It is common practice for employers to pay annualised salaries to employees where the salaries are intended to operate as ‘all-inclusive rates’ that satisfy all entitlements owed to an employee under an applicable award.
However, in the preliminary hearing of the recent case of Simone Jade Stewart v Next Residential Pty Ltd  WAIRC 00756, the WA Industrial Magistrates Court has cleared the path for an employee on an annualised salary to claim $29,000 in unpaid overtime and lunch breaks following an employer’s failure to specify the applicable employee award in their employment contract.
In this particular case, both parties conceded that the ‘Clerks – Private Sector Award’ governed the employee’s employment. The Award provides that an employer may pay an annualised salary in satisfaction of the following employee entitlements:
- minimum weekly wages;
- overtime and penalty rates; and
- annual leave loading.
The relevant clause of the Award also states employers that elect to pay employees an annualised salary must advise the employees in writing of the applicable award and of the specific award entitlements to be satisfied by payment of the annual salary.
However, rather than defining the applicable award and entitlements, the employment contract contained a catch all provision stating that the annualised salary was ‘inclusive of any award provisions/entitlement that may be payable under an award’.
The employer argued this term was sufficient to indicate that the annualised salary was inclusive ‘of any or all’ of the provisions set out and payable under the Award.
The Court ultimately rejected this approach, finding that the broad term created uncertainty as to which award applied and which provisions the salary intended to cover.
It was noted by the Court that specificity is crucial to ensuring employees can verify their salary against their award entitlements, and so they may confirm they are not suffering any wage disadvantage.
This decision serves as a warning for employers to avoid generic wording in employment contracts for annualised salaries. Additionally, employers must ensure provisions of employment contracts clearly identify the applicable award and specify the provisions of the award that are intended to be satisfied by payment of an annual salary.
If you require any assistance in drafting employment contracts, please contact a member of our team.