These arrangements, sometimes called annualised salaries, can be made from the first full pay period on or after 9 May 2022.
Health Services changes
Under the Health Services Award, full-time employees can agree to be paid an annual wage instead of a weekly or hourly pay rate if they’re classified as:
- Support Services levels 8 or 9
- Health Professional levels 2 to 4.
An annual wage under the Health Services Award can compensate an employee for their award minimum:
- overtime, penalty and shift rates for a limited number of hours
- leave loading.
Employees and employers can end an annual wage arrangement:
- at any time, by agreeing in writing that the arrangement is ending
- by giving the other party 12 months written notice that the arrangement is ending.
Written annual wage arrangement
The annual wage arrangement needs to be in writing and explain:
- the annual wage that will be paid
- which award entitlements are included in the annual wage
- how the annual wage has been calculated, including any assumptions used in the calculation
- the maximum (or ‘outer limit’) penalty hours and overtime hours the employee can work in a pay period or roster cycle without extra payment.
Employers have to give their employees a copy of the arrangement.
The employer needs to record the employee’s:
- start and finish times
- unpaid breaks.
Employees then sign the record of hours, either in person or electronically, at the end of every pay period or roster cycle. This record is used for annual reconciliations.
Overtime and penalty rates
An annual wage doesn’t mean an employee isn’t paid overtime or penalty rates. If an employee works for more than their agreed maximum (or ‘outer limit’) overtime or penalty hours in a pay period or roster cycle, they need to be paid for the extra hours at the overtime or penalty rate in the award.
Employers have to undertake a reconciliation of the employee’s annual wages:
- every 12 months after the arrangement starts
- when the arrangement or employment ends.
If the amount actually paid to the employee is less than the award payments that they would have been paid under the award, their employer has to pay them the difference within 14 days.
Common Law Set-off clauses
The FWC has made it clear that employers can still choose to use a common law set-off clause via an annual salary. This will be paid in full satisfaction of any monetary entitlements the employee would have received under the Modern Award in any particular pay period. You must still however comply with the pay record provisions of the Fair Work Regulations 2009 and ensure there are no underpayments in any particular pay period.
Please contact your BetterHR advisors to assist you in drafting your contracts if you wish to provide an annual salary to your employees.
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