What do the changes to annualised salary provisions mean to you?

You may have seen recent reports of several large Australian employers allegedly committing what is colloquially referred to as “wage theft”.

Employers must be vigilant that their employees are paid correctly and even more so from 1 March, 2020.

Late last year the Fair Work Commission handed down a decision which altered annualised salary provisions under 22 modern awards from 1 March 2020.

The Awards affected can be found on the Fair Work Commission’s website and include the Banking, Finance and Administration Award, the Clerks – Private Sector Award, the Legal Award and the Pharmacy Award.

This will undoubtedly affect a lot of white collar employees.

Currently the relevant Award allows an employer to pay an employee an annual salary in satisfaction of the minimum wage, allowances, overtime, penalty rates and annual leave loading.

For example, you can pay someone 20% more than the minimum wage in satisfaction of these Award entitlements, provided you state in writing to the employee what you are doing and what entitlements are covered by the increased payment.

The changes coming into effect mean that employers now have an obligation to track full-time salaried employees who are covered by the Award.

This may require a change in behaviour as, until now, salaried employees under the Award do not usually record their time and attendance and employers do not keep those records either.

From 1 March 2020 employers caught by the changes to the Award must in addition to current requirements:

  • Advise the employee in writing of the method of which the annualised wage has been calculated, including any overtime n penalty assumptions used in that calculation.

  • Advise the employee of the ordinary hours and overtime the employee might be required to work without becoming entitled to any payment on top of the annualised salary.

  • Track and record full-time employee hours and ensure that they are keeping within the limits of ordinary hours worked and overtime. If they are not, ensure that the employee is paid any additional overtime and their salary is increased to ensure compliance with the Award.

  • Run annual reports or a report on termination of any employee to ensure that the employees are receiving their full entitlements under the Award for all the hours they have worked in that reporting period.

There are large fines for not complying with the requirements of the Fair Work Act in this regard and Parliament is considering introducing legalisation to make it a criminal offence for breaching the Fair Work Act and underpaying employees. This information is intended only to provide a general overview and has not been prepared with a view to any particular situation or set of circumstances. It is not intended to be comprehensive nor does it constitute legal advice. While we attempt to ensure the information is current and accurate we do not guarantee its currency and accuracy.

You should seek legal or other professional advice before acting or relying on any of the information in this blog as it may not be appropriate for your individual circumstances.

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