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Shake Up to Employment Laws: Annualised Salary Arrangements

Employment Law

*The changes take effect on the first pay cycle after 1 March 2020. For many employers this will be on or about 12 March 2020.

*The regime may be expanded over time, but at this stage, employers just need to review their arrangements regarding full-time staff who fall under one of the 22 Awards effected by the changes.

*The Commission’s ruling has made very clear that in situations where employers pay their full-time staff annual salaries that are well above Award rates, they do not need to follow the new annualised salary arrangements so long as there is a very clear clause in the contract of employment which lists all of the Award entitlements that are intended to be offset by the salary they are paid, and so long as there is no doubt that the salary truly exceeds the totality of all entitlements owed under the Award.

*Where staff are paid at or close to Award, the new arrangements allow the parties to set an annualised salary, so that the employee gets the same amount every pay cycle, following a realistic assessment of the usual entitlements the employee would earn under the Award in usual circumstances. This provides greater certainty to both the employer and the employee as to how much the usual wage will be.

*Some of the practical difficulties of the annualised salary arrangements include that the parties must keep accurate records detailing the hours worked (both number and timing of those hours), and based on these records these needs to be an analysis performed every pay cycle, and then again overall once per annum, to ensure that the amount paid for any particular pay fortnight was sufficient to meet minimum Award obligations.

What do you need to do about these changes?

*check whether you have any full-time employees who are also covered by any of the 22 Awards.

*if any such employees have an employment contract with an annual salary that exceeds the Award, and which is intended to offset any possible entitlements under the Award, check that there is a clause in the contract of employment that comprehensively sets this out. It is expected that most companies will need to amend with greater detail any offset clauses they currently have in their contracts.

*if any such employees do not have an annual salary under a contract of employment, you will need to implement changes to how your record and pay those staff in accordance with the new annualised salary arrangements.

Our employment law team is well placed to assist companies with the implementation of these changes – do not hesitate to call Rod Berry on (02) 9411 4466 for help in this important area.