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New Annualised Wage Arrangement Provisions to be inserted into 21 Modern Awards

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By Renee Karakinos, Lawyer & James Sanders, Associate, MST Lawyers                                                                                                                                       

Do you employ full-time salaried employees in Australia? Are those employees covered by a modern award? If they are, then your business may be affected by the Fair Work Commission’s recent decision to make changes to annualised salary clauses.



The Fair Work Commission made a decision to introduce “model” annualised wage arrangement clauses into 21 modern awards that will take effect from 1 March 2020.  These clauses impose additional requirements on employers to notify, keep records and reconcile wages with respect to their full time salaried employees.

A full list of modern awards that will be affected by these changes are available online (click link here).


What is in the model clause?

From 1 March 2020, employers must:

  1. Advise their full time salaried employees in writing, and keep records of:

    • how their individual salary has been calculated, including specification of each separate component of the salary and any overtime or penalty assumptions used in the calculation;

    • the outer limit number of ordinary hours and overtime hours which would attract award penalty rates or overtime pay, whichever the case may be, which the employee may be required to work (subject to any maximum outer limit fixed in the relevant modern award);

  1. Make additional payments to employees if they work hours in excess of the outer limits specified in the annualised salary arrangements or the relevant modern award;

  2. Keep a record of employees’ start times, finish times and unpaid breaks; and

  3. Conduct a wage reconciliation (i) every 12 months from commencement of the employee’s employment or (ii) on termination of the employee’s employment. Where a shortfall exists, the shortfall must be back paid to the employee within 14 days.

To facilitate the reconciliation, the record of hours completed by an employee for each pay period or roster cycle must be signed by employee, or acknowledged as correct in writing.

It is important that for all award covered full time salaried employees, employers must update their employment contracts to ensure that the contents are consistent and compliant with the relevant “model” annualised wage arrangement clause.

A breach of a modern award clause can lead to substantial civil penalties for an employer, including for directors of the employer ($63,000 per breach for companies and $12,600 per breach for individuals).


Benefits for Employers

The new modern award “model” annualised wage arrangement clauses allow employers to take advantage of two benefits:

  1. Under the clause, and for the purposes of the National Employment Standards contained in the Fair Work Act 2009 (Cth), the “base rate of pay” means the employee’s minimum wage rate contained in the relevant award, exclusive of any incentive-based payments, bonuses, loadings, monetary allowances, overtime and penalties; and

  2. Most modern awards allow the employer (and employees) to terminate the annualised wage arrangement by giving 12 months’ written notice.


Next steps for Employers

In accordance with the above, before 1 March 2020, employers should:

  1. Identify relevant modern award(s) that apply to their business;

  2. Ensure that any annualised salary arrangements are consistent with the annualised wage arrangement clause in the identified modern award(s);

  3. Update all relevant employment contracts to ensure compliance with the annualised wage arrangement clause in the identified modern award(s); and

  4. Identify and comply with any back pay obligations in the relevant modern award(s).


If you have any questions in relation to these important new requirements for full time salaried employees, please contact the MST Lawyers’ Employment Law team by email or call +61 3 8540 0229.