What award do the changes apply to?
The changes apply to 22 different awards from 1 March 2020. While we will not recreate the list now, some of the more common awards affected include:
- Clerks – Private Sector Award 2010
- Pastoral Award 2010
- Manufacturing and Associated Industries Award 2010
While the basic premise of the changes is consistent across the Awards, there are actually 4 different possible versions of the changes which may be used – so a “one sized fits all” approach is not possible.
It should also be noted that it has been decided to implement the changes to a number of other Awards but these are still under consideration by the Fair Work Commission. These include Awards such as the Restaurant Industry Award 2010 and the Health Professionals and Support Services Award 2020. We will let you know when changes to these Awards may be effective.
In Brief – what do the changes mean?
The changes will require Employers who use annualised salary arrangements under award conditions to administer working hours and payments differently. They also require employers to review and reconcile all annualised salaries against the actual hours worked each year. Should this review find a shortfall between the payments received and those that should have been received as per the award, the shortfall will need to be paid to the employee.
What is an annualised salary?
An annualised salary is an arrangement under which an employee takes home a pre-determined (and unvarying) amount each pay period – expressed as an annual salary. When this applies to award based employees, the salary can be calculated to include award wage rates, penalties, overtime rates and other monetary allowances that may be included in the award.
How might this affect your business or your clients?
The changes may apply to all employees on annualised salaries.
The specific clauses in Awards may vary, however, In general, the changes require:
- Employers to advise employees in writing, and keep a record of the following:
- the annualised salary that is payable;
- specifically, identify the provisions of the Award which are covered by the annualised salary
- identity the method by which the annualised salary has been calculated including details on how this impacts each separate component covered
- the outer limit of ordinary hours which would attract the payment of a penalty rate or overtime in a pay period without the employee being entitled to a payment in excess of the annualised salary; and
- if the employee works hours in excess of the outer limits identified, penalty and overtime rates will apply.
- Employers must, every 12 months (or for the 12 months prior to termination), compare the amount of remuneration payable under award conditions to the amount of annualised salary paid and pay any shortfall to the employee within 14 days; and,
- Employers must keep records of starting and finishing times of work, any unpaid breaks taken etc for all employees on annualised salary arrangements.
Employees on “Common Law” agreements to “roll in” award conditions
The Commission has actually indicated that Common Law Agreements that roll in Award Conditions are not automatically invalidated by these changes. This means that arrangements in place between many Employers and Employees may not require change. We are more than happy to assist clients to determine whether this is the case.
Our Recommendations to prepare for these changes
We can assist you with the alteration of employment agreements, communication with employees, the preparation of new templates and can advise on arrangements for timekeeping etc. As a minimum, we recommend you and your clients implement, or request our assistance to implement, the following:
- Identify the employees covered under the Award who are paid an annualised salary
- Review employment agreements to ascertain whether the employee’s annualised salary arrangements are based on award conditions.
- Record in writing and advise the employee in writing the annualised salary amount and details as required by your Award.
- Implement timekeeping processes for all employees that will allow you to track and audit salary-based employees on a regular basis,
- Understand and record the limit of ordinary hours, penalty rates and overtime hours your annualised salary will cover,
- Ensure you consider these limits when rostering, and
- Implement a process to review amounts paid and actual hours worked (this must be done every 12 months as a minimum).
Should you require any assistance with the above actions please do not hesitate to contact our office for assistance.