The Fair Work Commission (FWC) has recently handed down a decision which will impact employers paying annualised salaries to employees covered by a Modern Award with an annualised salary clause. The new changes will take effect from 1 March 2020.
The FWC decision finalises the terms of 3 new standard ‘annualised salary arrangement’ clauses, which will replace the existing annualised salary clauses. The new terms will also be inserted into 3 Modern Awards which have not previously had an annualised salary clause. The changes will affect approximately 20 Modern Awards, including the popular Clerks – Private Sector Award.
There are several Modern Awards that include an annualised salary clause. It is common practice for employers to pay an ‘all inclusive’ annualised salary to compensate for Modern Award monetary entitlements in relation to the performance of work (such as overtime rates, penalty rates and loadings).
The model clauses will introduce new compliance requirements on employers engaging employees on annualised salary arrangements:
Well before 1 March 2020, employers should:
The FWC has made it clear that employers are not obliged to rely only on an award annualised salary arrangement. Employers may still choose to apply the normal common law contract with a set-off clause. However, it is worth noting that there are specific requirements that employers must follow in drafting a set-off provision that complies with employment laws.
We expect that many employers will find the new annualised salary arrangements challenging to implement and impractical to manage. Employers should review their current arrangements and prepare for the introduction of the new changes or seek advice about other options.
If you have any questions or would like to discuss your current employment arrangements, please contact Adren Choon on (03) 9629 9629 or firstname.lastname@example.org.