Annualised Salary Award Changes
A significant change to Modern Awards will commence on 1 March 2020 (with no grace period), with the implementation of the new annualised wage provisions in many Awards.
The new provisions are set to affect 22 awards including:
- farm workers under the pastoral and horticultural awards
- office staff under the clerks – private sector award
- white-collar professions under the Banking, Finance and Insurance Award and Legal Services Award
- Hospitality workers under the Restaurant Industry Award and the Hospitality Industry General Award
- Health professionals and Pharmacists under the Health Professionals and Support Services Award and Pharmacy Industry Award
- And more…
If you are affected, you will need to:
- Notify employees in writing of the annualised wage payment to them
- Identify which clauses in the Modern Award that are being satisfied by the annualised wage
- Specify an ‘outer limit’ of the hours that would attract penalties or overtime, which the employee may be required to work over a pay period or roster cycle for the annualised wage
- Keep detailed records of the employee’s actual start and finish times (including any unpaid breaks) and require employees to sign off, or acknowledge, that the record of hours is correct for that pay period or roster cycle.
- Make payments to employees for any additional hours worked outside of the ‘outer limit’ within the pay period or roster cycle: this payment must be separate to the annualised wage within that period
- Put in place a process to document an annual reconciliation (each 12 months from the commencement of an employee’s annualised wage arrangement) to ensure the annualised wage paid to an employee is at least equal to the amount that would have been paid under the Modern Award. This will include an annual calculation of the entitlements the salaried employee would have received, should they have been employed as an hourly rate employee.
- Reconcile and pay any shortfall within 14 days of this comparison being made.
- Update contracts where required
This is just a general outline of the model clauses. It is important that employers read, in detail, the model clauses in the Modern Awards that apply to their employees.
Businesses that are non-compliant with the new laws are exposed to Fair Work fines, with maximum penalties of $63,000 per breach for businesses and $12,600 per breach for individuals. Penalties for failure to comply with the terms of a Modern Award can technically occur even in instances where no underpayment has been made.
Is there anything else you can do? Apparently the Fair Work Commission has confirmed that the model annualised wage clauses do not affect an employer’s ability to enter into common law annual salary arrangements that set-off Modern Award entitlements. Cooper Grace Ward lawyers advise that the law regulating the drafting, implementation and enforcement of common law set-off clauses is complex. It is essential that employers obtain advice about this option before relying on them instead of the annualised wage arrangement under a Modern Award.