What’s your understanding of the obligations when paying employees an annualised salary? As part of their 4 yearly modern review, The Fairwork Commission (FWC) has introduced significant changes to annualised salary arrangements. These changes will be effective as of 1 March 2020, so it is crucial for employers affected to review their current annualised salary arrangements to ensure compliance with the new requirements.
What is an annualised salary?
An annualised salary (or wage) arrangement (established with the applicable award requirements) allows an employer to pay an annual salary to an employee in accordance with minimum weekly wages, benefits, various penalty rates and annual leave loading. Currently, annualised pay award requirements are relatively straightforward to implement and provide employers with a fair degree of flexibility and comfort when handling salary arrangements.
Who will be affected?
The changes to the annual salary clause will primarily affect industries where modern awards are commonly applied. This includes but is not limited to; Banking, Finance and Insurance, Clerks – Private Sector, Contract Call Centres, Legal Services, Manufacturing and Associated Industries & Occupations Award, Pharmacy Industry, and the Health Professionals.
What is changing?
Notable changes to the annual salary arrangments are as follows:
- An employer may pay an annualised salary to a full-time employee in accordance with minimum weekly wages, allowances, overtime penalty rates, weekend and other penalty rates and annual leave loading.
- Where an annualised wage is paid the employer must advise the employee in writing, and keep a record of:
- the annualised wage that is payable;
- which of the provisions of this award will be satisfied by payment of the annualised wage;
- the method by which the annualised wage has been calculated, including specification of each separate component of the annualised wage and any overtime or penalty assumptions used in the calculation; and
- the outer limit number of overtime hours which the employee may be required to work in a pay period or roster cycle.
- The employer is obligated to keep a record of the starting and finishing times of work, and any unpaid breaks taken, of each employee subject to an annualised wage arrangement.
- Every 12 months or upon termination of the employment (whichever occurs first), employers must compare the remuneration that would have been payable under the modern award with the annualised salary (with any shortfall to be rectified within 14 days).
How can employers prepare?
Feeling a little overwhelmed? It is expected that many employers will find these changes challenging and time-consuming. Fortunately, as the changes will not be implemented until 1 March 2020, this gives employers a headstart on understanding and implementing the refreshed annualised salary arrangements.
If you are uncertain how these provisions will affect your business, or would like more information about their impact, please do not hesitate to contact the friendly team members at HR Leading Edge.
For more information, see the FWC 4 yearly review of modern awards – Annualised Wage Arrangements.