What do employers need to know?
Underpayment of wages, headlined ‘Wage Theft’ in the media, is receiving a great deal of attention. George Calombaris, Woolworths and Coles have underpaid their employees.
How did they get this wrong?
Importantly, is your business at risk of getting it wrong?
Changes to 19 Modern Awards, 1 March 2020
The changes to the annualised salary clauses in Modern Awards are onerous. An administrative burden for employers. Your business may be at risk if you fail to implement and comply with the Award changes effective 1 March 2020.
This Employer Alert provides:
- Why have the Award annualised salary clauses changed?
- An overview of annualised salaries (before Award changes)
- An overview of the additional obligations for employers
- What employers need to do to mitigate risk
Why have the Award annualised salary clauses changed?
The new clauses aim to make sure that employees who are paid an annualised salary are not disadvantaged. There are additional obligations for employers to make sure their employees are not underpaid due to an annualised salary arrangement.
Overview of annualised salary arrangements (before Award changes)
Under an annualised salary arrangement, an employee is paid no less than if the employee was paid the minimum pay rates and entitlements for their role classification provided by an Award.
Generally, annualised salary arrangements include payment of reasonable additional hours worked, payment of overtime and penalties, allowances and annual leave loading that apply under Awards.
There are benefits for employees and employers.
- Employees receive the same salary payment each pay period regardless of the number of hours worked in any pay period.
- Employers are relieved of the administrative burden of calculating the number of hours worked by an employee and applying overtime/penalty rates, allowances and annual leave loading that apply under Awards.
Overview of additional obligations for employers
Annual reconciliation - Every 12 months, from the commencement of an annualised salary arrangement or, upon termination of employment, the employer must calculate the wages that would have been paid to the employee, if the employee was paid the minimum Award rates of pay. If there is any shortfall, the employer must pay the outstanding amount within 14 days.
This additional obligation is to make sure the annualised salary actually paid to the employee is not less than the Award.
Record keeping - Employers must keep detailed and accurate records of hours worked by employees paid an annualised salary. Start and finish times, as well as any unpaid breaks. In addition, the record of an employee’s hours, must be signed or, acknowledged as correct by the employee each pay period or, roster cycle.
This additional obligation is required for the purpose of conducting an annual reconciliation of an annualised salary arrangement.
Notification - Employers must state in writing the annualised salary payable to the employee as well as the assumptions made in calculating the number of additional hours worked (overtime/penalties, allowances and annual leave loading) must be factored into the annualised salary amount.
This additional obligation is required to demonstrate to the employee they are not disadvantaged by the annualised salary arrangement.
What employers need to do to mitigate risk.
- Conduct a review of all annualised salary arrangements that are currently in place.
- Develop and implement changes to policies/procedures/processes to meet the additional employer obligations under Awards.
Get the right advice.
The changes are not simple. The devil is in the detail. You need to know and understand the terms and conditions of the Awards relevant to your business.
There are other options available to employers who wish to pay annualised salaries. Alternatively, you may decide to pay in accordance with Award provisions and pay overtime and penalty rates, allowances and leave loading as required.
Ulton is your business partner. Our HR Consulting team can advise and support you with meeting your legislative obligations and compliance.
To find out more, contact Christine Guy, HR Consultant on (07) 4154 0413 or email cguy@ulton.net
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