Annualised salary changes to some Awards – is your business prepared?

In the wake of the alarmingly increasing number of employers being found to have underpaid their employees, the Fair Work Commission (FCW), has made a decision to change the annualised salary arrangements contained in 19 Awards and to insert an annualised wage clause in 3 additional Awards. These changes take effect from 1 March 2020, so if you currently use annualised salary arrangements under an Award, you need to be prepared for the new requirements.

Importantly, these changes only apply when an employer specifically applies the annualised terms of an Award. They do not change the existing common law arrangements whereby a carefully drafted offset clause inserted into a contract of employment enables the same or very similar outcome as an annualised salary arrangement. However, employers are cautioned that even when using an offset clause, accurate records of working hours should be kept to enable the employer to prove (if challenged) that an employee was paid all of their Award entitlements.

Although there are 3 model clauses that the FWC has inserted into the various Awards, all of these clauses require the employer to:

  • Keep a record of time worked including starting and finish time and any unpaid breaks. Employees must sign off on the hours as being accurate for each pay/roster cycle.
  • Advise the employee of the provisions of the Award which are satisfied by the annualised wage.
  • Document the method by which the annualised salary has been calculated. This includes specifying each separate component of the annualised salary and any overtime and/ or penalty rate assumptions used in the calculation of the annualised salary.
  • Document and advise the employee what the ‘outer limits’ are on the number of overtime hours or other penalty-rate hours which are intended to be satisfied by the annual salary. The employer must pay the employee in accordance with the Award for any hours they work which exceed those ‘outer limits.’ These payments must be made in the next pay cycle.
  • Undertake an annual reconciliation of the employee’s salary by working out what they should have been paid under the Award and comparing that with what they were actually paid. If the employer identifies a shortfall, they must rectify this within 14 business days.

The specific provisions applying to each Award are set out below. Importantly, those Awards in Category 1 only allow an employer to decide to annualise a salary without the agreement of the employee.

At this stage, the annualised salary provisions only apply to full time employees.

Affected Awards

Category 1

Category 2

Category 3

Employees have relatively stable work hours.

 

 

 

 

Employees work highly variable hours and/or significant ordinary hours of work which attract a penalty rate.

Employees work highly variable hours and/or significant ordinary hours of work which attract a penalty rate.

 

Employer can introduce an annualised salary arrangement unilaterally.

 

 

 

 

Employers/employees must agree on the implementation of an annualised salary arrangement. Either party is able to terminate employment on 12 months’ notice.

 

Employers/employees must agree on the implementation of an annualised salary arrangement. Either party is able to terminate employment on 12 months’ notice.

 

Annual salary must be calculated by reference to specific assumptions regarding overtime and/ or other penalty rates. The employer must also specify the outer limits for ordinary overtime hours that are satisfied by the annual salary.

 

Annual salary must be calculated by reference to specific assumptions regarding overtime and/ or other penalty rates. The employer must also specify the outer limits for ordinary overtime hours that are satisfied by the annual salary.

 

Annual salary to be an amount which is no less than a specified percentage about the minimum weekly award wage. The employer must also specify the outer limits for ordinary overtime hours that are satisfied by the annual salary.

 

Banking, Finance and Insurance Award 2010

 

Clerks - Private Sector Award 2010

 

Contract Call Centres Award 2010

 

Hydrocarbons Industry (Upstream) Award 2010

 

Legal Services Award 2010

 

Mining Industry Award 2010

Oil Refining and Manufacturing Award 2010 (clerical employees only)

 

Salt Industry Award 2010

 

Telecommunications Services Award 2010

 

Water Industry Award 2010

 

Wool Storage, Sampling and Testing Award 2010

 

Broadcasting and Recorded Entertainment Award 2010

 

Local Government Industry Award 2010

 

Manufacturing and Associated Industries and Occupations Award 2010

Oil Refining and Manufacturing Award 2010 (non-clerical employees)

 

Pharmacy Industry Award 2010

 

Rail Industry Award 2010

 

Horticulture Award

Pastoral Award 2010

 

Health Professionals Award 2010

Marine Towage Award 2010

 

Restaurant Industry Award 2010

 

Hospitality Industry (General) Award 2010

 

NB: applies to non-managerial employees only.

 

As noted above, these provisions only impact employers who are using the annualised arrangements under an affected Award. Employers are under no obligation to use these provisions and can elect to continue to use or introduce offset arrangements as an alternative.

If you need additional assistance determining if your business will be affected by these changes, or you would like to discuss options to achieve flexibility in the hours of work for your employees, we can assist you. Please contact our HR Consulting Division at support@providencehr.com.au  or on one of the phone numbers below.

Brisbane

Melbourne

Sydney

+61 7 3218 3900

+61 3 9252 0800

+61 2 9922 1166

  

Published: 20 February 2020

Please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice. Content is accurate as at the date published.

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