On 27 February 2019, the Fair Work Commission made a decision relating to annualised salary provisions in modern awards.
If you are an employer covered by any of the modern awards listed below, then it is likely that your obligations concerning paying employees an annual salary are going to change effective 1 March 2020.
What are the current rules about paying annual salaries?
A number of modern awards contain specific rules about paying employees an annual salary. The provisions vary from award to award, but most contain a specific obligation to inform employees which provisions of the award the annual salary is intended to cover (eg annual leave loading, overtime, etc). They usually also contain provisions which state (in essence) that the annual salary must be equivalent to cover all entitlements that the employee would have been entitled to have they been paid on an hourly basis.
Some awards, such as the Restaurant Industry Award 2010 and the Hospitality Industry (General) Award 2010 also contain requirements that the annual salary must be set at 25% more than the minimum weekly wage set by the Awards, calculated as an annual figure.
The Fair Work Commission has proposed to vary all modern awards which currently contain an annualised salary provision, and in addition include an annualised salary provision in three awards where no provision is currently contained (namely the Pastoral Award 2010, the Horticulture Award 2010 and the Health Professionals and Support Services Award 2010).
How is it proposed the rules will change?
How the rules will change depends on the particular award in question. However, there are a number of common features which will be included in all awards which currently have annualised salary provisions*. These include:
- Employers must specify an “outer-limit” of ordinary hours and overtime hours an employee may be required to work, and if the employee works in excess of these hours, the employer is required to pay the employee additional amounts;
- Employers must keep a record of the starting and finishing times, and any unpaid breaks are taken, of each employee subject to an annualised wage arrangement, which must be signed by each employee. The record must be signed by the employee each week, or each pay period or roster cycle (depending on the award).
- Employers must perform an annual calculation of the entitlements the employee would have received had they been paid on an hourly basis, and reconcile any shortfall when compared with the annual salary paid within 14 days.
*Such provisions will also be inserted in the Pastoral Award 2010, the Horticulture Award 2010 and the Health Professionals and Support Services Award 2010.
As will be obvious, the new obligations will significantly increase bureaucracy for employers.
It also unclear how part-time employees will be affected by the changes, as the new provisions are only expressed to apply to full-time employees.
Which awards will be affected?
The following modern awards are proposed to be varied:
- Banking, Finance and Insurance Award 2010
- Broadcasting and Recorded Entertainment Award 2010
- Clerks – Private Sector Award 2010
- Contract Call Centres Award 2010
- Health Professionals and Support Services Award 2010
- Horticulture Award 2010
- Hospitality Industry General Award
- 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
- 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
What should I do if I am covered by one of those awards?
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This post was originally published in March 2019. Its content has been updated with more accurate information as it has become available.