Is your business ready for the changes to annualised salaries?

In 2019 the Fair Work Commission handed down a decision imposing significant new obligations on employers paying annualised salaries under a number of modern awards. Annual salary clauses in 19 awards have been amended and the terms will be inserted into three additional modern awards.  A list of the effected awards is set out below.

Employers with employees who receive an annual salary and are covered by an affected modern award must prepare for the upcoming changes. But time is running out – these changes will take effect from 1 March 2020. Is your business ready? 

Key changes

Some of the key changes employers should know include:

  • notifying employees in writing of:
  • the annualised salary payable to them;
  • the clauses of the modern award satisfied by the annualised salary; 
  • how the annualised salary has been calculated; and
  • what the employee may be required to work in a pay period or roster cycle without being entitled to further payment , specifically employment agreements are required to state:
    • the outer limit of ordinary hours that would attract a penalty rate; and
    • the outer limit of overtime hours that the employee would be required to work.
  • any hours worked by the employee in excess of the outer limits in each roster or pay period must be paid in addition to the annual salary in accordance with the applicable provisions of the modern award. 
  • undertaking every 12 months from the commencement of the arrangement (or on termination of employment) a comparison of the annual salary paid and the amount that would have been payable to the employee if they had been paid in accordance with the modern award. Any shortfall must be paid to the employee within 14 days. Employers must also keep a record of each employee’s start and finish times and any unpaid breaks.

How should employers prepare?

Employers who have annualised salary arrangements should:

  • consider whether changes are required to existing employment agreements under the new annualised salary clause of a modern award.
  • ensure it complies with the requirements of the new clauses by implementing systems which allow recording of start times, finish times and breaks and that any hours performed outside the “outer limits” will be remunerated in addition to the annualised salary arrangement.

What are the consequences?

If an employer does not comply with the terms of a modern award annualised salary clause, and particularly where an annualised salary does not compensate for hours actually worked by an employee, an employer can be at risk for underpayment claims and penalties for breaches of the modern award. 

Effected Modern Awards

  • Banking, Finance and Insurance Award 2010
  • Broadcasting and Recorded Entertainment Award 2010
  • Clerks – Private Sector Award 2010
  • Contract Call Centres Award 2010
  • Health Professionals Award 2010
  • Horticulture Award 2010
  • Hospitality Industry (General) Award 2010
  • Hydrocarbons Industry (Upstream) Award 2010
  • Legal Services Award 2010
  • Local Government Industry Award 2010
  • Manufacturing and Associated Industries and Occupations Award 2010
  • Marine Towage Award 2010
  • Mining Industry Award 2010
  • Oil Refining and Manufacturing Award 2010 (clerical employees only)
  • Oil Refining and Manufacturing Award 2010 (non-clerical employees)
  • Pastoral Award 2010
  • Pharmacy Industry Award 2010
  • Rail Industry Award 2010
  • Restaurant Industry Award 2010
  • Salt Industry Award 2010
  • Telecommunications Services Award 2010
  • Water Industry Award 2010
  • Wool Storage, Sampling and Testing Award 2010

Don’t get caught out. We can advise whether your business is affected by the upcoming changes and ensure that your employment agreements are compliant. 

If you would like to find out more about your obligations under a modern award or any other matters relating to employment law, please contact Melanie Richards.