Do you pay your employees an “all up amount” annualised salary? For some awards there are significant changes on the way in 2020. Is your business ready?
As part of the four yearly review of modern awards, the Fair Work Commission handed down a decision impacting annualised wage (salary) provision changes for certain Awards.
When we talk about an annualised wage (salary) we are referring to an arrangement whereby an employer used the clause in the Award allowing them to pay a fixed annual wage (or salary) to an employee as an “all up amount”. This amount is high enough to more than cover the various entitlements the employee would be eligible for under an award ( e.g. minimum weekly wage, allowances, overtime, penalty rates, weekend rates, annual leave loading). Typically the ‘Better Off Overall or as it’s commonly referred to the ‘BOOT’ test is applied.
While on the surface the new provisions appear generally consistent, there are some major differences which create onerous obligations on employers. If your business is impacted by this change you will need to take action to ensure you are compliant by 1 March 2020.
Is my award impacted?
The list below sets out the awards in various categories. The categories are typically split based on regular vs variable hour industries.
| Category 1 | Category 2 | Category 3 |
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What are the changes?
Some of the key changes are outlined below:
- Salary Calculation
An employer may pay a full time employee an annualised wage in satisfaction of various award entitlements ( minimum weekly wage, allowance, overtime, penalty rates, weekend, annual leave loading etc) however the employer must advise the employee in writing:
- The annualised wage to be paid;
- The provisions of the award to be satisfied by the annualised wage;
- the method by which the annualised wage is calculated, including a break down of each individual component of the annualised wage and assumptions used in the calculation for any overtime or penalty rates;
- The ‘outer limit’ number of ordinary hours that would attract payment of penalty rates under the award in a pay period or roster cycle;
- the ‘outer limit’ number of overtime hours which the employee may be required to work in a pay period or roster cycle;
If an employee works hours in excess of either of the ‘outer limits’ outlined above during a pay period or roster cycle, those hours are not covered by the annualised wage and must be paid separately in accordance with the applicable award provisions. This means the employee receives payment in excess of the annualised wage.
- Record Keeping
For the purpose of complying with the comparison obligation, an employer must keep a record of the start and finish times (including any unpaid meal breaks) for each employee who is a party to an annualised wage arrangement.
This record must be signed by the employee or acknowledged in writing as being correct during each pay period or roster cycle.
- Conducting Reconciliation
The annualised wage must not be less than the minimum amounts payable under the award for work performed over the year for which the annualised wage is paid.
Each 12 months following the commencement of the annualised wage arrangement or upon termination of employment, the employer must calculate the remuneration payable under the award and compare it to the annualised wage actually paid to the employee. Any shortfall must be rectified by the employer within 14 days.
- Category Specific Requirements
In addition to the above changes, employers need to be aware of the category there award has been placed in. This will impact the degree of flexibility employer’s have when introducing and or removing annualised salary arrangements.
How do I prepare for these changes?
These changes are complex and we suspect, are going to be arduous and time consuming for employers to implement and manage. The above information is a general overview for the changes, we suggest employers impacted:
- Ensure they review the Fair Work Commission annualised wage provision (that apply to your business) and get clear on specifically what the impact will be on their business.
- Get appropriate advice on implementation and process requirements to ensure compliance. You will need to look at how you will measure time at work for your Award employees i.e. timesheets
- Alternatively, seek advice about other options for compliance.
If you believe you may be impacted by these changes, please get in touch with Employee Matters to book a complimentary discovery session to talk through your issues.
Remember, with our expanded team and service footprint, we are always here for you, so if you have any immediate needs for our HR and Recruitment expertise, please call your Employee or Recruitment Expert direct or book a Discovery Session today.
