Key changes to annualised salary arrangements

by | Feb 28, 2020 | Employment Law and Workplace Relations Blog

Important changes to the annualised salary arrangements will take effect from 1 March 2020 and may significantly impact on any employers that currently have annualised salaries in place for their employees.

Key issues

The modern awards that have been impacted by this change include:

  • Clerks – Private Sector Award 2010;
  • Legal services Award 2010; and
  • Manufacturing and Associated Industry and Occupations Award 2010.

Some of the changes to any annualised salary arrangement include:

  • An obligation to notify, in writing, the employee subject to an annualised wage on certain matters including the method of calculation of the wage; and
  • The imposition of potentially onerous recording obligations on employers who pay their full-time employees in accordance with an annualised salary.

Employee notification

An employee subject to an annualised wage arrangement must be advised, in writing, of:

  • the annualised wage payable to them;
  • the provisions of the award which are required to be satisfied by the annualised salary (if applicable to the employee’s ordinary hours) are as follows:
    • Minimum rates;
    • Allowances;
    • Overtime;
    • Shift penalty rates; and
    • Annual leave loading;
  • the method of calculation of the annualised wage; and
  • the outer limit of ordinary hours that will result in penalties or overtime the employee may be required to work in a pay period or roster cycle without being entitled to further pay.

Where the employee has worked in excess of the outer limit, this must be paid separately to the annualised salary.

Record keeping obligations

Every 12 months, an employer must calculate the amount of remuneration that would have been payable to the employee under the annualised salary provisions and compare it to the actual annualised wage paid to the employee.

Where the actual amount is less than what the employee is entitled to under the award, the employee must pay the amount of the shortfall within 14 days.

The employer is required to keep a record of:

  • starting and finishing times of work; and
  • any unpaid breaks taken for each employee that is subject to the annualised wage arrangement. This must be signed or acknowledged as correct in writing by the employee each pay period or roster cycle.

There are also existing record-keeping obligations in the Fair Work Act and Regulations that deal with hours worked including overtime, which are already relevant to employees on annualised salary arrangements.

Key takeaways

The above changes come into effect from March 1, 2020.

In preparation for this, employers should:

  • be aware of the new obligations and ensure that their current and future annualised wage arrangements are consistent with the terms of the modern awards;
  • ensure that their record keeping protocols are sufficient to comply with the existing and upcoming record-keeping obligations relevant to employees receiving annualised salaries.

The upcoming award changes are not intended to prevent employers from using common law contracts of employment with appropriate set off arrangements. We recommend employers seek legal advice about this area if required.

To view the Fair Work Commission’s Decision with respect to the above changes, please click here.

Please contact our employment and workplace relations team on (08) 9321 0522 should you require any advice on the abovementioned changes to the Award and how it may impact on your business.

Natalie Knight

Natalie Knight