FWC inserts burdensome annualised wage clauses in modern awards

By Simon Dewberry
Employment & Safety

In brief

The Fair Work Commission (the FWC) has decided that new annualised wages clauses will be inserted in 19 modern awards, impacting how employers administer annual salary arrangements for their award-covered employees. Senior Associate Tarsha Gavin reports.

How does it affect you?

Employers wishing to pay an annual salary to employees covered by an applicable modern award will be subject to a number of new notification, recordkeeping and wage reconciliation obligations, which are aimed at ensuring that employees are not disadvantaged by annualised arrangements.

The decision

The FWC has, as part of its four-yearly review of modern awards, determined that one of two model annualised wage clauses will be inserted into each of 19 modern awards (with some minor variances between the awards). These awards include the Clerks – Private Sector Award, the Banking, Finance and Insurance Award and the Manufacturing and Associated Industries and Occupations Award.

The key difference between the two model clauses is that employee consent to the annualised wage arrangement will be required in eight of the awards, where employees typically work highly variable hours or significant ordinary hours that attract penalty rates. In the remaining 11 awards, where employees work relatively stable hours, employee consent to the arrangement will not be required.

The model clauses will impose a number of requirements on employers, in particular:

  • Employers will be required to advise the employee of the award provisions that are satisfied by the annualised salary, the method by which the salary has been calculated, including specification of each component of the salary and any overtime or penalty assumptions included, the outer limit of ordinary hours that would attract award penalty payments, and the outer limit of overtime hours the employee may be required to work without being entitled to an above-salary payment.
  • At the end of each 12 months from the commencement of the annualised salary arrangement (or at the employee's termination), the employer must compare the annualised salary paid against the remuneration that would have been payable to the employee under the award. Where there is any shortfall, the employer must pay the outstanding amount within 14 days.
  • The employer must keep records of the starting and finishing times and unpaid meal breaks of each employee, for the purpose of undertaking the comparison exercise set out above.

The model clauses have not yet come into force, as the FWC has requested further submissions about which of the two model clauses should be adopted in particular awards, and any transitional provisions that may be necessary. We expect that once those submissions are considered, the FWC will announce when the model clauses will take effect in the relevant awards.