Annualised Salaries

The Fair Work Commission is making changes to the annualised salary provisions in many modern awards. The changes will take effect as of 1 March 2020.

What Are Annualised Salaries?

Some modern awards allow an employer, by mutual agreement with the employee, to pay a fixed salary each pay period rather than paying the employee according to each hour that is worked.

The fixed salary must amount to a predetermined, annualised amount and must be enough to offset any entitlements that are provided for in the relevant award such as the base rate of pay, overtime rates, loadings and penalty rates.

The benefit for the employer is less administration overhead because payroll need not calculate and pay the employee a different amount based on hours worked each pay period in accordance to complex award conditions. The benefit for the employee is predictability in terms of how much they can expect to earn each pay period.

What Are the Changes?

Where an employee is subject to one of the affected modern awards and has entered into an annualised salary agreement, the employer will be required to do the following:

  • Document in writing the following:
    • which provisions within the applicable award are covered by the annualised salary arrangement
    • the maximum number of overtime/penalty rate hours that are covered by the annualised salary
  • Pay the employee, at the applicable rate as defined in the award, for any additional overtime or penalty rate hours that the employee works outside the limits covered by the annualised salary.
  • Keep detailed time and attendance records that must be signed off by the employee each pay period as an acknowledgement of their accuracy.
  • Perform an annual reconciliation to compare what has been paid under the annualised salary with what would have otherwise been paid under the award based on the hours worked by the payee during the year. If there is a shortfall, the employer must pay the difference to the payee within 14 days.

Which Modern Awards Are Affected?

  • 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
  • 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
  • Marine Towage Award 2010
  • Restaurant Industry Award 2010
  • Hospitality Industry (General) Award 2010

Why Are the Changes Being Made?

Many of the high-profile underpayment cases that have been uncovered recently can be attributed to employers paying annualised salaries but failing to build in a sufficient buffer into the annualised salary to offset the entitlements under the applicable awards.

The changes seek to address this problem and to therefore protect employee entitlements.

How Do the Changes Affect FastTrack360 Users?

Given the additional administrative overhead that the new requirements will impose, particularly the requirement to perform an annual reconciliation, there will arguably be little benefit for employers to pay an annualised salary if they already have the capability to capture detailed time and attendance details, interpret the time and attendance details against an award and to pay according to the award conditions.

Because FastTrack360 provides these capabilities, users already have the functionality to pay in accordance with award conditions and that is the best way to ensure that compliance is achieved.

However, if simple pay agreements or flat rates have currently been configured in FastTrack360 to pay annualised salaries, full agreements may need to be configured instead to capture and apply all the conditions of the relevant awards. FastTrack Professional Service consultants can be engaged to help with the configuration of complex awards where necessary.

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