A Heavy Burden on Employers – FWC to Introduce Annualised Hours Clause

New model annualised wage clauses have been proposed for 19 modern awards covering industries including health, hospitality, mining, banking and legal services, as part of the Fair Work Commission’s (FWC) 4 yearly review of modern awards. The new clauses, initially drafted in February 2018, have been contested by employer groups, who claim they will impose a, “major red-tape burden”, on employers which is “inconsistent with many of the existing annualised salary clauses in awards“.

The clauses will impose new record-keeping and reconciliation requirements, requiring employers to keep records of the hours worked by employees on annualised wage arrangements. Employers will then be required to conduct annual reconciliations, instead of a general review, to ensure that employees are reconciled for any shortfalls between what they have received as an annualised salary and what they would receive under their relevant modern award.

The FWC has drafted four variant model clauses.

One of the proposed model clauses will apply to awards covering employees who work highly irregular and variable hours or a considerable number of ordinary hours that would otherwise attract penalty rates. Employees covered under these awards will have the option of entering into an annualised wage arrangement “by written agreement”.

Another of the proposed model clauses will not require a written agreement and will apply to awards in industries with typically stable hours.

An additional model clause incorporates a minimum 25% pay increase above the award rate for non-managerial employees within the restaurant and hospitality awards.

In response to concerns expressed by employers that the insertion of the model clauses would result in onerous record keeping requirements for the employer, the Full Bench of the FWC commented that whilst it “may be more administratively burdensome than under existing provisions…it is nonetheless the case that it remains less onerous than calculating wages weekly, fortnightly or monthly in accordance with the normal requirements”.

The FWC are seeking submissions from interested parties prior to 27 March 2019, which they will consider before they finalise their decision to insert annualised wage arrangement provisions into modern awards. If you would like to make a submission and would like us to assist you, or if you have any questions about the impact of the model clauses on your business, please do not hesitate to contact Nick Stevens, Jane Murray or Angharad Owens-Strauss.

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