Following a decision of the Fair Work Commission on 20 January 2023,1 the Professional Employees Award 2020 (Award) will be amended to impose new monetary obligations on employers (as well as to clarify the coverage provisions of the Award).
The Award applies to employers in the IT industry, as well as to employers of professional scientists and engineers.
The Award is unusual because it applies to highly qualified employees who - in other fields - would often fall outside the scope of the modern award system.
The current position on overtime and penalty rates
Currently, the Award does not prescribe specific rates of pay for employees who work overtime or other "unsociable" hours. Rather, the Award simply requires employers to ensure that employees are compensated for such hours, and suggests that such compensation may include (among other things) taking those hours into account when fixing annual remuneration.
Combined with the fact that the minimum rates of pay set by the Award for ordinary hours of work are often much lower than the rates paid by employers (particularly in the IT industry), this has often given employers covered by the Award much greater flexibility than other most other modern awards.
For example, a Level 2 experienced professional covered by the Award is currently entitled to a minimum annual salary of AUD 66,277. If an employer was willing to pay an employee at this level, say, AUD 80,000, it would be open for the employer to take the position that this fairly compensated the employee for all hours of work, and give little further thought to the matter. Contrast this to the position under many other awards, which require employers to carefully track hours of work, and pay specific penalty rates based on when additional hours are performed.
Having determined that the current provisions of the Award do not meet the objective of establishing a "fair and relevant safety net", the Fair Work Commission has determined that the provisions must change. Broadly speaking, the changes will be as follows.
- Employees will be entitled to be paid overtime or receive time off in lieu of overtime for working in excess of 38 hours per week.
- Penalty rates will be payable for any hours worked before 6 am or after 10 pm on any day from Monday to Saturday. A higher penalty rate will apply for Sunday or public holiday work.
- Employers will be required to keep records in relation to hours of work.
However, importantly, these requirements will not apply to employees whose annual salaries are at least 25% higher than the minimum annual salary payable under the Award for their classification.
Employers should also note that the coverage provisions of the Award will be clarified to make clear that the Award applies to all employees performing professional engineering duties, professional scientific duties, professional information technology duties, or quality auditing (provided they are not employed in a wholly or principally managerial position).
The determination giving effect to the change has not been finalised. However, we expect the amendments will take effect in the coming months. To prepare, we recommend the following.
- If your organisation is in the IT industry, or employs scientists or engineers - conduct an audit of award coverage.
- If you already know your organisation is covered by the Award, conduct an audit of award classification and pay rates in order to determine whether the new requirements will apply to you.
- Obtain advice about ways of managing the change, including options for refreshing your employment contracts.