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By Key Business Advisors
Human Resources News

Do you employ staff on annual salaries? If the answer is yes, then read on. .

Back in July 2019, the Fair Work Commission handed down a decision that is taking effect on the 1st of March 2020 affecting all full-time employees on an annual salary arrangement and covered under the following awards: 

Category 1

  • Banking, Finance and Insurance Award 2010 
  • Clerks – Private Sector Award 2010 
  • Contract Call Centres Award 2010 
  • Hydrocarbons Industry (Upstream) Award 2010 
  • Legal Services Award 2010 
  • Mining Industry Award 2010 
  • Oil Refining and Manufacturing Award 2010 (clerical employees only) 
  • Salt Industry Award 2010 
  • Telecommunications Services Award 2010 
  • Water Industry Award 2010 
  • Wool Storage, Sampling and Testing Award 2010 

Category 2 

  • Broadcasting and Recorded Entertainment Award 2010 
  • Local Government Industry Award 2010 
  • Manufacturing and Associated Industries and Occupations Award 2010 
  • Oil Refining and Manufacturing Award 2010 (non-clerical employees) 
  • Pharmacy Industry Award 2010 
  • Rail Industry Award 2010 
  • Horticulture Award 
  • Pastoral Award 2010 
  • Health Professionals Award 2010

Category 3 

  • Marine Towage Award 2010 
  • Restaurant Industry Award 2010 
  • Hospitality Industry (General) Award 2010 

This decision was made to protect employees from any underpayment arising from their annualised salary arrangement. Full-time employees are often paid an annual salary to ease the administrative burden and often work reasonable overtime hours without compensation, as it is included in their annual salary. However, underpayments can occur when employees work more hours than those included in their annual salary  

To avoid this situation and ensure employees are not disadvantaged, as of the 1st March 2020, businesses who employ full-time staff on an annual salary will be required to do the following:

  • Inform the employee in writing on the specific provisions (overtime, allowances, etc) included in their annual salary. 
  • Calculate the employee’s annual salary and notify employees in writing how the calculation was performed. 
  • Specify in writing the maximum of ordinary hours which would attract a penalty payment and any overtime hours not included in the annual salary.  
  • For each pay cycle, record the employee start times, unpaid breaks and have the employee to sign or acknowledge as accurate. 
  • Each year, or at the end of employment, check that each employee hasn’t been underpaid by doing a reconciliation (compare the annualised salary the employee received with the actual hours worked) and pay any shortfall within 14 days. 

From the 1st of March 2020, a written agreement will be required to enter an annualised salary arrangement, except for employees covered under the awards of Category 1.

What’s next?
  • Businesses should check the correct award and classification for each full-time annual salaried employee. 
  • For employees covered by category 2 and 3 awardsemployers should ensure an agreement is put in place to confirm the arrangement. If you have a current contract in place, ensure that a well-drafted set-off is included. 
  • Calculate the employee’s annual salary including all penalties, overtime rate etc. and ensure the employee is not underpaid.  
  • Update your record-keeping systems to ensure all full-time employees’ hours are recorded accurately. You could use paper or online timesheets to do that, or even an online app such as ‘Record my Hours’ created by the Fair Work Ombudsman.   
  • Ensure an alert is in place to reconcile the employees’ pay every year and pay any shortfall if you find any.  

With less than a month to go, we understand this can be overwhelming. KBA can help with ensuring you are compliant as of 1st March 2020. We have developed salary calculators that comply with legislation detailing the annual salary calculation. Get in touch today and speak to one of our team members to see how we can help.  

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