Many employers prefer the simplicity of paying their nanny or domestic employee one flat hourly rate rather than calculating different rates for evenings, weekends, overtime and allowances.
In many cases, this is possible—but only if the employee is better off overall than they would be under the applicable Award.
What is the Better Off Overall Test?
The Better Off Overall Test (BOOT) is a principle under the Fair Work Act that ensures an employee is not disadvantaged by an alternative pay arrangement.
In simple terms, if you choose to pay a flat hourly rate instead of following every individual Award entitlement, the employee must receive at least the same overall benefit they would have received under the Award—and preferably more.
Can BOOT Apply to Domestic Staff?
Most domestic staff, including nannies, housekeepers, gardeners and private chefs, are covered by the Miscellaneous Award 2020.
The Award sets out minimum employment conditions, but allows for individual flexibility arrangements in the areas of:
- overtime rates; or
- penalty rates; or
- allowances; or
- annual leave loading.
Rather than calculating each of these separately, some employers can pay a higher flat hourly rate that compensates the employee for these additional entitlements.
However, the agreed rate must leave the employee financially better off than if every shift had been paid strictly under the Award.
Most importantly this change needs to be done with the employees agreement and must be detailed in the signed employment contract.
What Should Employers Consider?
Before agreeing to a flat hourly rate, employers should consider:
- The employee’s ordinary working hours
- Whether weekend or evening work is common
- Expected overtime
- Casual or permanent employment
- Any applicable allowances
The arrangement should be reviewed if the employee’s working pattern changes, as a rate that was once sufficient may no longer leave the employee better off overall.
A flat hourly rate can make payroll much simpler for both employers and employees. However, it should never result in an employee receiving less than they would under the Award.
