ANNUALISED SALARIES & UNDERPAYMENT SCANDALS
The Fair Work Commission, as part of the four-yearly review of modern awards, flagged that there would be a change to annualised salary requirements after a raft of issues arising from underpayments to salaried employees covered by Awards.
The new framework is to be put in place effective 1st March 2020, ensuring that employers are paying annual salary workers correctly, and not less, than any relevant Award.
Unless you have been putting your head in the sand or under a rock, you’ll know there have been significant issues highlighted in the last few years (and more in recent months) surrounding underpayments to salaried workers, who still fall under an Award and hence are protected by a “minimum wage” no matter if they are deemed salaried or not.
And while the added onus to an employer and payroll system seems a continued burden, new cases of underpayments keep coming to light – the latest being all over the news in the last weeks for Coles, although they are not alone.
Annual Salaries
An employer can pay an employee that falls under an Award an annualised salary if the Award allows it, which is a set amount over a year, no matter what day or hours of the week is worked. Some of the new provisions say an employee must agree to it, but it depends on the Award.
There are some clear bonuses in annualised salaries for both parties:
No messy payroll calculations across different rosters and hours
It “evens out” an employee’s pay across different rosters that might span between 2 to 8 weeks. I.e., an employee may work more hours and earn more pay one week, and then less hours and less pay the following weeks. Annual salaries ‘even out’ that peak and trough for budgeting (and tax) purposes
Includes payment for overtime, allowances and leave loading within the annualised salary,
May provide for a higher level of pay than the Award to recognise the skill-set and/or knowledge of the employee
If it’s not new, why all the fuss?
There has always been the need to reconcile an employee’s annual salary to ensure that, for the hours and role worked, the employee is still either:
At the minimum prescribed under the Award; or
Better off than the Award.
This calculation should be regular (i.e., at least annually) to ensure that the annualised salary is at least the same as the relevant Award (base pay rate + allowances + overtime + annual leave loading) for the hours and type of work performed.
However, due to ongoing issues with employers either choosing not to check, or getting this wrong on such a wide-scale and pervasive level, Fair Work is now signalling a major change about how and when you should do these checks as an employer to make sure your employees aren’t worse off under an annualised salary.
Payroll doesn’t
have to be complicated.
What to do now?
Let’s boil it down:
Simply, check at least once a year (post Award wage increases) that any annualised salary employees that fall under an Award are getting the right pay for hours worked
Check again if and when rosters change substantially – hours, overtime, allowances, etc
Set it out clearly in writing to the employee (i.e. an employment contract) about what their annualised salary covers
If someone leaves your employment, check their pay and rectify any shortfalls within 14 days
Keep a record of start and finish times. To be safe, get them to “clock on and off” as other employees do, don’t treat them any differently .
As always, we are here to help – either as a one-off check with calculations – or ongoing.
Please contact us to help with your HR and remuneration strategies.