Allowances: A Quick Guide

What is an allowance? 

Most modern awards and enterprise agreements provide for allowances which are usually paid to employees who complete certain tasks, have a particular skill, or tool, or work in onerous or dangerous conditions. These are paid in addition to their ordinary income.  

Allowances are one of the components that can contribute to underpayments. Businesses must consider various factors of underpayments. Although they may diligently check award rates, keep up with minimum wage increases, and apply penalties and loadings, they often overlook allowances. 

Which allowances do I need to pay my employees? 

Allowances are specific to each industry’s award. Therefore, if a business has employees covered by multiple awards, they must be familiar with the relevant allowances for each award. 

Here are some common allowances found in many awards: 

  • Leading hands allowance: this allowance is payable to employees who are in charge of other employees and is often calculated based on the number of individuals under their supervision. 
  • Laundry allowance: this allowance is payable to employees who are responsible for laundering their own uniforms or special clothing which is required by the employer to be worn while at work. 
  • Motor vehicle allowance: this allowance is payable to employees who use their private motor vehicle when performing work-related duties and is usually calculated on a per-kilometer basis. 
  • First aid allowance: this allowance is payable to employees who have first aid certification and are designated as first aid officers in the workplace 
  • Meal allowance: this allowance is usually payable when an employee has worked overtime without sufficient notice. 
  • Tool allowance: this allowance is payable to employees who are required to provide their own tools or equipment. 

Higher Duties Allowance

The ‘higher duties allowance’ is a type of allowance commonly present in several awards, such as those for retail, children’s services, hospitality, and nursing, that employers often overlook. 

Rather than a fixed sum, the higher duties allowance is a concept that dictates that an employee working at a higher level than their assigned classification should receive payment at the wage rate of the higher level. Some awards enforce limitations on the application of this principle by restricting its availability to work performed beyond a certain number of hours or days. It is crucial for businesses to understand when and under what circumstances they must provide a higher duties allowance. 

What is the allowance amount I must pay ? 

Certain allowances are computed based on a percentage of the ‘standard rate,’ which is the minimum wage assigned to a particular classification by the award. Consequently, the allowance payment will increase each year on 1 July when the minimum wage is adjusted. 

While other allowances have fixed amounts, it is advisable not to become complacent since these figures are frequently modified to account for changes in the consumer price index. As a result, businesses may be caught off-guard when the amount they are required to pay for a specific allowance increases from one year to the next. To avoid such surprises, it is crucial to remain up to date with your award obligations. 

Although failing to pay or underpaying allowances may only result in a minor shortfall, it still constitutes an underpayment that can lead to significant penalties. As such, it is advisable to become well informed in all relevant awards and their corresponding allowances. Additionally, regularly reviewing the most current versions of the awards can help ensure that any changes or increases in allowances are promptly identified.

If this seems too much for you, that’s where Now Actually can help. We have all this information available and can help apply it to your business. If you need help, email us at contact@nowactually.com.