Are you aware of the changes to annualised salary arrangements which come into effect on 1 March 2020?
It has generally been possible to pay award covered employees a set salary amount each pay period, and to use an ‘offset’ clause in their contract to satisfy financial entitlements of the Modern Award, such as overtime, annual leave loading and penalty payments.
However, from 1 March, new changes will place obligations on employers that utilise an annualised wage arrangement for some award covered employees. Employers will be required to notify employees of how the annualised wage has been calculated, keep additional records and conduct annual audits.
Which Modern Awards are affected?
The Awards have been grouped into categories:
Category 1 (employees generally have a pattern of fairly stable hours) includes:
- Banking, Finance and Insurance Award 2010
- Clerks - Private Sector Award 2010
- Contract Call Centres Award 2010
- Hydrocarbons Industry (Upstream) Award 2010
- Legal Services Award 2010
- Mining Industry Award 2010
- Oil Refining and Manufacturing Award 2010 (clerical employees only)
- Salt Industry Award 2010
- Telecommunications Services Award 2010
- Water Industry Award 2010
- Wool Storage, Sampling and Testing Award 2010
Category 2 (employees generally work highly variable hours or significant ordinary hours that attract a penalty rate) includes:
- Broadcasting and Recorded Entertainment Award 2010
- Local Government Industry Award 2010
- Manufacturing and Associated Industries and Occupations Award 2010
- Oil Refining and Manufacturing Award 2010 (non-clerical employees)
- Pharmacy Industry Award 2010
- Rail Industry Award 2010
- Pastoral Award 2010
- Horticultural Award 2010
What are the new requirements?
Employers will be required to ensure the following processes are in place for full time employees on an annualised salary arrangement:
- Specification of method of calculation: Keep a written record of annualised salaries being paid which should specify the provisions of the award that are satisfied by offering the annualised salary.
- Record-Keeping: Keep a written record of start and finish times (including unpaid breaks) of each employee throughout the year. Each record is to be signed off by the employee.
- Annual Reconciliation: To be carried out every 12 months from the commencement of employment, or on termination of employment. The purpose of this is to calculate the amount of remuneration that would have been paid to the employee (under the provisions of the award) and compare it to the amount of the annualised salary actually paid to the employee. If there is any shortfall, the employer must pay the outstanding amount within 14 days.
Next Steps
- Review if any of your full time employees fall under these listed Awards. If not, no further action is required;
- If your employees do receive an annualised salary, consider if you’d like to continue with this arrangement or pay each entitlement for each pay period;
- If you do offer an annualised salary, ensure the amount is sufficient to satisfy your obligations;
- Prepare an agreement or letter which sets out the updated terms;
- Review your payroll system and implement processes to capture start and finish times.
The intent of the clauses for annualised wage arrangements is to ensure and maintain a fair safety net of terms and conditions for employees; however, the practical effect on employers is that it will likely result in an administrative burden.
If you are unsure of how these new obligations will impact your business or how to comply with the record-keeping and reconciliation requirements, please contact us.