Changes to annualised salary arrangements

As part of their four-yearly review of Modern Awards, the Fair Work Commission (FWC) is in the process of making changes to existing “annualised salary” clauses that appear in many current modern awards.

An annualised salary is an arrangement under which an employee takes home a pre-determined and unvarying weekly or fortnightly proportion of a fixed annual salary.

From 1 March 2020, employers electing to pay annualised salaries to employees covered by certain modern awards must comply with new FWC documentation, record-keeping and remuneration reconciliation requirements.

The new requirements include documenting how the annualised salary amount has been calculated, defining an “outer limit” of ordinary and overtime hours, keeping detailed records of start, break and finishing times for each employee and conducting a review of the salary arrangement every 12 months.

The FWC changes are targeted towards ensuring that employees are not disadvantaged by annualised wage arrangements and are timely in light of recent wages underpayments cases involving such high profile employers such as Woolworths, Qantas, Commonwealth Bank, Bunnings, Super Retail Group and the MAdE Establishment restaurant group, run by celebrity Chef George Calombaris.

Awards named for the annualised salary changes at this stage include the Clerks-Private Sector Award, the Manufacturing and Associated Industries & Occupations Award, the Hospitality Industry (General) Award, the Banking, Finance and Insurance Award, The Legal Services Award and the Health Professionals Award.

Employers paying annualised salaries in accordance with impacted awards will need to ensure they have systems and process in place prior to 1 March 2020 to address the FWC changes. Employers who fail to comply may risk underpayment claims from employees and associated civil penalties for breaching a modern award. Penalties for a single breach of the Fair Work Act may be up to $63,000 per contravention for a company and $12,600 per contravention for individuals.

Not sure if this FWC decision impacts your business? Confused about the pros and cons of annualised salaries versus paying under an Award? Relax; Bare Bones Consulting has got your back on this one…and anything to do with human resources . We’ll ensure we explain your options in a clear and simple manner so you can make an informed decision on the best course of action for you. After all, you have a business to run, right?