In the wake of the alarmingly increasing number of employers being found to have underpaid their employees, the Fair Work Commission (FCW), has made a decision to change the annualised salary arrangements contained in 19 Awards and to insert an annualised wage clause in 3 additional Awards. These changes take effect from 1 March 2020, so if you currently use annualised salary arrangements under an Award, you need to be prepared for the new requirements.
Importantly, these changes only apply when an employer specifically applies the annualised terms of an Award. They do not change the existing common law arrangements whereby a carefully drafted offset clause inserted into a contract of employment enables the same or very similar outcome as an annualised salary arrangement. However, employers are cautioned that even when using an offset clause, accurate records of working hours should be kept to enable the employer to prove (if challenged) that an employee was paid all of their Award entitlements.
Although there are 3 model clauses that the FWC has inserted into the various Awards, all of these clauses require the employer to:
The specific provisions applying to each Award are set out below. Importantly, those Awards in Category 1 only allow an employer to decide to annualise a salary without the agreement of the employee.
At this stage, the annualised salary provisions only apply to full time employees.
Affected Awards
Category 1 | Category 2 | Category 3 |
Employees have relatively stable work hours.
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Employees work highly variable hours and/or significant ordinary hours of work which attract a penalty rate.
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Employees work highly variable hours and/or significant ordinary hours of work which attract a penalty rate.
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Employer can introduce an annualised salary arrangement unilaterally.
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Employers/employees must agree on the implementation of an annualised salary arrangement. Either party is able to terminate employment on 12 months’ notice. | Employers/employees must agree on the implementation of an annualised salary arrangement. Either party is able to terminate employment on 12 months’ notice.
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Annual salary must be calculated by reference to specific assumptions regarding overtime and/ or other penalty rates. The employer must also specify the outer limits for ordinary overtime hours that are satisfied by the annual salary.
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Annual salary must be calculated by reference to specific assumptions regarding overtime and/ or other penalty rates. The employer must also specify the outer limits for ordinary overtime hours that are satisfied by the annual salary.
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Annual salary to be an amount which is no less than a specified percentage about the minimum weekly award wage. The employer must also specify the outer limits for ordinary overtime hours that are satisfied by the annual salary.
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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
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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
Horticulture Award Pastoral Award 2010
Health Professionals Award 2010
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Marine Towage Award 2010
Restaurant Industry Award 2010
Hospitality Industry (General) Award 2010
NB: applies to non-managerial employees only.
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If you need additional assistance determining if your business will be affected by these changes, or you would like to discuss options to achieve flexibility in the hours of work for your employees, we can assist you. Please contact us on mazarshr@mazars.com.au or 07 3218 3919.As noted above, these provisions only impact employers who are using the annualised arrangements under an affected Award. Employers are under no obligation to use these provisions and can elect to continue to use or introduce offset arrangements as an alternative.
Published: 20 February 2020
Please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice. Content is accurate as at the date published.