Do you pay annual salaries? Find out how the employment law changes may impact your organisation.

The Decision

The Fair Work Commission (FWC) has recently handed down a decision which will impact employers paying annualised salaries to employees covered by a modern award with annualised wage provisions within the award. There are over 20 Modern Awards that will be impacted by these changes with the majority commencing on 1 March 2020.

The Changes

In general, the upcoming changes to salaries are extremely prescriptive and will impose a number of administrative burdens.

There are three “subtly different” model clauses between the different awards, they all have common requirements including a mandatory duty to:

• State in an agreement, which clauses are being satisfied by the annualised salary and their calculations
• Specifying an ‘outer limit’ of hours per pay period or roster cycle that are included in the salary
• Pay employees for any additional hours worked outside of the ‘outer limit’ within the pay period or roster cycle.
• Reconciliate each worker’s record every 12 months to ensure the salary paid is at least equal to the amount that would have been paid under the Modern Award
• Keep detailed records of the employee’s start and finish times and requiring employees to acknowledge that the record of hours is correct for that pay period or roster cycle.

What should employers do to prepare?

If you pay annualised salaries to employees, you should:

• Prior to 1 March 2020, review whether the relevant award(s) pertaining to your organisation has an annualised salary clause
• Consider the relevant annualised wage clauses against any contractual annualised salary arrangements you have for employees who are covered by these awards and make essential changes to ensure compliance with the new requirements

With the additional administrative burdens than comes with these changes, we strongly recommend that you weigh up the benefits of an annualised salary under the new arrangements against paying wages, overtime and other entitlements separately as and when they fall due.

As there are no real cost savings on wages to be made either which way you choose, the best way forward would be the option that will have less administration attached to it.

What if we get it wrong?

If your organisation fail to comply with the terms of a modern award annualised wage clause, you will be exposed to the risk of underpayment claims and potential penalties for breaches and may join the long list of household names such as Coles, Bunnings and Woolies, who all got it wrong… in the millions!   

Impacted 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

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

If you have any questions or concerns regarding salary arrangement or looking for alternative solutions, such as individual flexibility agreement for your staff, please contact our experts for further information, help and guidance.