Commencing 1 March 2020 changes will be made to 20+ modern awards including the commonly applied Clerks – Private Sector Award 2010, Manufacturing and Associated Industries and Occupations Award 2010, and Hospitality Industry General Award 2010 among others.
The Fair Work Commission drafted three model clauses relating to annualised wage arrangements for inclusion in relevant modern awards. These variations to modern awards will impact existing and new annualised salary arrangements for permanent award covered employees and will require employers to take immediate action to ensure compliance is achieved from 1 March 2020. Failure to comply with the new changes may result in significant penalties imposed on employers.
The provision of an annualised wage is permitted in certain modern awards, allowing an employer to pay an employee an annual salary which is designed to compensate for certain entitlements in the modern award (including minimum weekly wages, overtime, penalties, allowances and leave loading).
This standardises the amount of money the employee receives each pay period, without requiring the employer to pay based on the specific hours worked during a pay/roster cycle. Subsequently, the administrative burden on the employer is reduced.
The three new model clauses are attributed to the various modern awards according to the expected variation of an employee’s work schedule, namely consistent versus fluctuating, and in the rarer case, where historical award clauses required a salary to be a specified percentage above the modern award’s minimum weekly wage.
Generally, the effect of the new model clauses is to ensure employees on annualised wages receive at least the equivalent amount that they would have been paid should award entitlements have been strictly applied throughout the year.To ensure that there is a scaffold for accountability, the annualised wage clauses will now require that a record is kept with respect to each agreement, detailing:
- The annualised wage to be paid;
- What award provisions are included in the annualised wage;
- The calculation used in determining the wage (evidencing inclusion of entitlements);
- The outer limit of ordinary hours attracting penalty rates; and
- The outer limit of overtime that the employee could be required to work over a pay period or roster cycle before receiving excess payment above the annualised salary.
Every 12 months from the commencement of the annualised wage agreement (or earlier where termination occurs), the employer must calculate the remuneration the employee would have received if not on an annualised wage and reconcile this with the wage that was paid to the employee throughout the preceding period.
If a deficit is apparent, then the employer has 14 days to remunerate the employee the difference. In order for these calculations to be possible, employers will be required to keep a record of an employee’s start and finish times and any unpaid breaks. However, for these records to be valid, they must be signed by the employee or acknowledged in writing or electronically every pay period or roster cycle.
In the lead up to March, employers should take a number of steps to ensure
compliance. These include:
- Checking whether their business has employees under any of the affected modern awards;
- Familiarising themselves with the applicable variation;
- Reviewing any impacted annualised salary arrangements with respect to the new requirements;
- Making amendments to the annualised wage agreements as necessary; and
- Implementing a system of record keeping meeting the above requirements.
If you are concerned about how these changes are going to impact your business, simply need assistance in preparing your organisation or determining whether these changes will impact your business, you can reach out to our team here or by calling us on 1300 406 005.