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Annualised wages – new obligations on employers

Libby Pallot, Walter MacCallum, Anthony Massaro, Ben Tallboys, Abbey Burns, Caitlin Walsh and Caitlin Meers

Annualised wages

Earlier this year, the Fair Work Commission published its decision in relation to the 4 year review of annualised wage arrangements in modern awards, available here.

From 1 March 2020, annualised salary clauses in many awards will be replaced with a standard clause containing more comprehensive obligations.  Standard clauses will also be added to other awards.

The awards affected capture many business and industries, including the Banking Finance and Insurance Award 2010, Clerks – Private Sector Award 2010, Local Government Industry Award 2010, Manufacturing and Associated Industries and Occupations Award 2010, Hospitality Industry (General) Award 2010, and the Health Professionals Award 2010.

New obligations on employers

Employers often pay award-covered employees ‘annualised salaries’ – an all inclusive annual amount that covers the employee’s entitlements to wages, overtime, penalties, allowances and other amounts under the relevant award. These arrangements mean employees have predictable incomes, and employers are able to pay a fixed amount each pay period, reducing administrative time spent on payroll.

Employers under some awards will be required to seek agreement from an employee prior to implementing an annualised wage arrangement. Further, there are now additional (and complex) documentation requirements relating to the calculation of the annualised wage (broken down by component), assumptions made by the employer about the employee’s hours (for the purposes of overtime and penalty rates), and outer limits of ordinary hours. The new requirements also introduce comprehensive record keeping requirements, requiring employers to monitor start/finish times, breaks and overtime for staff on annualised wages.

The new annualised wage system will require careful attention from affected employers, to ensure employees on annualised salaries are paid in accordance with the relevant Award. The documentation and record-keeping requirements will also impose a significant administrative burden.

Employers can continue to offer an annualised salary based on a contractual set-off arrangement, however, this will depend on the terms and conditions of employment offered to particular employee and would require legal advice.

Affected awards

The following awards will be amended to include the new annualised wage clauses:

  • 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 Salt Industry Award 2010
  • Telecommunications Services Award 2010
  • Water Industry Award 2010
  • Wool Storage, Sampling and Testing Award 2010
  • Broadcasting and Recorded Entertainment Award 2010
  • Local Government Industry Award 2010
  • Manufacturing and Associated Industries and Occupations Award 2010
  • Pharmacy Industry Award 2010
  • Rail Industry Award 2010
  • Restaurant Award 2010
  • Marine Towage Award 2010
  • Hospitality Award 2010
  • Pastoral Award 2010
  • Horticulture Award 2010
  • Health Professionals Award 2010

What do employers need to do?

The Commission’s decision is complex and needs to be considered by each employer individually. Employers may need to change their template employment agreements, as well as workplace policies.

Employers must be compliant with the changes by 1 March 2020, and should obtain advice about the impact of the changes on their business and employees well before then.

If you need assistance understanding or interpreting your rights and obligations regarding annualised salaries and set-off clauses, please contact the Russell Kennedy Workplace Relations, Employment and Safety team.

If you would like to keep in touch with alerts and insights from our expert Workplace Relations, Employment and Safety team, you can subscribe to our mailing list here.

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