Annualised wage arrangements for Award-covered employees – not set and forget!
As of 1 March 2020, employers who have annualised wage arrangements in place for award-covered employees, will be faced with a number of new obligations resulting in more onerous notification, record-keeping and auditing requirements – yes, creating a significant administrative burden for employers.
So, the first thing to get straight is: what is an annualised salary (wage) arrangement ? Essentially, it's an 'all-inclusive' annual rate instead of a rate that specifies all applicable award entitlements (such as overtime, penalty rates and loadings). Historically an annualised arrangement was used as a means of payroll convenience that allowed an employer to satisfy all award entitlements by paying an employee an annual salary (wage).
However, with the new ruling, any employers with employees covered by the relevant awards (there are more than 20 awards in total affected by this ruling) will be required to meet several new administrative obligations – being:
- notification requirements to the employee about:
- the amount to be paid as an annualised salary;
- how the annualised salary was calculated; and
- the entitlements the annualised salary is intended to satisfy;
- Setting the 'outer limit' of hours worked which the salary will satisfy and ensuring payment of any hours which are worked exceeding this time;
- Annual reconciliations/audits of the arrangement – which involves comparing the actual amount earned to the amount which would have been earned considering all of the hours worked;
- Recording and keeping a record of each employee's start and finish times, as well as any unpaid breaks taken, for the purpose of carrying out the reconciliations.
NOTE: employers are also required to have employees sign this record (or acknowledge it in writing, electronically) each pay period or roster cycle .
Four 'model clauses' have been prepared and each of the >20 Modern Awards have one of these new clauses.
Cooper Grace Ward has a simple diagram on their website depicting which Award has adopted which Clause.
This new ruling will surely have employers reviewing whether an annualised salary arrangement is still a "convenient", viable option.
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