Important changes to modern award annualised salaries – here’s what you need to know

On 1 March 2020 the Fair Work Commission (FWC) introduced new obligations for employers who pay annualised salaries to employees covered by certain modern awards.

Why are these changes taking place?

Following a spate of recent publicised cases of employers underpaying their staff, the FWC made changes to a number of modern awards. The primary driver was to ensure that employees were no worse off under an annual salary than they would be as hourly employees under their award.

What are the changes?

As part of its four-yearly review of modern awards, the FWC decided to introduce three new standard ‘annualised wage arrangement’ clauses to 22 modern awards – two of which previously didn’t contain annualised wage clauses.

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What do employers need to do?

The changes introduce significant new obligations for employers, who are now required to:

  • Keep time and attendance records, including start and finish times as well as unpaid breaks, for affected employees. This means affected salaried employees now need to record their worked hours.
  • Pay affected employees overtime and penalty rates for hours worked in excess of those prescribed within the annualised wage agreement. Overtime hours deemed outside what is included in the annualised salary contract may need to be paid.
  • On an annual basis, compare the salary paid against what an employee would have been paid been under the award. If the salary paid is less than that under the award, the employer must pay the employee any shortfall within 14 days.

Glynn Flaherty, Director of payroll advisory firm Payroll Matters, says that the critical first step for employers is identifying which of their employees are affected.

“The first thing employers need to do is be aware of which staff these changes apply to. Many employers may not be aware which of their employees are subject to compliance obligations contained within an award.”

“You may have staff who you pay a salary and aren’t subject to any award and those who are employed under an award and are paid as such. Then you may have staff whose employment is underpinned by an an award, but they are treated as salaried employees.”

“Finding out who these salaried employees are, which award they are subject to, and if that award is affected by the changes that took effect on 1 March is the first step.”