2020 Annualised wage arrangement changes - How will it affect you?

Employment relations for small businesses can be quite complex and it is difficult to keep up with frequent changes. But the cost to your business should you get it wrong can be very significant, so below we are going to run through the 2020 annualised wage arrangement changes and how it can impact you.

You may have already received some notification that The Fair Work Commission (FWC) has handed down a decision which has changed annualised wage provisions under 22 modern award (from 1^st of March 2020 onwards).

You have seen it in the media of recent time’s multi-million dollar business being held accountable for underpayment of staff wages. The FWC introduction of these changes is to close loopholes to ensure employees are being paid fairly.

At this stage, the new annualised wage provisions only apply to full-time employees.

Awards that will be impacted

The list of awards that will be impacted

• Banking, Finance & Insurance Award  
• Broadcasting Award 
• Clerks Award 
• Contract Call Centres Award  
• Hydrocarbons Industry (Upstream) Award 
• Legal Award 
• Local Government Award 
• Manufacturing Award 
• Mining Award 
• Oil Refining & Manufacturing Award 
• Pharmacy Award 
• Rail Award 
• Salt Award 
• Telecommunications Award 
• Water Award 
• Wool Award. 

The Commission also plans to update the following awards with new rules, but hasn’t set a timeframe yet:

• Health Services Award 
• Hospitality Award 
• Marine Towage Award 
• Restaurant Award

 ** Note – Ensure you review your applicable awards annualised wage arrangement clause as some are subject to a written agreement (the employee must agree).

If you aren’t sure what award applies to your employees please use the FWC free tool ‘find my award’ to get clarity & ensure you are compliant.

Affected by the changes? Here’s what to do:

If these changes affect you in a nutshell here is what you need to start implementing now!

1. Make sure all full-time employees who are subject to the above changes are recording & submitting their hours including breaks either in writing or electronically each pay cycle.
2. The annual wage arrangement must be in writing & given to your employees which must include;
   a)   the annual wage that will be paid
   b)   which award entitlements are included in the annual wage;
   c)   how the annual wage has been calculated, including any assumptions used in the calculation;
   d)   the maximum (or ‘outer limit’) number of penalty hours & overtime hours the employee can work in a pay period or roster cycle without extra payment;
   ** If you require a template or assistance with preparing this document please contact us. 
3. If employees during their pay period (weekly, fortnightly, monthly) have worked outside the ‘outer limits’ the employer must pay the overtime rates applicable within the relevant pay cycle.
4. Employers must undertake a reconciliation of their employees' annual wages;
   a)   every 12 months after the arrangement starts;
   b)   when the arrangement ends, or;
   c)   when the employment ends;

 Award free employers should still take this opportunity to ensure their employees are being paid per National Minimum Wages & compliant with the National Employment Standards (NES) every new employee should be given a copy of the Fair Work Information Statement.

It is also crucial that employees’ contracts have an appropriate “set off” or “offset” clause to enable employers to pay an annual salary that will cover all entitlements. Without such a clause, employers run the risk of employees being entitled to extra pay when (for example) they perform additional hours, regardless of how high their annual salary is set. 

You need to exercise caution when relying on the ‘set off’ clauses in an employee’s contract. Ensure that the salary is set high enough so it will cover all entitlements that may be applicable.

It is best practice to still record all employees' hours & complete a full reconciliation which applying over-time/annual leave loading/ weekend work & applicable allowances once a year & when the employment ends to determine if the employee is ‘better off overall’ & if their salary needs adjusting. The employer is required to rectify any shortfalls.

Here to help

If you are affected by these changes & are feeling overwhelmed & don’t know where to start, please do not hesitate to reach out to us here at Trekk Advisory. We can provide you tailored advice to ensure you are compliant with the changes & suggest ways to ensure your resources aren’t too heavily impacted moving forward.