Important Update – Annualised Salaries – New Obligations for Employers

As part of the four yearly review of modern awards which we briefly summarised In our November edition of Vision in the Workplace, the Fair Work Commission (FWC) has handed down a decision which affects employers paying annualised salaries to employees covered by modern awards.

Employers who currently pay annualised salaries to certain award-covered employees will need to take steps to ensure they are compliant with these onerous requirements by 1 March 2020.

HR/Payroll Requirements

There are also a number of requirements to ensure that employees are at all times adequately compensated, including:

  • Keep a record of finishing times of work, and any unpaid breaks taken, for the purpose of conducting calculations and reconciliations;
  • Records must be signed or acknowledged as correct by employee each pay cycle; and
  • Annual reconciliation from the commencement of the arrangement (or on termination of employment) calculating what the employee would have been paid under the Award compared to the annualised wage actually paid, reconciliation payments of shortfalls must be completed within 14 days.

Advisory Requirements

Employers must advise employees in writing of:

  • The annualised salary that is payable to them;
  • Which specific clauses of the Award apply to them, and is satisfied by payment of the annualised salary;
  • How the annualised salary has been calculated (including specification of each separate component of the annualised wage and any overtime or penalty assumptions used in the calculation);
  • The outer limit number of ordinary hours which would attract payment of penalty rates under the award in a pay period or roster cycle; and
  • The outer limit number of overtime hours which the employee may be required to work in a pay period or roster cycle

Penalties for non-compliance

Where an employer fails to comply with the terms of a modern award annualised wage clause, and particularly where an annualised salary is not sufficient to compensate for hours actually worked by an employee, employers will be exposed to the risk of underpayment claims and potential penalties for breaches of the modern award.

The Fair Work Ombudsman Sandra Parker has made underpayment a core focus of the agency.

It is therefore integral that businesses that employing workers on annualised salary arrangements ensure their compliance with the new legislation prior to 1 March 2020.

If you have any questions in relation to whether the new legislation will affect your workforce and/or any compliance questions relating to the new legislation please do not hesitate to contact Nick Stevens, Jane Murray or Angharad Owens-Strauss.

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