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Do you need to comply with modern award “Annual Wage” rules? 

About a year ago, the Fair Work Commission made variations to a number of modern awards to insert or change provisions on Annual (or Annualised) Wage Arrangements.

This really arose from widespread abuse of annualised wage arrangements most notably in the hospitality and retail industries where people have been paid on an annualised wage arrangement and been required to work hours well in excess of what they were actually getting paid for.

These new provisions took effect from 1 March 2020 and that means that it is coming up to time to do the first annual reconciliation.

Looking at the Clerks – Private Sector Award 2020 which has pretty broad application across industries, the relevant clause (Clause 18) sets out:

1. The matters that can be included in an Annualised Wage Arrangement such as award minimum rates, allowances, penalty payments, overtime, shift and annual leave loadings and a few other items
2. That the employer must advise the employee in writing of the amount of the annualised wage and how it was calculated, detailing each component and any penalty rate and overtime assumptions used in the calculation plus the outer limit of hours that the employee can work under the annualised wage arrangement without being entitled to additional payment of penalty rates or overtime rates under the award.
3. That the employer must do a reconciliation of the employee’s paid wages against what they would have got under the award every 12 months and when they leave employment and, fort that to happen, the employer has to record the employee’s starting and finishing times and any unpaid breaks and have that signed off by the employee at the end of each pay period or roster cycle. 

On face value, that appears to tell us that these rules apply to any employee who would be covered under a modern award that contains such a clause – in this case, every receptionist, accounts clerk, order intake clerk, etc in most industries attract coverage under the Clerks – Private Sector Award 2020.

Sadly, for many employers and employees, that would not be a welcome addition to their working day or their compliance requirements. 

However, it seems that they might not necessarily have to. On their website, the Fair Work Ombudsman says: “Employers can still pay all employees an annual salary without using annual wage arrangements in an award as long as it covers all of their minimum entitlements. Employers should consider getting independent advice to make sure they’re paying their employees enough.”

That would suggest that you can just do a common law contract stipulating an annualised wage arrangement (call it a salary just to distinguish it from the award provisions) and not have to worry about the award clause of itself.

If you elect to do take the common law option, make sure that:

1. You have accounted for all of the monetary provisions that would apply to the employee based on their real hours of work (when they are and how many they are) and that they really are better off monetarily under the contract than they would be under the award;
2. There is a written employment agreement that sets out the terms of that contract including the specification of any set-off arrangements (eg where overtime payments or annual leave loading or other provisions have been provided and set off in total remuneration);
3. The employee understands and accepts the contract on that basis and signs off on the employment agreement as evidence of that acceptance;
4. You regularly review remuneration paid under the contract of employment to take account of any changes in award conditions (eg annual minimum wage reviews) and ensure that the employee stays better off under the annualised salary arrangement than they would be under award conditions: and
5. You understand that, while you may be able to provide and set off monetary entitlements under the award against an annualised salary, you actually cannot contract out of awards. That may mean that, if the employee believes that the annualised salary is not adequate compared to award entitlements, the dispute settlement procedure in the award could come into play.

Because these matters are complicated, all employers should ensure that they have access to competent professional workplace relations advice. 

More information is available at  https://www.fairwork.gov.au/about-us/news-and-media-releases/website-news/past-website-news/new-rules-for-annualised-wage-arrangements#who-do-the-new-rules-affect

You can take advantage of our free first consultation if you would like to see whether we might be able to help – contact us on 0438 533 311 or at https://ridgelinehr.com.au/contact-us/