March 13, 2020   |   Payroll

What do the annualised salary changes mean for my company?

If you are in the payroll or HR profession, you have likely already heard about Fair Work’s annualised salary changes that came into effect on Sunday 1 March.

If you are still unsure about whether it impacts your business or what to do if it does, we have some tips to help you out.

What are the new annualised salary clauses?

Although most of the awards to be updated already include annualised salary clauses, the new clauses require greater actions and obligations by the employer.

For more information and background, read the dedicated article on the changes on our website by our friends and the employment law experts at Murfett Legal.

What awards will be affected?

The new annualised salary clauses have been added to an initial 18 modern awards from 1 March 2020.

The awards to be impacted from 1 March are as follows;

  • Banking, Finance and Insurance Award 2010
  • Broadcasting, Recorded Entertainment and Cinemas Award 2010
  • Clerks – Private Sector Award 2010
  • Contract Call Centres Award 2010
  • Horticulture Award 2010
  • Hydrocarbons Industry (Upstream) Award 2010
  • Legal Services Award 2010
  • Local Government Industry Award 2010
  • Manufacturing and Associated Industries and Occupations Award 2010
  • Mining Industry Award 2010
  • Oil Refining and Manufacturing Award 2010
  • Pastoral Award 2010
  • Pharmacy Industry Award 2010
  • Rail Industry Award 2010
  • Salt Industry Award 2010
  • Telecommunications Services Award 2010
  • Water Industry Award 2010
  • Wool Storage, Sampling and Testing Award 2010

If you are thinking, well that doesn’t impact my business, before you take a sigh of relief, the following awards are also set to have the new clauses added at a yet to be defined date;

  • Health Professionals and Support Services Award (2010);
  • Hospitality Industry (General) Award 2010;
  • Marine Towage Award 2010; and
  • Restaurant Industry Award 2010

For a full list of the awards to be impacted, visit the Fair Work website here.

What can you do to make sure your company is on top of these changes? We have five top tips to help you out.

Tip 1: Assess whether you have employees impacted by the changes

The first place to start is to eliminate employees that are not covered by the annualised salary changes, this should include the following;

  • Employees not employed in a permanent full-time role;
  • Employees that receive a guaranteed annual earnings rate above the high-income threshold;
  • Employees covered by a registered agreement, i.e. EA or EBA; and
  • Employees not covered by the awards listed above.

If you are unsure whether you have employees covered by the updated awards, the best place to start is an award’s coverage clause and the classifications the award covers. The coverage clause details which types of employers and employees are covered by that respective award.

When you have determined an employee is covered, it is also important to check the annualised salary clauses in the award as not every classification or position can be entered into an annualised salary arrangement.

In relation to high-income earners, the high-income threshold currently stands at $148,700 as of 1 July 2019. Guaranteed earnings do not include items such as super and variable items such as commissions and non-guaranteed bonuses.

Tip 2: Review employment contracts

So, you have employees covered by the annualised salary changes? The next step would be to review their employment contracts to make sure the remuneration clauses are in-line with the new annualised salary terms.

It is important to pay special consideration to the remuneration and offset clauses. When it comes to the remuneration, you need to specify the annualised salary amount, provisions of the award that is being compensated with the annualised salary and how the annualised salary was calculated.

The annualised salary can cover any or all of the following items;

  • Minimum weekly wages
  • Overtime, weekend and other penalty rates
  • Allowances; and
  • Annual leave loading

On top of documenting the method of calculation, you need to specify the outer limits of what the annualised salary covers.

As defined by Fair Work in the Local Government Industry Award 2010, this includes;

‘the outer limit number of ordinary hours which would attract the payment of a penalty rate under the award and the outer limit number of overtime hours which the employee may be required to work in a pay period or roster cycle without being entitled to an amount in excess of the annualised wage…’

Tip 3: Capturing time and attendance

As part of the updated recordkeeping requirements, you will need to record the start and finish times of your employees as well as any unpaid breaks.

If you don’t already capture time and attendance, this may be a major cultural shift within your organisation. However, adopting a solution that offers timesheets or time clock functionality within your workforce doesn’t need to be a hassle. Most payroll software providers have an employee self-service portal with time and attendance capability.

With Definitiv we supply multiple options for our customers to suit the needs of different employers and employees, these include;

Personal TimeClock

The Personal TimeClock allows an employee to clock on and off, change duties and register breaks from the comfort of their own phone. With each event registered, the Personal TimeClock will also capture their GPS location.

This option is perfect if you have employees who work from home or are on the road driving from one job to the next.

For office or site based staff, the Personal TimeClock can even be paired with an iBeacon to restrict where an employee can clock on and off.

Find out more about our Personal TimeClock here.

TimeClock

Our TimeClock is more than just your traditional time clock. Available as an app on the iOS store, it is easy to download and set up in your organisation. Our TimeClock allows your employees to register an event using NFC technology to tap ‘n’ go.

Find out more about our TimeClock here.

Timesheets

Sometimes, filling in the reliable timesheet is the way to go.

Employees are able to fill in timesheets in Definitiv via our mobile app and through the Employee Hub via a browser.

Our timesheets are auto-filled based on what an employee was scheduled to work. If the costing for the timesheet needs to be changed, our timesheets are also dynamic and rule-driven so will only show options relevant to an applicable employee, i.e. the roles they can work in or the projects they can work on.

If you are already a Definitiv customer and want to implement one of the above time capture options or unsure what option is best for your organisation, please get in touch with our team.

Tip 4: Annual Reviews

As part of the new requirements, an employer is required to conduct an annual review on the anniversary of the employee’s commencement date.

Although this may sound like you will need to conduct individual annual reviews every second day, your contract dates can be aligned if updating employment contracts or when conducting annual wage reviews. We suggest picking a start date during a quieter period in the year, i.e. not around EOFY.

The best way to perform an annual review in Definitiv is through setting up the applicable modern awards in a test environment and processing the employees based on actual time and attendance data. This will enable you to compare their annualised salary to what they would have made under the modern award. It is important to note when conducting your annual review that you may not be able to offset an overpayment in one pay period with an underpayment in another.

If an employee would have been better off under the award, then you will need to make sure they are recompensated the difference within 14 days.

This review will also need to be carried out within 12 months of an employee’s termination of employment or their annualised salary arrangement.

Tip 5: Managing additional payments throughout the year

If an employee goes beyond their outer limits during a pay period or roster cycle, you may want to be able to compensate them for these hours, which are outside of their annualised salary arrangement, within the same pay period or roster cycle. This will help prevent your business from having to pay out a larger lump sum at the end of the annual review.

If for example, in the employment contract you have stated that you will pay the employee at a specified hourly rate once they go beyond their outer limits, this can be automated in Definitiv.

To be able to automate payments that fall outside of an annualised salary arrangement, please contact our team to discuss how this can be done in Definitiv.

Disclaimer

Information provided in this article is general information, not legal advice and should not be relied upon as such. Definitiv does not accept liability for any loss or damage arising from reliance on the content of this article.