After a lengthy Modern Award review period resulting in numerous changes to the Modern Awards, the first changes were implemented on 4 February 2020.
However, the greatest change arising from the Modern Award review will commence on 1 March 2020, with the implementation of the new annualised wage provisions in many Awards. If you are currently using annualised salaries, or wish to in the future, you will need to take steps to make sure you comply with the new requirements.
Which Awards are affected?
Overall there are 23 Modern Awards that will be impacted by the changes to the annualised wage provisions. There are two new model clauses which will commence on 1 March 2020 affecting 20 Modern Awards. Any remaining model clauses will commence at later date not yet determined by the Commission and will affect the:
- Hospitality Industry (General) Award 2010;
- Marine Towage Award 2010; and
- Restaurant Industry Award 2010; and
- Health Professionals and Support Services Award 2010.
Set out below is a breakdown of each of the varied 20 Modern Award and its model clause that commences on 1 March 2020.
Key requirements of new model clauses
While there are nuances between the model clauses, all clauses have common requirements. These include:
- notification in writing to employees of the annualised wage payment to them
- identification of which clauses in the Modern Award that are being satisfied by the annualised wage
- specifying an ‘outer limit’ of the hours that would attract penalties or overtime, which the employee may be required to work over a pay period or roster cycle for the annualised wage
- payments to employees for any additional hours worked outside of the ‘outer limit’ within the pay period or roster cycle: this payment must be separate to the annualised wage within that period
- an annual reconciliation each 12 months from the commencement of an employee’s annualised wage arrangement, to ensure the annualised wage paid to an employee is at least equal to the amount that would have been paid under the Modern Award
- keeping detailed records of the employee’s actual start and finish times (including any unpaid breaks) and requiring employees to sign off, or acknowledge, that the record of hours is correct for that pay period or roster cycle.
This is just a general outline of the model clauses. It is important that employers read, in detail, the model clauses in the Modern Awards that apply to their employees.
What does this mean for my business?
If you already have an employment contract in place that incorporates an annualised salary provision under one of the existing Modern Award provisions, you will need to make sure that the arrangement now complies with the new requirements.
What this involves will depend on the relevant Modern Award. As a minimum, we recommend that before March 2020 you:
- review which employees are currently engaged under annualised salary provisions in Modern Awards
- work with your payroll department to determine which systems you have in place for employees to record all hours worked each pay period/ roster cycle and a mechanism for employees to sign off or acknowledge those records as being accurate
- consider whether your current annualised salary arrangement under a Modern Award currently sets an outer limit of hours that can be worked and if not, whether you will need to issue new contracts of employment.
Even if the annual salary you are paying your employees is higher than what they would be entitled to under a Modern Award , you need to take steps to implement the necessary changes so that the employer (and you personally) are not at risk of penalties under the Fair Work Act 2009 (Cth) for failure to comply with the terms of a Modern Award. This can technically occur even in instances where no underpayment has been made.
Is this the only way I can implement annual salaries for my Award covered employees?
No. The Fair Work Commission has confirmed that the model annualised wage clauses do not affect an employer’s ability to enter into common law annual salary arrangements that set-off Modern Award entitlements.
The law regulating the drafting, implementation and enforcement of common law set-off clauses is complex. It is essential that employers obtain advice about this option before relying on them instead of the annualised wage arrangement under a Modern Award.