The Elephant in the Room …. Annualised Salary Changes? - Business 360 Pty Ltd
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The Elephant in the Room …. Annualised Salary Changes?

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The Elephant in the Room …. Annualised Salary Changes?

As businesses have needed to focus on the ongoing impacts of the COVID pandemic, dealing with the Fair Work annualised salary arrangement requirements may well have been inadvertently ignored by many employers.

As a reminder, the Fair Work Commission handed down decisions varying 23 modern awards in respect to employees who are paid by way of annualised wage. This decision followed a major review of Modern Awards by the Fair Work Commission and came into effect on 1st March 2020.

Three different annualised wage arrangement clauses were inserted into the affected Awards with the following common requirements for employers:

  • record in an annualised wage agreement/arrangement (whichever is required) the provisions of the award which are satisfied by the annualised wage, and in the case of the modern awards in Categories 1 and 2 below, record the method by which the annualised wage has been calculated. This may include specifying each separate component of the annualised wage and any overtime or penalty assumptions used in the calculation of the annualised wage
  • record in the annualised wage agreement/arrangement (whichever is required), the ‘outer limits’ on the number of overtime hours or other penalty-rate hours which are to be taken as paid for by the annualised wage arrangement;
  • pay an employee (in addition to the annualised wage) for any hours worked which exceed those ‘outer limits’ in accordance with the applicable provisions of the modern award (i.e., overtime and penalty rates). These additional payments must be paid in the relevant pay cycle for the hours worked
  • keep records of the start times and unpaid breaks for each employee and have employees sign, or acknowledge as accurate, that record in each pay cycle or roster cycle
  • each 12 months from the commencement of the annualised wage arrangement or on termination of employment, calculate the amount which would have been payable to the employee under the modern award and compare this against the annualised wage arrangement. If a shortfall is identified, employers must rectify any shortfall within 14 days.

What do I need to do?

  1. Check whether the Award/s that cover your business operations have been varied and review the specific requirements according to the model annualised wages clause in the relevant Award/s that cover your business. Information can also be found on the Fair Work Ombudsman’s website: https://www.fairwork.gov.au/newsroom/news/new-rules-for-annualised-wage-arrangements
  2. In accordance with the specific model clause, advise employees in writing of the terms of their arrangement and what award entitlements it will cover.
  3. Specify an outer limit for the ordinary and overtime hours that the annualised wage is designed to pay for and guarantee that for any additional hours worked beyond those limits within each pay cycle additional payments will be made to meet award minimum remuneration.
  4. If you haven’t already, establish a recording system to record the start and finish times of each shift, the duration of all unpaid breaks. Make sure your records are signed off by your employees each pay period as a true and accurate record.
  5. On the anniversary of each such arrangement compare the salary earned in that year with the minimum award payment for working the same hours and backpay any shortfall within 14 days.