Changes are being introduced by the Fair Work Commission for those employers that pay annual salaries with a number of new annualised salary clauses to be inserted into a number of modern awards with effect from 1 March 2020.

Employers with employees covered by the modern awards listed in the industries/occupations below should review their employment contracts and update their HR and payroll practices in preparation for the changes being introduced on 1 March 2020:

  • Banking, Finance and Insurance Award 2010
  • Broadcasting and Recorded Entertainment Award 2010
  • Clerks – Private Sector Award 2010
  • Contract Call Centres Award 2010
  • Health Professionals Award 2010
  • Hydrocarbons Industry (Upstream) Award 2010
  • Horticulture Award
  • Hospitality Industry (General) Award 2010
  • Legal Services Award 2010
  • Local Government Industry Award 2010
  • Marine Towage Award 2010
  • Manufacturing and Associated Industries and Occupations Award 2010
  • Mining Industry Award 2010
  • Oil Refining and Manufacturing Award 2010
  • Pastoral Award 2010
  • Pharmacy Industry Award 2010
  • Rail Industry Award 2010
  • Restaurant Industry Award 2010
  • Salt Industry Award 2010
  • Telecommunications Services Award 2010
  • Water Industry Award 2010
  • Wool Storage, Sampling and Testing Award 2010

A highlight for all employers to take note of is that almost all employers employ clerical and administrative employees.  With the Clerks – Private Sector Award 2010 being one of the awards affected, it is likely that these changes will impact the majority of employers in one form or another.

What are the changes?

Depending on which modern award(s) apply to your workforce, the model clauses will impose a number of detailed mandatory requirements on employers who pay employees an annual wage in satisfaction of specific modern award entitlements.

Examples of some of the changes include being required to advise employees in writing of:

  • which provisions of the modern award that apply to them will be satisfied by payment of an annualised wage
  • the mathematical method by which the annualised wage has been calculated
  • the outer limit number of ordinary hours which would attract the payment of a penalty rate under the award and the outer limit number of overtime hours which the employee may be required to work in a pay period or roster cycle without being entitled to an amount in excess of the annualised wage under the award
  • any excess hours of work that will not be covered by the annualised wage for which separate payments under the award would apply.

In addition to the requirements of what to advise in writing, employers are required to ensure employees are at all times adequately compensated by their annual wage, including:

  • Completing annual calculations of what the employee would have been paid under the award compared with the annualised wage actually paid, and perform reconciliations and back-pay any shortfalls within 14 days
  • Keeping a record of the starting and finishing times of work, and any unpaid breaks taken, of each employee subject to an annualised wage arrangement in order to perform the calculations and reconciliations
  • Having relevant records signed by employees or acknowledged as correct in writing (including by electronic means) for each pay period or roster cycle

Why have the changes been introduced?

Whilst it is common practice for employers to pay an overall annual remuneration to award covered employees, very few employers audit these annual salaries on an annual basis to ensure the overall remuneration compensates employees for each individual award entitlement they are entitled to.

It is hoped that these changes will improve the practices of properly compensating employees for the work they perform.

What do you need to do?

Employers should review their employment contracts and update their HR and payroll practices to comply with the new obligations.

This will involve understanding which modern awards apply to your workplace and whether employees are currently paid correctly for the work they perform.

We recommend that you speak to your HR and/or legal advisor to understand how these changes will affect you and what you need to put in place to ensure you are compliant.

These changes will take effect from 1 March 2020.  Failure to comply with these changes will attract civil penalties under the Fair Work Act 2009 (Cth) so it is important that you take the time now to review and be prepared for these changes.

Disclaimer: this information is of a general nature and should not be viewed as representing financial advice. Users of this information are encouraged to seek further advice if they are unclear as to the meaning of anything contained in this article. Davidsons accepts no responsibility for any loss suffered as a result of any party using or relying on this article.