On 27 February 2019, the Full Bench of the Fair Work Commission handed down an Annualised Wage Arrangements Decision that proposes additional record keeping and reconciliation requirements for employers.

What is being proposed?

The Full Bench of the Fair Work Commission has proposed that requirements be inserted in Modern Awards for annualised salary arrangements, including requirements that:

  • employers conduct an annual reconciliation of the amount paid to an employee compared to the amount that employee would have been paid under the Award and ‘make good’ any shortfall
  • employers keep a record of the hours worked by employees
  • annualised wage arrangements be terminated at any time by agreement or on 12 months’ notice
  • the method of calculation for an annualised salary arrangement be specified in writing
  • annualised salary arrangement specify an outer limit on the number of hours that would attract penalty rates under the modern award and that can be worked under the arrangement, effectively prohibiting employees from working an unlimited number of hours in terms of their annualised salary.

The Commission has proposed two draft model clauses:

  • one for those industries where employees work highly variable hours, for example Rail Industry Award 2010, Pharmacy Industry Award 2010, Horticulture Award 2010.
  • another for modern awards where employees generally have stable hours of work, for example the Banking, Finance, and Insurance Award 2010, Clerks – Private Sector Award 2010, among others.

The Commission also invited employers to apply to have an annualised salary provision included in a specific award for part-time employees.

What will this mean for employers?

Many employers already have practices that reflect the proposed terms. However, this change will impose further obligations on employers in terms of record keeping and hours of work, particularly where salaried employees work extra hours without being directed to do so.

Employers should still be mindful of the additional obligations intended to be included in modern awards when considering which employees should have an annualised salary.

Employers are encouraged to review existing practices generally to ensure they are annualising award employees’ salaries to ensure compliance with the applicable awards and the Fair Work Act 2009.