Explanatory Statement
Fair Work (Unclaimed Monies Interest Calculations) Instrument 2015
Issued by the authority of the Minister for Employment
Section 559 of the Fair Work Act 2009 (the Act) allows an employer to pay an amount to the Commonwealth that would otherwise be owed to a former employee. Section 559 applies to certain amounts, such as wages, that have been unclaimed by the former employee, whom the employer can no longer contact. Payment of the amount to the Commonwealth discharges the employer’s obligation to pay the money to the former employee. The former employee can then later claim the money from the Fair Work Ombudsman.
The Fair Work Amendment Act 2015 amended section 559 of the Act so that in some circumstances the Fair Work Ombudsman must also pay an amount of interest to the former employee. Subsection 559(3A) provides that interest is payable where the Fair Work Ombudsman pays an amount of money under subsection 559(3) that is an amount of $100 or more and has been held in the Consolidated Revenue Fund for six months or more.
Subsection 559(3B) of the Act enables the Minister for Employment to make an instrument that sets out the method for calculating interest payable under subsection 559(3A).
The instrument specifies that interest compounds annually and is payable at the rate of increase in the All Groups Consumer Price Index between the two March quarters most recently published by the Australian Statistician before the first day of the relevant financial year.
Details of the instrument are provided at Attachment A.
A Statement of Compatibility with Human Rights has been completed for the instrument, in accordance with the Human Rights (Parliamentary Scrutiny) Act 2011. The Statement’s assessment is that the measures in the instrument are compatible with human rights. A copy of the Statement is at Attachment B.
The instrument is a legislative instrument for the purpose of the Legislative Instruments Act 2003.
The Minister for Employment consulted with the States and Territories under the Intergovernmental Agreement for a National Workplace Relations System for the Private Sector. The Fair Work Ombudsman, the Department of Finance and the Australian Bureau of Statistics were also consulted about the making of this instrument.
The instrument commences as set out in section 2 of the instrument.
Attachment A
Details of the Fair Work (Unclaimed Monies Interest Calculations) Instrument 2015
Section 1 – Name of instrument
This section sets out the name of the instrument as the Fair Work (Unclaimed Monies – Interest Calculations) Instrument 2015.
Section 2 – Commencement
This section provides that the instrument commences on the day after it is registered or the day Part 10 of Schedule 1 to the Fair Work Amendment Act 2015 commences, whichever occurs later.
Section 3 – Authority
This section provides that the instrument is made under subsection 559(3B) of the Act.
Section 4 – Purpose
This section provides that the purpose of the instrument is to set out how to work out the amount of interest the Fair Work Ombudsman must pay to a person under subsection 559(3A).
A note to this section sets out when the conditions in subsection 559(3A) will be satisfied.
Section 5 – Definitions
This section sets out the definitions of various terms used in the instrument. It includes a ‘signpost’ definition that refers readers to the section in which a term is substantively defined.
Section 6 – Calculation of interest
This section sets out how to work out the amount of interest (if any) that must be paid in respect of an unclaimed amount.
The interest period for the unclaimed amount must first be identified. This is done pursuant to the method set out in section 7 of the instrument.
The total amount of interest payable in respect of the unclaimed amount is then worked out by adding together the amount of interest payable for each financial year wholly or partly within the interest period.
Section 7 – Interest period for an unclaimed amount
This section specifies the period over which interest is payable on the unclaimed amount.
The interest period commences the day the unclaimed amount was paid to the Commonwealth under subsection 559(1) of the Act.
Section 7 provides that the interest period ends 14 days after payment of the unclaimed amount is authorised by the Fair Work Ombudsman under subsection 559(3) of the Act. The 14 day period reflects the anticipated time for the payment of these amounts by the Fair Work Ombudsman, and allows for the ready calculation of interest.
Section 8 – Interest payable for a financial year
Subsection 8(1) provides the formula for calculating the interest payable for a financial year.
In broad terms the formula provides that the amount of interest for a financial year is the amount of unclaimed money (plus any interest payable in relation to prior financial years), multiplied by the interest rate and the number of days in the interest period in the financial year, then divided by the total number of days in the financial year.
The amount of interest is rounded to the nearest cent.
The interest rate is specified as the percentage change in the index numbers for the two March quarters most recently published before the first day of the financial year. This rate is rounded to four decimal places. However, if the percentage change between the two quarters is zero or negative, the interest rate for the relevant year will be zero.
Paragraph 8(2)(a) provides that in working out the interest rate for a financial year, only the index numbers published in terms of the most recently published index reference period for the Consumer Price Index are to be used. That period will be based on the most recent base year as determined by the Australian Bureau of Statistics.
Paragraph 8(2)(b) provides that if index numbers are published in substitution for previously published index numbers those new index numbers do not have the effect of requiring retrospective amendment of payments previously made based on the original index numbers. There is exception where the Australian Bureau of Statistics changes the base year and new index numbers are published as a result.
Sample calculations
Assume that $100.00 of unclaimed wages owing to John Smith is paid to the Fair Work Ombudsman by Mega Engines Pty Ltd on 1 July 2017. Further assume that the interest rate for the 2017/18 financial year is 1.6% and that the interest rate for the 2018/19 financial year was 2.5%.
- The Fair Work Ombudsman authorises the payment to John Smith on 20 October 2017.
John Smith is not entitled to interest because the money has been held for less than 6 months.
2. The Fair Work Ombudsman authorises the payment to John Smith on 15 March 2018
$100 x 272 days (1 July 2017 – 15 March 2018 + 14 days) x 0.0160 = $1.19 interest
365
Total amount paid: $101.19
Total interest: $1.19
3. The Fair Work Ombudsman authorises the payment to John Smith on 25 September 2018
$100 x 365 days (1 July 2017 – 30 June 2018) x 0.0160 = $1.60 interest
365
Add the interest $1.60 to the initial $100.00 paid to the Fair Work Ombudsman.
$101.60 x 101 days (1 July 2018 – 25 September 2018 + 14 days) x 0.0250 = $0.70 interest
365
Add the interest payable for the 2017/18 financial year and the interest payable for the 2018/19 financial year to the amount of unclaimed money.
Total amount paid: $102.30
Total interest: $2.30
Attachment B
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Fair Work (Unclaimed Monies Interest Calculations) Instrument 2015
The instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview of the legislative instrument
The purpose of this legislative instrument is to prescribe the method for calculating interest payable on certain amounts paid by the Commonwealth under section 559 of the Fair Work Act 2009 (the Act). It is consequential on the commencement of Part 10 of Schedule 1 to the Fair Work Amendment Act 2015.
Human rights implications
Article 6(1) of the International Covenant on Economic, Social and Cultural Rights (ICESCR) recognises the right to work and obliges States to take appropriate steps to safeguard this right.
Article 7 of the ICESCR provides for the right to just and favourable conditions of work, including the right to fair wages.
Section 559 of the Act promotes the right to fair wages by providing that if an employee has left employment and cannot be located, the employer can pay monies owing to that employee to the Commonwealth, which holds the money until the employee can be paid.
The amendments made by Part 10 of Schedule 1 to the Fair Work Amendment Act 2015 extend the Act’s existing protections in section 559 so that the real value of the money is maintained over time by means of the payment of interest to the employee. This instrument facilitates the operation of those amendments by setting out the method for calculating that interest.
Conclusion
The instrument is compatible with human rights because it promotes human rights.