An annual wage arrangement (also known as an annualised wage arrangement) is an arrangement pursuant to which an employee is paid a pre-determined and generally unvarying weekly wage, this being a weekly proportion of a fixed annual wage.
This annual wage is calculated by projecting the weekly wage, penalty payments and other allowances that are payable to the employee under the applicable award for the 12 month period.
What type of employees are effected by the new rules?
On 12 February 2020 the Fair Work Commission established new rules in respect of annual wage arrangements for certain full time employees who are effected by the following awards:
Banking, Finance and Insurance Award;
Contact Call Centres Award;
Horticulture and Pastoral Awards;
Hydrocarbons Industry (Upstream) Award;
Local Government Award;
Oil Refining and Manufacturing Award;
The new rules under these awards only apply to the specified full time employees. They do not apply to part time or casual employees.
Key features of the new rules
In summary, the key features of the new rules in respect of annual wage arrangements for relevant full time employees affected are as follows:
The new rules take effect from the first full pay period on or after 1 March 2020.
An employer may pay the relevant employees an annual wage in satisfaction of the various entitlements that are specified under the applicable award.
Depending on the award which applies, these entitlements include entitlements such as:
The applicable minimum rates;
The applicable allowances;
The annual wage paid to relevant employees must be an amount not less than the amount the employee would have received under the applicable award had they been paid for all of the relevant entitlements over the relevant 12 month period.
Employers must undertake a reconciliation of their employees’ annual wages every 12 months after the arrangement starts, when the arrangement ends or when the employee’s employment ends.
As part of the reconciliation process, the employer must calculate the amount of remuneration that would have been payable to the employee under the terms of the award over the relevant period and compare it to the annual wage actually paid to the employee.
If after completion of the reconciliation the annual wage paid to the employee is less than the amount the employee would have received under the applicable award, the employer must pay the employee the amount of the shortfall within fourteen days.
Employers who pay employees an annual wage must comply with their record keeping obligations. That is:
The employer must keep a record of the following matters (and provide the employee with a copy of the said record):
The annual wage that is payable to the employee for the relevant 12 month period;
Which entitlements payable to the employee are included in the annual wage;
The method used to calculate the annual wage, including details of any assumptions used in the calculations; and
The maximum number of penalty hours and overtime hours which the employee may be required to work in a pay period or roster cycle without being entitled to extra payment beyond the annual wage.
The employer must keep a record of the employee’s starting and finishing times and unpaid breaks taken. These records must be either signed or acknowledge as correct (including by electronic means) by the employee at the end of every pay period or roster cycle.
Can we help? If you are effected by one of the applicable awards and are considering paying relevant full time employees an annual wage, it is very important that you comply with all of your obligations.
Our skilled commercial lawyers are happy to assist you in understanding your obligations under the applicable award in respect of annual wage arrangements, and assist you in complying with those obligations.