New Fair Work obligations coming next year. Are you ready?
Employers that pay an annual salary to their employees covered by an applicable Modern Award will soon be subject to a number of new notification, record keeping and wage reconciliation obligations. These new Fair Work obligations are aimed at ensuring employees aren’t being disadvantaged by annualised arrangements. The new clauses will only be inserted into Modern Awards which already contain an annualised salary clause. Modern Awards affected may be small in number but include Awards covering significant numbers of employees, including, for example, the:
- Horticulture Award 2010
- Pastoral Award 2010
- Clerks – Private Sector Award 2010
- Manufacturing and Associated Industries and Occupations Award 2010
The new clauses introduce several notification, recordkeeping and wage reconciliation requirements on employers who pay their Award-covered employees annualised salaries. In addition, employees who work highly variable hours or significant ordinary hours will be required to consent to the annualised wage arrangements given the attraction of penalty rates to the hours worked. Examples of some of the new requirements imposed on employers include:
- Keeping records of how the annualised salary has been calculated to factor in any overtime or penalty rates;
- Making additional payments to employees if hours exceed those specified in their annualised salary arrangements;
- Keeping records of starting and finishing times as well as unpaid breaks, which must be signed by employees (or in some cases, electronically acknowledged as correct) each pay period;
- Conducting a reconciliation every 12 months to calculate whether the employee has been better off on the annualised salary arrangement compared to the relevant Modern Award.
- The need to keep records of start and finish time, the need to obtain employee sign-off as to accuracy and the need for yearly reconciliation will of course add to the administrative cost (and make annualised arrangements less attractive to employers) but the Commission considered that without these arrangements employees would never know whether they were better off under the annualised arrangements.
As of 1 March 2020, employees covered by any of the above Awards and who are on an annualised salary arrangement must now be advised in writing of:
How the annualised salary has been calculated factoring in any overtime or penalty assumptions used;
- The outer limit number of ordinary hours which would attract penalty rates under the Modern Award; and
- The outer limit number of overtime hours which the employee may be required to work in a roster cycle without receiving any excess payment above the annualised salary.
- Employers will also be required to make an additional payment to an employee if they work hours in excess of the outer limits specified in their annualised salary arrangement. Further, employers must also keep a record of starting and finishing times and unpaid breaks taken by the employee. This record must then be signed by employees each roster cycle.
To conclude an already onerous process, every 12 months from the commencement of the annualised salary arrangement, the employer must conduct a reconciliation which calculates if the employee has been better off on the annualised salary compared to the relevant Modern Award. If there has been a loss, this must be paid back to the employee within 14 days.
Again, these changes take effect as of 1 March 2020. Therefore, we recommend that employers start preparing now for the changes so that they are compliant and understand their obligations prior to the deadline.
WHAT YOU NEED TO DO, AND HOW CAN HR GLOBAL SOLUTIONS HELP?
It is essential that any employer using annualised salaries now reviews their contracts of employment, their policies and HR practices in place, to ensure that come March 2020, the annualised salary regime will still comply with the law. While the Award changes do not take effect until March 2020, cases such as Woolworths show that a review of salary arrangements should be undertaken sooner rather than closer to March. Even if current practices comply with the new requirements, in some industries there will be new requirements for consent and additional record keeping.
Complexities in the terms of Modern Awards often cause confusion, leading to unintended Award breaches and exposing employers to a high risk of underpayment claims. For example, inconsistencies in actual employment arrangements and the arrangements of an annualised salary can arise from difficulties in understanding the rules around roster patterns, rates for grades of employees, part-time or full-time classifications, the maximum number of shifts a staff member is permitted to work, length of times between shifts and the number of days off. Additionally, implementing periodic audits, training on formal policies and checking matching annual salaries to the time actually worked can require professional assistance, given the complicated nature of such procedures and the seriousness of risk exposure.
Our team at HR Global Solutions have the necessary expertise to help you avoid the dilemma Woolworths, Qantas, Rebel Sport, Supercheap Auto, BCF, Commonwealth Bank, Michael Hill, MAdE Establishment, Sunglass Hut, Bunnings, Woolworths and Rockpool Dining Group, who have found by reviewing their annualised salary arrangements against the Fair Work Act and the relevant Modern Award. Contact us to obtain assistance in formulating arrangements that comply with the FWC’s new requirements.
This news alert provides a summary only of the subject matter covered without the assumption of a duty of care by HR Global Solutions. No person should rely on the contents as a substitute for legal or other professional advice.
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