The Fair Work Commission recently made a decision which will change annualised salary provisions under 22 modern awards from 1 March 2020 onwards. If an applicable award covers your employee(s), your obligations for paying employee salaries are going to change.
Under the Fair Work Act, Employers have always been obligated to pay salaried employees under all Awards at leastthe same gross amount that they would have received under their respective awards (including overtime, allowances and travel). Most entitlements should already be accounted for, but as salaried employees do not typically record their time and attendance, it has been almost impossible for employers to calculate any entitlements.
With the recent changes to the annualised salary provisions, you need to start tracking full-time employee hours, even if they’re salaried. It means employers can be penalised under the award act, even if their employees are salaried.
Here’s the kicker – nearly 1 million (~100%) of Australian businesses have staff employed under at least 1 of these awards, putting thousands of business owners at risk. The chances of these changes affecting you are pretty much certain. And, with a wage theft bill on the horizon, failure to follow procedure could soon result in company directors facing jail time.
The following awards are where employers are able to pay an annual salary without the employee’s agreement.
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
The following awards will require the employee to agree for the employer to pay an annual salary.
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
Pastoral Award 2010
The following awards where the new requirements will be introduced at a later date (a date after 1 March 2020, which is yet to be determined).
Last year we saw countless Australian businesses called out by Fair Work for failing to comply with their employment obligations. One notable example was the George Calombaris scandal in which his MAdE Establishment underpaid workers $7.8 million. The investigators found “significant underpayments” at the restaurants were the result of annualised salary arrangements not being correctly applied, with some staff missing out on overtime and penalty rates.
Fair Work is continuing (and will continue) to name and shame Australian businesses. The upcoming changes to the annualised salary agreement are part of their strategy to close loopholes and ensure Australian businesses are paying employees fairly. With businesses already handling PR nightmares and costly settlements, the proposed wage theft bill will make payroll scandals a c-suite issue. If you’re a business leader sitting on your hands and fobbing off the responsibility of payment obligations to someone else, this is your wake up call.
What do the annual salary changes mean for Australian businesses?
Implementing these changes could prove time-consuming and frustrating for employers and employees alike, but failure to follow the 2020 annualised salary changes is a direct breach of the Fair Work Act. As an employer, you could be fined and if the wage theft bill passes, could even be sentenced to jail time.
Next steps for Australian employers
If your payroll and HR support haven’t already alerted you to what’s going on, you should meet with them and discuss the next steps. As a general guide, we recommend businesses do the following:
Ensure all full-time employees who fall under one of the relevant awards track and submit all hours worked each week, either in writing or electronically.
Have in place written documentation which records which provisions of the award are intended to be included within the annual salary.
Where an employee works hours which exceed those ‘outer limits’ in a pay period/roster cycle, pay the employee for those hours worked (at the relevant overtime or penalty rate) within the relevant pay cycle.
Run a report at least once per year comparing employees’ salaries with the employees’ full entitlements under the Award for all the hours they have worked in the relevant period.
Run reports each time an employee is terminated to ensure they have been paid the minimum amount under the Award for the hours they have worked since 1 March 2020, or since the last annual report.
Immediately top up an employee’s salary for any underpayments identified in comparison with their Modern Award entitlements.