How does the annualised wage arrangements decision affect our business?
From 1 March 2020, many awards will be varied to include a new annualised salary clause. A list of awards that will be affected can be found here and some advice on how employers can comply with these changes can be found here.
It is important to note that the introduction of annualised salaries will not affect all employees. Employers do not have to agree to annualised wage arrangements and can choose to pay employees through other methods outlined below. Further detail regarding these alternatives can be found here.
Other options are:
This decision will only affect awards that already contain an annualised salary clause, replacing it with one of three new clauses, which contain additional requirements for employers.
This decision does not insert a new annualised salary clause to awards that did not already contain one, nor does it change which employees may introduce an annualised salary under an award. For example, in the Manufacturing and Associated Industries and Occupations award 2010, a new annualised salaries clause will replace the existing clause which only applies to supervisors, trainers and coordinators (outlined in clause 24.1(g)(i)). As a result, the new clause will also only apply to supervisors, trainers and coordinators.
The changes resulting from the annualised salaries decision will only affect employees covered by awards. If you have an enterprise agreement that is stand-alone (i.e. does not incorporate or specifically excludes a modern award) then this decision will not affect employees covered by that agreement.
However, if you have an enterprise agreement that incorporates a modern award, then this decision may affect you if you decide to enter into an annualised wage arrangement with your employees. Employers do not have to agree to annualised wage arrangements. Contact the Workplace Advice Line on 1300 55 66 77 for more advice in this area.
If employers have entered into an annualised wage arrangement with their employees, they will need to regularly audit their employees’ earnings.
Employers with an annualised wage arrangement will need to ensure that the employee’s annual wage is not less that the amount that would have received under the relevant award for the work they performed over the year. Employers must calculate the amount that the employee would have received under the relevant award and compare this to the amount of the annualised wage that was actually paid to the employee.
This calculation must be made each 12 months from the commencement of the annualised wage arrangement. Employers will also have to undertake a reconciliation on the termination of employment of the employee. If the employee was entitled to be paid more under the award for the hours worked, than they received under the annualised salary arrangement then the employer must pay the difference within 14 days.
Employers who choose to enter into an annualised wage arrangement with their employees, will be required to keep specific records for this arrangement. Employers must keep a record of the starting and finishing time and of any unpaid breaks taken. This record must be signed by and employee or acknowledged as correct in writing (can be electronically).
All employers should be aware of their record keeping obligations under the Fair Work Regulations 2009. Regulation 3.34 requires that “if a penalty rate or loading (however described) must be paid for overtime hours actually worked by an employee”, the employer must keep a record of the number of overtime hours worked by the employee during each day, or when the employee started and ceased working overtime hours.
These record keeping requirements under the Fair Work Regulations 2009 apply to all employers, regardless of whether they have entered into an annualised wage arrangement.
The introduction of annualised wage arrangements will replace existing clauses in awards and take effect on 1 March 2020. These changes will only apply to employers who have entered into such arrangements. Employers do not have to use annualised wage arrangements and can implement alternative arrangement such as paying employees in accordance with an award, using a common law off-setting arrangement or an IFA.
For more information, members of Ai Group should contact the Workplace Advice Line on 1300 55 66 77.
