Modern Awards and Annualised Salary Clause Changes – Does this affect Architecture?
After a recent 4 yearly review of modern awards, the Fairwork Commission has handed down a decision to make changes to annualised salary clauses. As a result there are some 20 awards that have been affected and will require a number of important actions by the Employer to meet their obligations.
What is an annualised salary clause?
This is by far the first most important clarification to understand in the first instance.
Some modern awards include what is known as an annualised salary clause. Essentially this is a clause that allows employers to implement an agreement with employees to pay them on an annualised salary arrangement, as opposed to paying them wages based on specific hours worked each week. All minimum entitlements must still be paid and adhered to, such as minimum wages, overtime, penalties, loading etc…
The difference however, is that this annualisation does not base payments on the number of hours worked each week. It is effectively a set amount that is often implemented as it can provide flexibility and take the headache out of paying employees. Rather than calculating wages each week based on specific hours each pay cycle, an annualised arrangement enables an annual salary to be calculated based on the hours expected to be worked overall during the year and is to be paid in equal payments each pay cycle.
What is changing?
Whilst employers should always check the award for specific compliance obligations, the new clauses will impose the following:
The Employer must advise the employee in writing of the salary and keep a record of:
- The annualised salary payable
- The award provisions satisfied by the payment of the annualised salary
- The method of calculating the annualised salary
- The outer limit number of hours in the award which would attract a penalty rate
- The outer limit number of overtime hours the employee may be required to work per pay period or roster cycle without an entitlement to a payment in addition to the annualised salary
- In addition to the annualised salary, if the employee works in excess of the maximum number of overtime hours, the employer must pay employees, in accordance with award requirements in respect to overtime or penalty rates.
- At the end of each 12 month period from the commencement date of the annualised salary arrangement (or upon the employees’ termination) the employer will have to calculate the remuneration that would have been owed to the employee under the award based on their actual hours of work.
- This must then be compared to the actual annualised salary paid.
- If any shortfall, the employer must pay the outstanding amount within 14 days.
- Employers must keep a record of start and finish times of all employees under an annualised salary arrangement, as well as unpaid breaks.
- The employees must sign off to acknowledge whether physically or electronically that the record keeping is correct during each pay period.
So what awards are actually affected at this stage?
It seems there are some 20 awards affected including for drafting –
- The Manufacturing and Associated Industries and Occupations Award 2010
At this stage Architects are not affected in regards to the reporting however it must be clearly pointed out it does NOT exempt Architects from their liabilities as many firms are known to work hours in excess of award and do not check whether they are in breach of minimum payments (after taking into account overtime rates)
Drafting however does fall under the Manufacturing and Associated Industries and Occupations Award 2010 and therefore could affect many firms within Design and Architecture.
Changes are effective as of March 1st, 2020 and will no doubt be closely monitored by Fair work. Advice to all our Clients is that its critical they become familiar with the specific provisions within the awards applying to their employees as it may take some time preparing for these changes (where applicable) and the implementation of new systems accordingly.
Please note that this article is not legal advice and based purely on independent research undertaken by Bloomfield Tremayne and purely for informative purposes only – for specific assistance, support and clarification on these recent changes we would direct Employers to the Fair Work Commission website – https://www.fwc.gov.au/ in addition to communicating with your internal HR department or your external bodies designed to provide legal and systems support.