Annualised wage provisions: what does this mean for my business?

From 1 March 2020, new rules for annualised salaries will make keeping timesheets and conducting yearly pay reviews compulsory for some businesses. The rules also restrict how long employers have to compensate workers for underpayment.

The Fair Work Commission’s update to 18 Modern Awards is intended to ensure workers on annualised wages are not worse off than those paid an hourly or weekly wage.

Members who have employees on annualised wage arrangements, pay their employees a flat rate of pay, or aren’t sure if their employees are covered by an award are encouraged to contact CCIWA’s Employee Relations Advice Centre team on 9365 7660 or email [email protected].

Affected awards include:

  •  Banking, Finance and Insurance Award 2020
  •  Broadcasting, Recorded Entertainment and Cinemas Award 2010
  • Clerks—Private Sector Award 2010
  • Contract Call Centres Award 2010
  • Horticulture Award 2010
  • Hydrocarbons Industry (Upstream) Award 2010
  • Legal Services Award 2020
  • Local Government Industry Award 2010
  • Manufacturing and Associated Industries and Occupations Award 2010
  • Mining Industry Award 2010
  • Oil Refining and Manufacturing Award 2020
  • Pastoral Award 2010
  • Pharmacy Industry Award 2010
  • Rail Industry Award 2010
  • Salt Industry Award 2010
  • Telecommunications Services Award 2010
  • Water Industry Award 2010
  • Wool Storage, Sampling and Testing Award 2010

What is an annualised wage arrangement?

An annualised wage arrangement is a provision under an applicable award that allows employers to bundle certain award entitlements and pay employees an ‘all-inclusive’ wage each pay cycle.

What has changed?

The new provisions are intended to ensure that an employee engaged on an annualised wage arrangement, under an applicable award, is not any worse off than an employee being paid an hourly or weekly wage under the same award. They vary between awards to account for differences between roles and industries, but in general outline that:

  • details of the arrangement, including the hours of work compensated for, are to be provided in writing to the employee;
  • each pay cycle, the employee must be compensated for any hours that fall outside the agreement;
  • for each 12 months engaged on an annual wage, the total annualised wage of an employee must be reviewed against what they would have received under the award;
  • a record of start and finish times of each employee, as well as any unpaid breaks taken must be kept and verified by the employee; and
  • any underpayments discovered upon completion of the annual review must be corrected and back paid within 14 days.

Practical considerations

Businesses may be impacted by the changes even if they are paying the worker on an annualised salary above what they would receive under the minimum award rate. This is particularly important given the recent crackdown on underpayment of wages.

Household name businesses have recently been the subject of high profile prosecutions for underpayments. The Australian Government is now considering criminalising systematic and deliberate wage underpayment. Currently, employers can be fined a maximum penalty of $63,000 per occasion for underpayments — and up to $630,000 per occasion if the contravention is considered serious. However employers who are part of an employer organisation such as CCIWA have proven to be less likely to underpay employees. They’re also more likely to be ethical businesses.

CCIWA’s team of experienced workplace relations lawyers can draft contracts and complete wage audits to help ensure your business is compliant with the changes.

Want to know more? Members of CCIWA can access a member exclusive Industrial Award Service that provides up to date information on the Modern Awards. The service includes a copy of the award, a wage schedule and real time updates relating to any changes to the award. To subscribe to the Industrial Award Service, contact CCIWA’s Employee Relations Advice Centre team on 9365 7660 or email [email protected].

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