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What you need to know about annualised wage arrangements

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What you need to know about annualised wage arrangements

What you need to know about annualised wage arrangements

26 February 2020


On 4 July 2019 the Fair Work Commission (the Commission) issued a decision inserting annualised wage arrangements into a number of modern awards as a party of the 4-Yearly Modern Award review process.
 
Subsequently, on 23 December 2019 the Commission issued draft determinations of the clause for 21 modern awards, with a further draft determination expected soon for the Health Professionals and Support Services Award 2010.
 
These provisions will take effect from 1 March 2020.
 
The annualised wage agreements allow for the consolidation of specified award entitlements (including minimum weekly wages, allowances, penalty rates and annual leave loading) into a fixed annual wage.
 

The model clauses

There will be three different annualised wage agreement model clauses (numbered 1,3 and 4 in the decision above) to be inserted into the 22 awards as below.
 
All three model clauses require employers to:            
  • Advise employees in writing of the terms of their arrangement and what award entitlements it will cover.
  • Specify an outer limit for the ordinary and overtime hours that the annualised wage is designed to pay for and guarantee that for any additional hours worked beyond those limits within each pay cycle additional payments will be made to meet award minimum remuneration.
  • Employers must keep records of the start and finish times of each shift, the duration of all unpaid breaks and have them signed by their employees each pay period or roster cycle.
  • On the anniversary of each such arrangement compare the salary earned in that year with the minimum award payment for working the same hours and backpay any shortfall within 14 days.  


Model clause 1            

  • Banking, Finance and Insurance Award 2010
  • Clerks - Private Sector Award 2010
  • Contract Call Centres Award 2010
  • Hydrocarbons Industry (Upstream) Award 2010
  • Legal Services Award 2010
  • Mining Industry Award 2010
  • Oil Refining and Manufacturing Award 2010 (clerical employees only)
  • Salt Industry Award 2010
  • Telecommunications Services Award 2010
  • Water Industry Award 2010
  • Wool Storage, Sampling and Testing Award 2010
This model clause will be inserted in awards where employees generally work constant hours.  
 
Under this model clause employee agreement is not required for the adoption of annualised salaries, however the agreement must specify how the annualised wage is calculated.
 

Model clause 3            

  • Broadcasting and Recorded Entertainment Award 2010
  • Local Government Industry Award 2010
  • Manufacturing and Associated Industries and Occupations Award 2010
  • Oil Refining and Manufacturing Award 2010 (non-clerical employees)
  • Pharmacy Industry Award 2010
  • Rail Industry Award 2010
  • Horticulture Award
  • Pastoral Award 2010
  • Health Professionals and Support Services Award 2010  
This model clause will be inserted in awards where employees generally work variable hours that are subject to penalty rates.  
 
Under this model clause employee agreement is required for the adoption of annualised salaries, and the agreement must also specify how the annualised wage is calculated.
 

Model clause 4            

  • Marine Towage Award 2010
  • Restaurant Industry Award 2010
  • Hospitality Industry (General) Award 2010 – non managerial staff only  

This model clause will be inserted in the above modern awards which previously specified that annualised salaries must be of a greater value than the minimum weekly wage set out in the modern award.
 
Under this model clause employee agreement is required for the adoption of annualised salaries. The annualised salary must be a certain percentage above the relevant award’s yearly remuneration inclusive of certain award penalty rates and allowances.
 

Employer considerations

Notwithstanding these changes, employers can continue using annualised salary clauses or off-setting clauses in contracts of employment in preference to adopting the annualised wage arrangement from any relevant modern award.
 
However, for any employees covered by these awards who are to be paid annualised wages or salaries, employers should:            
  • Ensure they have systems in place to accurately record the hours worked by those employees including their actual start and finish times and the amount of unpaid break time taken, each day or shift.
  • Ensure that the annualised wage arrangements for each employee will be compliant with the relevant award as of 1 March 2020.
  • Ensure that for each pay cycle and each 12 months on an annualised wage arrangement if an employee receives less than they would have received under the award an additional payment is made to avoid underpayment.
  • Remember the onus of proof is on employers to disprove any underpayment claims.  Failure to comply with the new Annualised Wage clauses carries the risk of having to make back payments to employees and ex-employees, as well as the possible requirement to pay penalties for breaches of the award.

For more information, watch the webinar on annualised salary presented by Australian Business Lawyers and Advisors.
 

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