Employers will often pay employees an annualised salary where employees are paid the same amount each pay period.
Some modern awards now contain an annualised salary clause, which enables an employer to pay an employee an annualised salary in accordance with that clause.
MODERN AWARD ANNUALISED SALARY
If your employees are covered under a modern award, you should check if the relevant modern award contains an annualised salary clause.
Whilst there is a difference in the annualised salary clauses contained in modern awards, of relevance is that the clause does impose additional obligations on an employer including the requirement:
- to notify the employee of the annualised salary arrangement;
- to keep a record of
- the annualised wage payable;
- the provisions in the award that will be satisfied by the annualised wage;
- the method by which the annualised wage was calculated; and
- the outer limit of the number of ordinary hours or overtime hours which the employee may be required to work in each pay period
- to pay penalty rates or overtime in addition to the annualised salary to an employee in a pay period if the outer limits are reached in that pay period;
- to keep timesheets which record in writing an employee’s starting and finishing times and unpaid breaks taken and which have been signed by the employee or verified in writing by the employee as being correct;
- to conduct a reconciliation every 12 months and on termination of the annualised salary to calculate the amount of remuneration that would have been payable to the employee under the award over the relevant period and compare zit to the amount that was actually paid to the employee for that period; and
- if the reconciliation identifies that the amount actually paid to the employee is less than the amount that would have been payable to the employee under the award, the employer must pay the shortfall to the employee within 14 days of the reconciliation.
COMMON LAW ANNUALISED SALARY
The introduction of annualised salary clauses in particular modern awards does not prevent employers implementing an annualised salary arrangement with an award covered employee using a common law contract with a set off clause. However, in order to avoid underpaying an employee, the employee’s annualised salary must still be greater than the employee’s minimum entitlements under the award.
THE NEED TO CONDUCT ANNUAL RECONCILIATIONS / AUDITS
In light of the above, to reduce the risk of underpayment claims and to comply with the obligations under annualised salary provisions, employers should conduct annual audits (or engage a lawyer to conduct an annual audit) in respect of every annualised salary arrangement.
This article is prepared to only provide general information about the topic. It is not intended to be used as advice in any way.