Changes in modern awards effective 1 March 2020
Due to many recent cases of systematic underpayment of employees, the Fair Work Commission has decided to implement changes to modern awards. These changes will provide greater protections for employees and place further obligations on employers.
Often employment agreements are structured to offer an employee an annualised wage which captures all monetary entitlements of an employee such as minimum wage, penalty or overtime rates and loadings. It is common that an employee will not understand these entitlements or when they should be receiving additional remuneration, this can result in an underpayment of employees.
The new obligations to be introduced are aimed at ensuring employees are aware of their annual entitlements and how their pay is determined. This will better allow an employee to ensure their annualised remuneration is adequate and calculated to include all entitlements required under their award.
Who will these changes affect?
The Fair Work Commission has finalised arrangements for new annualised salary clauses to be inserted into a number of modern awards with effect from 1 March 2020. It is worth noting that these changes will only apply to full time employees. These changes introduce new practices for HR and payroll aimed to combat “wage theft” and noncompliance with awards. The 22 modern awards that will be amended are:
• Banking, Finance and Insurance Award 2010
• Broadcasting and Recorded Entertainment Award 2010
• Clerks – Private Sector Award 2010
• Contract Call Centres Award 2010
• Health Professionals Award 2010
• Hydrocarbons Industry (Upstream) Award 2010
• Horticulture Award
• Hospitality Industry (General) Award 2010
• Legal Services Award 2010
• Local Government Industry Award 2010
• Marine Towage 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
• Restaurant Industry Award 2010
• Salt Industry Award 2010
• Telecommunications Services Award 2010
• Water Industry Award 2010
• Wool Storage, Sampling and Testing Award 2010
As most businesses employ clerical or administrative employees it is likely that many employers will need to be aware of these changes and may need to seek legal advice to ensure compliance with the 1 March 2020 changes.
What employers will need to do
The clauses that will be inserted into the modern awards will place a number of further requirements on employers to disclose information to employees and keep more detailed records. An employer must disclose the following to their employees in writing:
- Which provisions of their award will be satisfied by payment of their annual wage;
- The mathematics upon which the employees annualised wage has been calculated. This must include specification of each separate component of the employees wage such as any assumption of overtime or penalty rates;
- The ‘outer limit’ of hours outside of ordinary hours which an employee may be required to work in a pay period without being entitled to any amount in excess of the stated annualised wage; and
- Any excess hours of work that would not be covered by the annualised wage and which the employer must make separate payments under the award.
As an employer you must not only notify employees of these points you must also implement payroll and HR practices to ensure that your employees are and have been adequately compensated. The newly required practices will include:
- Completing annual calculations of what an employee would have been paid under the award and comparing this to actual annualised wage. If there if any shortfall this must be paid to the employee within 14 days; and
- You must keep records of the start, finish and unpaid break times of Employees. These records must be signed each pay period by the Employee and will form part of the required calculations of annualised wage.
All employers must carefully examine the award that will affect their business and the people whom it employs. You must consider whether your employees are being correctly remunerated for the type of work they perform. Any identified issues or deficiencies should be rectified in accordance with the terms of the applicable modern award.
The most practical method to ensure your compliance with the new awards will be to implement the above payroll and HR changes and to pair this with an updated employment agreement which ensures compliance with the new terms of the modern award.
Where an employer fails to comply with the terms of a modern award annualised wage clause, and particularly where an annualised salary is not sufficient to compensate for hours actually worked by an employee, employers will be exposed to the risk of underpayment claims and potential penalties for breaches of the modern award and Fair Work Act 2009 (Cth).
Set off provisions
The Fair Work commission has stated that employers are not obliged to rely only on an award with annualised salary arrangements. An employer may choose to have a set off clause in their employment agreements. There are specific requirements that employers must follow if they wish to include a set off clause in their employment agreements to comply with employment law.
Can we help?
We expect that many employers will find the new annualised salary arrangements challenging to implement and impractical to manage. Employers should review their current arrangements and prepare for the introduction of the new changes or seek advice about other options.
If you would like more advice or information regarding how these new requirements may affect you or your company call WMD Law on (02) 9525 8688.
CEO & Accredited Specialist in Family / De Facto Law
Telephone: 9525 8688
Facsimile: 9526 2608