtime and/or misclassification of Award entitlements. Jobs are regularly changing as practices pivot to meet changing demands.
New electronic backdoor “robo debt red tape” rules?
As mentioned earlier, the new threat is that The Australian Taxation Office has new payroll disclosure rules commencing on the 1st July 2021. It will be mandatory from 1st January 2022. The ATO’s “softly softly” approach to Single Touch Payroll will not last long. It is important to revisit your payroll data. They are taking a closer look at how you pay your employees. They have a keen eye for unpaid overtime and ‘wage theft’.
Using changes to Single Touch Payroll from 1st July, the Australian Tax Office will be mandating from 1st January 2022, there will be unprecedented greater scrutiny on your payroll accounting systems. Single Touch Payroll was introduced in 2018. Wage theft is a big issue. One significant recurring issue is overtime.
The Australian Tax Office with their friends, such as Fair Work, may be taking a serious look by accessing your payroll records with a mooted $10m funding project to look at payroll safe harbouring rules.
The additional information you need to report should already be captured in your current payroll software.
The key changes to the STP reporting include disaggregation of gross:
Currently, your STP report includes a gross amount, which is the total of many different components and payment types. Because some of these are treated differently, for social security purposes you will now need to report more detail.
Your STP report will separately itemise the following components of the gross amount:
For many businesses, up-to-date employment contracts are not being correctly mapped to payroll systems. This has led to many “big-end-of-town” successful underpayment of wage audits. The days of excessive overtime are numbered and marked with “eye-watering” penalties of up to $660,000 for corporations per incident.
The twin non-compliance enemies are: hubris and ignorance.
Even with their top lawyers and advisers, many of the best and brightest organisations have been caught flat-footed. Poor contracts, poor advice, systems, misunderstandings and lack of attention to the details, or a combination appear to be their main undoing. Many were paying above the Award and thought they were doing the right thing and/or were above scrutiny.
Small to medium businesses are next in line. Like many medical payroll audits, expect little leniency because you are saving the world. Working for the greater good or ignorance is not an excuse. You are expected to walk and chew gum at the same time on this one.
It is a good idea to carefully review whether you have a tax and Fair Work audit insurance policy.
No matter how generous the goodwill of your staff, employers under the Fair Work Act can no longer keep paying for “unreasonable overtime”.
You cannot contract out of this obligation even if the employee agrees.
The recent announcement by the Australian Tax Office (ATO) enables them to “robo audit” how your practice may get caught.
The ATO has taken this to a new level.
We have seen (and they have stated) that they are allowed to share data with agencies like Fair Work, Payroll Tax, WorkCover and Superannuation Guarantees. The timing could not be worse.
This is a sensitive time for general practice.
Practices are facing a new wall: Pfizer vaccine demand based on limited resources. To vaccinate Australia with insufficient Medicare funding is tying both hands behind its back. Unless you have your systems and numbers right, something will break. Hopefully not you or your practice.
Proactive practices have done a great job and they will continue to survive and thrive. It is an unpredictable environment. This is compounded by a clever electronic robo debt red tape machine. It is hungry to feed the Government’s massive budget deficit appetite in the smartest and quickest way possible.
Top 6 Mistakes Practices Make
Assuming you do not have a problem, failing to double-check can be a problem within itself.
The breeding ground for a systemic underpayment of wage error is usually created in the way you set up your practice. I am yet to see an Award compliant process in place.
This starts with not accurately monitoring your staff morale. Simple and cost-effective tools such as Officevibe can get you there to seek timely appropriate professional advice.
From the outset, many practices do not seek specific legal or tax advice. Accordingly, they fail to update their systems correctly and legally prepared employment contracts.
I end with the deadliest and most common mistake practices similar to yours may make.
Don’t assume: “I am an honest person so we will be OK”
Practices that have “assumed” they are doing the right thing are most vulnerable to the new change.
Never assume you are doing the right thing the right way. Employment laws are not static; they change every year. Copying other practices’ employment contracts or using generic employment templates that are not customised to your practice or industry may leave a painful systematic risk.
That feeling is a loss of “trust”. If not handled carefully, it may permanently damage staff morale forever.
Hope is no longer a strategy. Sadly, the most vulnerable are practices preparing for the COVID-19 vaccination. Move from risky behaviour to preventative behaviour.
You do not have the time or money to deal with it
Saying you have no time because you are saving lives may fall on deaf ears. This is a hip pocket issue. A practice cannot continue to save lives if the patient survives but the practice dies.
Nobody is above the law. The ultimate responsibility falls on practice owners, shared with their accountants and bookkeepers depending on their role in your practice. It is not a choice if you do not want to fend off an expensive and embarrassing audit.
Risking a fine of up to $660,000 per breach should help make this a priority if nothing else will. The ATO and Fair Work do not believe medical practices deserve special dispensation or are poor. To the contrary, the smaller ones that people can identify with, make great case studies.
You can turn this potentially negative situation into a real positive.
You do not have to look far or wide to find a practice who has copied another practice’s template and modified or even written their own contracts. Using another practice’s agreement is like using a dirty needle. You do not know where it has been, or its intended use. In my opinion, it could be a dangerous approach.
For the unwary, employment contracts can become a complex document with many pitfalls. A simple word or number can cause a systemic problem like quoting the incorrect pay rate. Starting with the right professional advice is critical.
Ask: when was the last time your contracts and systems were externally professionally reviewed by a lawyer or accountant?
Assuming your amazing professional advisers are on top of it…
For some, paying for professional advisers may be a grudge purchase, unless you are in the face of a complaint or prosecution. If you want to sleep better, the opposite is true.
Assuming your advisers are on top of it and should have said something, is unfortunately not a defence. Their defence will be: if you do not ask they will not tell you, especially if you are fee-sensitive or expected to know.
Another challenge is that it is hard to find the right adviser. A traditional “small Mum & Dad” or big law/accounting firm may not save you. Just ask the lawyers and accountants who advised Woolworths and the ABC. A big challenge is making sure your advisers are experienced enough and work together to proactively address your concerns. We have worked exclusively in this field for nearly 30 years across Australia. So you at least know one place to start.
It is a vicious cycle. It is a necessary investment (cost) for doing business. Practices need to budget correctly for it. Understanding the benefits should outweigh the cost.
Relying on outsourcing and great-looking payroll software is not enough!
The IT industry coined the phrase “rubbish in and rubbish out”. Outsourcing to a payroll company may be cold comfort when you read the fine print. If you give them the wrong information, they usually disclaim any legal responsibility for incorrect information you give them. Their glossy brochures, websites and cool software will not save you from a breach.
If it has not been set up properly, your digital footprint will certainly make things a little more awkward to unwind.
A common mistake is: nobody has ever checked to see if your Fair Work compliant employment contracts have been correctly mapped into your payroll software system by your accountant. Do not be surprised the wrong figures automatically keep coming up, regardless of whether your bank account reconciles or not.
That is not the point of the exercise. For Tenant Doctors (commonly referred to as Independent Contractors) we implement the Doctors Pay Calculator, because the right answer goes beyond a reconciliation, spreadsheet or a database in the cloud.
Context and valid content i.e. contracts matters.
No. 1 Mistake: “We are OK: We pay way above the Award rate!”
If I had a dollar for every time a practice owner or manager said to me “We are OK: We pay way above the Award rate!” or “my staff are on salary so we don’t need to worry about that,” I would have retired by now.
Unfortunately for many practices, this belief that paying above award rates or salaries means they don’t need to worry about certain aspects of award entitlements is wrong. The fact they rely on other practices who say the same thing does not make it true.
Additionally, they do not have a set-off clause in an employee’s employment contract that may be in breach of the applicable award and/or may not be able to rely on the higher rate should an employee challenge their entitlements.
A set-off clause allows above-award payments to be set off against award entitlements (such as overtime, penalty rates, etc.). However, if the salary paid to an employee does not cover the applicable modern award entitlements, then the employer could potentially be liable for an underpayment.
Award misclassification, unpaid training and paying an “all-in-rate” for overtime and allowances is the number one reason practices – including the big corporates and law firms – were given a shock.
This is where the devil is in the details. I say if you can’t prove it, be prepared to lose it.
Many practices believe if they pay above the Award rates they are fine. After all, every other practice they speak to does. This does not make what you do right. The best well-intended advice will not save you. The devil is literally in the written details of your contracts. From what I have witnessed from the practices that I have represented, many DIY employment contracts should be relegated to your rubbish bin.
It is not a simple case of paying somebody $2 an hour above the Award rate and/or writing it into your contract and you are off the hook. Thinking you pay an “all-in rate” and mean no harm and not having this in writing is worse.
Practices have to do their homework to prove their case. It is achievable but is poorly understood. It takes a lot more than just a good lawyer, accountant or practice manager. Practice owners should personally check systems, processes (including workflows) and contracts and seek qualified experienced advice now.
Regularly working unreasonable overtime is against the law > 38 hours a week
Often, practice managers would brag they “do not get paid enough and work over 60 hours a week!”
Excessive unmonitored overtime on a regular basis generates high staff turnover, preventable life-threatening healthcare errors, and possibly a hefty underpayment of wages and prosecution.
Practices need valid written all-in rate individual flexibility agreements that observe the Award conditions listed such as specific allowances, penalties and overtime rates. Furthermore, they should ensure each person regardless of the contract is not to work “unreasonable overtime” hours (i.e. >38 hours on a regular basis). It does not matter whether you are a receptionist, nurse, practice manager or director who is an employee. This alarmingly ‘grey area’ is beginning to get a lot of attention including fines of up to $660,000 for corporations per breach.
Many practices are not aware that regularly working more than 38 hours a week is not in accordance with the Fair Work Act unless it is mutually agreed, reasonable overtime. An inability (due to staff shortages) to take time off can only compound this pandemic problem.
Is it worth the risk of being automatically referred to Fair Work for further investigation?
The ever-changing needs of the pandemic such as vaccine boosters and opening up borders are not going to go away for at least another few years. This problem will not go away until the pandemic does in every country.
It is time to acknowledge your staff have been overstretched, and it is time to “structurally” do something about it.
It is time to put an end to overtime!
Paying more money is not the solution. Treat the problem and do not use money to treat the symptoms. It will not go away and will get worse in time. This is how you lose great staff. Start by setting the right expectation.
Don’t be surprised your competitor is paying higher wages and making the same mistake. Get off the FOMO treadmill and focus on how you should run your practice first.
Surprisingly, poor practice governance and financial literacy is the problem. If you do not understand what I mean then you know where to start. Very few get this right which is why multiple things start to go wrong. Lying does not help cover your tracks. Sometimes it takes 10 small lies to cover up the first one.
It is more than just billing like a rockstar and getting the bragging rights to hammering the cost of a ballpoint pen to 30 cents. That is not managing. Anybody can cut regulatory corners and breed a toxic workplace and state their overheads are 30% of gross fees. The piecemeal whack-a-mole approach is a pathway to insanity.
It is time to take a helicopter view instead of a bottom-up approach.
Eating and sleeping well should be the ultimate goal. Your practice is your most valuable investment. It is not an overhead. Valuing the intangible systems as well as the tangible is critical. Running a successful practice is about the software and not just the hardware inside. Focus on outputs and not just the inputs. How efficiently and effectively are you operating?
For a practice under the pump, there is a better cure than working more overtime. But you will have to spend money to make money.
It is urgent that practices carefully respond to this emerging ATO issue. The last thing you want to do is unnecessarily break the trust your staff have in you and/or go bust on a robo ATO/Fairwork audit.
You do have a choice. Risk being less profitable and automatically take on more staff. Or alternatively, work smarter and not harder: do better with fewer resources.
Stay connected, communicate and collaborate with your staff for a solution.
Start by asking yourself the following questions:
Source: Office Vibe – Health and Life actual staff score as at 10th June 2021
24/7 compare yourself to the industry
Source: Office Vibe – Health and Life actual staff score as at 10th June 2021
Check your employment agreements and systems: Make sure your contracts are correct and prepared with a legal professional with the support of your accountant. Correctly incorporate overtime payments and allowances into your contracts. Ensure you complete your End of Year Payroll runs with this checklist;
Before calling your lawyer, call your accountant: Ask if employing additional staff is viable? Ask what will make my practice viable? Do not reinvent the wheel: understand what is possible. Review new ways to run your practice and then your numbers. Seek a medical and health experienced and qualified accounting second opinion. Then contact a lawyer to review your employment agreements;
Free up key staff: outsource to experienced and qualified people the tasks that are important but non-core activities such as bookkeeping, monthly benchmarking reporting and accounting, sterilisation etc or;
Leave a legacy and not a liability: If you personally do not want to make the changes, carefully consider succession planning. Prepare to sell down part or all of your practice to the next generation who can help you do all of the above.
Please seek professional advice before acting on any of this information, it should be used for general information only as a conversation starter. Feel free to get in touch with me if you have any concerns.
Some Useful links
End of Year
Fair Work links
About me: David Dahm BA (Acc.), CA., FCPA, CTA, FFin, CPM, FAAPM, FAIM, FGLF.
Registered Tax Agent, Former AGPAL Surveyor 10 years of service
David Dahm is CEO and founder of the national medical and healthcare chartered accounting firm Health and Life and global Founder and CEO of the not for profit project the International Healthcare Standards and Ethics Board (www.ihseb.org)
After a serious work-related car accident in 1989, and nine operations later I continue to be a patient and provider advocate. I enter my third decade as a national Chartered Accountant for Medical and Healthcare practices in Australia. I am a former 10-year Australian General Practice Accreditation surveyor. I come from a medico family. I have served on the AAPM National Board and was the inaugural national Chair of the Certified Practice Manager CPM post-nominal. I continue to provide accounting tax and practice management advice to many practices all over Australia.
You know who you are and I thank you for this real honour and privilege to serve you and your community through you. Note: I am not a lawyer please seek appropriate legal and accounting advice. This information is for general use and discussion only.