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Annualised salary changes are coming from 1 March 2020 – What could this mean for your law practice?

Annualised salary changes are coming from 1 March 2020 – What could this mean for your law practice?

By Joel Zyngier, Veronica Belot and Michelle Luarte

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The Fair Work Commission’s (‘FWC’) decision of 4 July 2019 (‘decision’) will change annualised salary provisions under 23 modern awards from 1 March 2020 onwards. Some of the affected modern awards include:

  • Clerks – Private Sector Award 2020;
  • Local Government Industry Award 2020; and
  • Legal Services Award 2020 (which covers legal clerical and administrative employees, law graduates and law clerks).

The LIV will answer some commonly asked questions below.

Q: “What does the decision mean?”
The decision finalised three new standard ‘annualised wage arrangement’ clauses. This creates more administrative obligations on employers whose employees are covered by the relevant modern awards. A summary of those obligations is as follows; however, the LIV recommends that employers review those clauses in full under their applicable Award:

  • Advise employees in writing, and keep a record of:
  • The annualised wage that is payable;
  • The method by which the annualised wage has been calculated, including specification of each component of the annualised wage 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 additional payment.
  • Keep records of the starting and finishing times and unpaid meal breaks of each employee. This record must be signed by the employee, or acknowledged as correct in writing (including by electronic means) by the employee, each pay period or roster cycle.
  • Reconcile the annualised wage paid each 12 months, and if there’s any shortfall, pay this within 14 days.

 

Employers who have employees on annualised salaries who are covered by modern awards, will need to ensure that their organisations comply with the requirements of the new model clause. Therefore, it is important to review the relevant annualised salary clause that applies to your circumstances.

Q: “We pay our employees an annualised salary through a contractual set-off clause. What does this decision mean for us?”

Employers who rely on a contractual ‘set off’ clause, can continue to rely on such clauses to offset award entitlements. As the FWC stated: ‘the model clauses (in awards) do not seek to invalidate or regulate any such contractual arrangements’.

However, whichever option an employer chooses (an annualised salary arrangement under a modern award or a contractual set-off clause) employers must still comply with record-keeping obligations under the Fair Work Act 2009 and Fair Work Regulations 2009. This includes the requirement under Regulation 3.34 that if a penalty rate or loading must be paid for overtime hours worked by an employee, the employer must keep a record of the number of overtime hours worked by the employee each day and the starting and ceasing time of the overtime hours.

Q: “What is the risk if I don’t comply with the annualised decision?”

The LIV understands that there are practical and technical challenges in implementing these arrangements, however recommends that employers comply with the law. If an employer fails to comply with the terms of a modern award annualised wage clause, and the annualised salary is not sufficient to compensate for hours actually worked by an employee, employers will be exposed to the risk of underpayment claims and potential civil penalties under the Fair Work Act for breaches of the modern award.

The maximum penalty for each contravention of the Fair Work Act by a body corporate is $63,000, and by an individual is $12,600. Fair Work Inspectors can also issue an infringement notice of $3150 per contravention for a body corporate, for contravening record-keeping and pay slip obligations under the Fair Work Regulations.

Conclusion
The LIV recommends that the following measures be implemented:

  • Employers confirm whether any modern award covers their employees;
  • Employers ensure that their organisation is compliant with the annualised salary provisions;
  • HR departments and payroll take steps to ensure that payroll systems and record keeping procedures are up to date;
  • Employers undertaken annual salary reviews and annual salary reconciliations; and
  • Employers maintain accurate records as per obligations under the Fair Work Act 2009 and Fair Work Regulations 2009.

 

Authors: Joel Zyngier and Veronica Belot, Co-Chairs of the LIV Workplace Relations Executive Committee and Michelle Luarte, LIV Policy Lawyer to the LIV Workplace Relations Section.



Disclaimer: This news alert provides a summary only of the subject matter covered without the assumption of a duty of care by the firm. No person should rely on the contents as a substitute for legal or other professional advice. For specific employment advice applicable to your organisation, the LIV recommends that you seek independent legal advice.


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