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The Fair Work Commission (FWC) has made a significant decision to amend the Professional Employee Award 2020 in relation to two issues:

  1. The coverage of the Award; and
  2. Employee hours of work and overtime

The coverage of the Award

The Professional Employees Award is a unique occupation-based Award as it largely covers highly paid professional salaried employees whose peers in other industries are generally not covered by the modern award system. The Award covers the following types of employees:

  • Engineers (across all industries including construction, consulting, manufacturing, mining);
  • Scientists;
  • Medical researchers; and
  • Employees principally engaged in the following industries:
    • information technology;
    • quality auditing; or
    • telecommunications services.

The FWC has removed the “principal purpose test” for the last category of employees and has clearly stated that the Award will now cover an employee performing:

  • professional engineering duties;
  • professional scientific duties;
  • professional information technology duties; or
  • quality auditing

who are classified in one of the classifications at Schedule A, provided that the employee is not employed in a wholly or principally managerial position.

The purpose of this change is merely to clarify the coverage of the Award, and is not intended to limit or extend the current scope of the Award.

Employee hours of work and overtime

Currently, ordinary hours of work are 38 hours per week or by agreement an average of 38 hours a week over a regular cycle. Hours worked additional to these can be compensated by either:

  • granting of special additional leave;
  • granting if special additional remuneration;
  • taking factors such as additional hours or working on unsociable hours into consideration when calculating an annual salary; or
  • granting a special allowance or loading.

Employers are required to review this compensation annually to ensure that it is set at an appropriate level.

The FWC also noted the difference in how full-time employees are covered under the Award compared to part time and casual employees who must be paid the appropriate minimum hourly rate for every hour worked. There is a disconnect that part-time and casual employees are still paid their hourly rate for work in excess of 38 hours per week, but that no clear entitlement exists for full-time employees working additional hours.

There is also no clear or enforceable penalty rate entitlement for hours worked for different hours of the day example outside ordinary business hours.

The FWC largely accepted views that many workers on the award rate operate well out of standard business hours and that it is common for employees such as engineers to work 60 to 70 hours a week. The FWC accepted that a large majority of employees under the Award are paid significantly in excess of the minimum annual wages prescribed under the Award however it also accepted the view that a minority of employees under the award, mostly graduate employees are award reliant and operate on annual salaries slightly above the minimum wages meaning their real hourly rate is below the minimum wages set by the Award.

As such, in accordance with the modern award objective of establishing a fair and relevant safety net, the FWC established new guidelines as follows for all employees under the award:

  1. Ordinary hours: The FWC has taken a “minimalist” approach by declaring ordinary hours of work are 38 hours per week. This amends the current ability to average hours.
  1. Reasonable requests for overtime: In accordance with s 62 of the Fair Work Act 2009 (Cth), an employer may request or require that a full-time employee work in excess of 38 hours per week (overtime) provided that the additional hours are reasonable.

The following changes will not apply to employees whose contractual entitlements to an annual salary is at least 25% or more in excess of the minimum annual Award wage for the appropriate classification.

  1. Overtime hours: an employee is to be paid the appropriate hourly rate for all hours worked in excess of 38 in a week, including work on or in connection with call-backs and work performed on electronic devices or remotely.
  1. Penalty Rates:
  • a penalty rate of 125% shall apply to all hours worked (whether ordinary or overtime hours) before 6.00 am or after 10.00 pm on any day Monday to Saturday. For casual employees, this is in addition to their casual loading.
  • a penalty rate of 150% shall be payable for rostered hours (whether ordinary or overtime hours) worked on a Sunday or public holiday. Again, for casual employees, this is in addition to their casual loading.
  1. Time off in lieu: Employees and employers can agree for an employee to take time off in lieu for additional hours that are worked instead of receiving overtime payment.

What do employers need to do?

Record keeping

These changes impose an extra wage obligation on employers which means you need to keep records of all hours worked outside of the 38-hour work week, before 6am or after 10pm between Monday and Saturday, and on Sunday and public holidays.

Records should include work performed remotely, on electronic devices or in connection with call-backs. These record-keeping obligations will only apply to employees who are caught by these changes, being those who do not receive at least 25% in excess of the minimum award annual wage.

Review of current employment arrangements

Employers should review existing employment arrangements to determine which employees are currently paid an annual salary that is less than 25% in excess of the minimum annual wage under the Award. Employers should then consider:

  • how it is going to implement tracking and payment of overtime and/or penalties for employees impacted by these changes.
  • the operational impact of implementing time and record keeping obligations, such as how hours are tracked and how employees are required to maintain hours of work records via timesheets or online logs might affect the work culture and employee engagement, example employees working remotely
  • whether they can rely on any contractual clauses to lawfully set-off any entitlements to overtime or penalty rates that may arise;
  • conducting a salary review to consider whether they wish to:
  • increase any annual salary arrangements so that employees are paid 25% or more in excess of minimum annual wages so as to not be caught by these changes; or
  • enter into a ‘guarantee of annual earnings’ for a guaranteed period with an employee who earns more than the high income threshold, under s.330 of the FW Act – the practical effect of this being that the employee will no longer be covered by the terms and conditions of the Award for that period. (Note, the current high income threshold is $162,000 pa, and will therefore not be available to many award-covered employees.)

The FWC noted that the amendments are likely to increase the wage expenses for some employers and add compliance costs through the need to maintain timesheets for out-of-hours work, nevertheless the variations are likely to have a net benefit elsewhere.

While the draft determination is in effect, interested parties have until February 10 to submit their views before the changes are formally adopted.

The BetterHR Advice team is available to assist you if you have any enquiries on how to these changes may affect your business on 1300 659 563 or visit: