FWO changes that may impact you even if you pay above award rates
The Fair Work Commission (FWC) Full-Bench has handed down a decision which will change annualised salary provisions for many modern awards from 1 March 2020.
WHAT IS AN ANNUALISED SALARY?
An annualised salary arrangement is permitted under a number of awards and allows an employer to pay a fixed annual salary to cover various award entitlements, including minimum weekly wages, allowances, overtime, penalty rates and annual leave loading.
The Fair Work decision may change how you manage this in your organisation from requiring employees to record start and finish times, through to requiring overtime payments regardless of whether you are paying above the minimum rate.
A Current Case Study
Company XYZ approached us recently to conduct a review of their payment of penalties allowances, against the relevant modern award to ensure their practices are compliant.
Company XYZ employees are covered by the Manufacturing and Associated Industries and Occupations Award 2010 and these employees work remotely for typically 12 hour days. Company XYZ pay their staff an hourly rate for all standard hours, almost double the minimum award rates of pay. For the purpose of overtime, the Company then pays a higher flat hourly rate for all work carried out in excess or their ordinary hours per day, which is more than the 1.5x, but less than the 2x their higher hourly rate.
Despite paying well above the minimum rates of pay for ordinary and overtime hours, the changes to the annualised salary provisions may impact Company XYZ’s current practice of overtime payments.
3 Key Points for Employers
The new annualised salary provisions in awards are more prescriptive and contain a number of administrative requirements that employers must follow.
Here are three key aspects employers need to be aware of:
1. Notification obligations
Employers are required to advise the employee in writing of the annualised salary payable to them, the clauses of the modern award satisfied by the annualised salary, and how the annualised salary has been calculated.
2. Outer limit
Employers must also specify the outer limit of ordinary hours that an employee may be required to work without being entitled to additional payment. If an employee works hours in excess of the outer limits, the employee must be paid separately in accordance with the applicable award provisions.
3. Annual reconciliation and record keeping
Employers are required to carry out an annual reconciliation for each staff member from commencement (or upon termination if prior to 12 months), by calculating remuneration payable under the award and comparing this to the actual annualised salary paid to the employee. Any shortfalls must be rectified by the employer within 14 days.
WHAT ACTION SHOULD EMPLOYERS TAKE?
Employers should review the annualised salary provisions that will apply to your business from 1 March 2020 and start preparing for the introduction of the new arrangements or alternatively, seek advice about other compliance options.