Annualised Salaries: Changes to Modern Awards

Annualised Salaries: Changes to Modern Awards

 

employees working together on laptops

What are the new changes to Annualised Salary Arrangements?

The Fair Work Commission has introduced changes to the terms of several modern awards. From the 1st March 2020, there are new obligations for employers paying annual salaries – these changes vary slightly depending on award.

 

 

Which awards are affected?

To understand your obligations, you need to know which award(s) apply to your business and what level your employees are classified at. From the first full pay period after 1 March 2020, the terms of 18 modern awards will be amended:

award changes 2020

Source: Employment Innovations

In addition, four other awards will be amended at a later date:

  • Hospitality Industry (General) Award, 2010
  • Restaurant Industry Award, 2010
  • Marine Towage Award, 2010
  • Health Professionals & Support Services Award, 2010

 

professional woman working on laptopWhat are the new obligations?

1. Some individual agreements should be facilitated with employees who work highly varied hours, before an annualised salary arrangement is initiated.

2. The annualised salary should not result in the employee receiving less than they would have had the modern award been applied in the usual way. A clause should be included in the contract to cover this.

3. All arrangements must be made in writing for annualised salary arrangements, including provisions included in the arrangement such as minimum weekly wages, allowances, overtime & penalty rates, annual leave loading.

4. The agreement must specify the “outer limits” of the number of overtime hours included

5. The total hours worked must be reconciled annually to ensure that the total number of hours worked across the year have not exceeded the included annualised hours calculated including the outer limits

6. The employee must provide the employer with start and finish times and unpaid meal break times each week

7. The arrangement may be concluded by either party at annual intervals

 

Do employees have to agree to the Annualised Wage Arrangement?

Some amended awards specify that the annualised wage arrangement can only be done by agreement, others state that agreement is not necessary. The awards that do require agreement have been included below:

award changes that require agreement

Source: Employment Innovations

 

Updates to Annualised Salary Employment Agreements

Wherever an annualised wage is paid, the employer must advise the employee in writing with:

  • The amount of “annualised wage” payable
  • Which provisions of the award the annualised wage compensates an employee for
    Tip: look at the “Annualised Wage Arrangements” clause of the award to see which provisions can be covered by the arrangement (e.g. Clause 16 – Minimum Weekly Wages)
  • How the annualised wage has been calculated. Include specification of each component and any overtime/penalty assumptions
    Tip: Award rates increase each July, it’s a great idea to include contingency for this
  • The outer limits of overtime and penalty rate hours an employee may be required to work in a pay period. If an employee does work outside of these limits, they must be paid for those hours (at award rates) in that same pay period. Think of this as protection for employees from working excessive hours, and protection for employers from having to pay excessive amounts.

 

Outer Limits

Outer limits are the maximum number of overtime hours and ordinary time penalty rate hours that can be worked in a pay period as part of the annualised salary agreement. If an employee works for longer than the outer limits, the employer must pay them for these additional hours (at the applicable award rate).

Employers can choose what the outer limits will be or agree on this with the employee.

 

Recommendations

  • Ensure all employees have an employment agreement or contract in writing
  • Review the employee’s regular or expected patterns of work to determine outer limits
  • Consider any weekends/public holidays they may be required to work

 

Capturing Time Worked

Employers must keep a record of the start and finish times of work, and any unpaid breaks taken. These records must be signed by the employee each pay period.

Records must at minimum include:

  • Start and finish time of work
  • Start and finish time of any unpaid breaks

The best way to do this is to use timesheets. There are several HR software options/apps available which can make this process simple for you. We have detailed some example software types below; if you would like us to recommend something suited to your business, please don’t hesitate to get in touch.

 

Annual Reconciliation Process

For every employee on an annualised salary agreement, every 12 months (from commencement of agreement) the employer must calculate the amount of remuneration payable to the employee under the provisions of the award, and compare it to the amount of wage actually paid to the employee.

Please note: this process is software dependent. Please get in touch with a bookkeeper if you need assistance.

 

How can HR, payroll and bookkeeping software help?

Man working at mac desktop with apple watch

HR and payroll/bookkeeping software can streamline your new time-recording and reconciliation requirements.

For example, HR software such as Tanda or Employment Hero allows employees to click in and out via an app on their phone; this data can then be quickly integrated into payroll systems for calculating wages and reconciling.

In addition, common awards are built into some payroll systems, meaning the system can automatically calculate payments based on hours worked.

Bookkeeping software such as MYOB, Quickbooks Online or Xero bookkeeping have simple Single Touch Payroll systems to make payroll simple, whether you run payroll yourself or engage with a bookkeeper for payroll.

Xero for instance, integrates with a number of HR software apps, including Deputy, HR Central, KeyPay and Tyro. Your local bookkeeper will be able to help you select the software best suited to your business, set you and your staff up with that software and show you the streamlined process to quicker and more efficient payroll.

 

What should employers do now?

  • Ensure you are aware of which awards apply to your business and that staff are correctly classified
  • Ensure you have all required documentation (e.g. Annualised Wage Arrangement document or Contract of Employment)
  • Ensure you have some form of system in place for time-recording (we highly recommend getting in touch with your bookkeeper to get set up with relevant accounting software and HR apps
  • Ensure you have systems in place to perform reconciliations.

hr software system icon

Final Thoughts

If you’re an employer and these changes all seem rather daunting, it might be best to speak to an accountant or bookkeeper to help you and your staff get set up with the new changes correctly. The information and insight a bookkeeper can provide goes a long way to helping you make smart decisions and streamline your business operations.

Whether you’re just after some bookkeeping tips, basic bookkeeping services or a software package such as MYOBXero, Quickbooks Online or Receipt Bank, we can help. Your business will be better for it, and so will you.

See below for our bookkeeper locations; if you’d like to ask a question, please feel free to use the form below!

 

Our Bookkeepers

Justine Day: Southern Highlands / Bowral Bookkeeper
Amanda Graham: Southern Highlands / Bowral Bookkeeper
Petra Austing: Southern Highlands / Bowral Bookkeeper
Karin Evans: Gold Coast Bookkeeper
Pru Hall: Wollongong Bookkeeper
Jackie Short: Canberra Bookkeeper