These arrangements, sometimes called annualised salaries, can be made from the first full pay period on or after 9 May 2022.
Marine Towage changes
Under the Marine Towage Award all full-time employees can agree to be paid under an annual wage arrangement.
An employee’s annual wage:
- needs to be at least 40% more than the award minimum weekly wage for their classification multiplied by 52
- can’t be less than what they would’ve been paid over the year if they were paid all of their award entitlements for their work.
Employers need to make sure the employee’s annual wage is high enough to cover the award entitlements that they’ve included in the arrangement, which can include:
- minimum wages
- overtime and penalty rates for a limited number of hours
- public holidays.
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 amount
- which award entitlements are included in the annual wage
- the maximum (or ‘outer limit’) number of 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.
Record-keeping
The employer also 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
The maximum (or ‘outer limit’) number of penalty hours and overtime hours the employee can be required to work in a pay period or roster cycle without extra payment is:
- 20 ordinary hours that are normally paid at a penalty rate per week, and
- 15 overtime hours per week.
If an employee works more than their agreed maximum (or ‘outer limit’) number of overtime or penalty hours, they’re entitled to be paid at the overtime or penalty rate provided by the award for the work performed.
Annual reconciliations
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 otherwise received, their employer has to pay them the difference within 14 days.
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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.
4 yearly review of modern awards – Annualised Wage Arrangements [2022] FWCFB 51 (7 April 2022)
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