Practical implications of the March 2020 Annualised Wage Arrangement changes
The Fair Work Commission has announced amendments to 22 modern awards that affect the employment of salaried staff members.
The major changes introduced by these amendments include:
- a new requirement for employers to keep time and attendance records for salaried employees;
- a new entitlement that employees be paid overtime and penalty rates in addition to their annualised salary in some circumstances; and
- a new requirement that employers conduct a 12 monthly reconciliation of the salary against what the employee would have been paid under the award.
This means that salaried staff who traditionally haven’t recorded their hours of work will now need to keep a record of their start and finish times, including breaks. Employers will now need to use those records to ensure the employee is paid more under the salary than they would have been paid under the award.
Tanda is working on creating a feature release that will help with compliance and eliminate possible additional admin that comes with the change. Subscribe here and we’ll keep you updated.
Tanda has developed the below process as a guide for complying with these new requirements.
Step 1 – Determine which award conditions will be covered by the annualised wage
An annualised wage is typically paid in satisfaction of as many pay conditions as the award allows (e.g. minimum weekly wages, allowance, overtime penalty rates, weekend and other penalty rates, and annual leave loading). You should check your award to determine which pay conditions can be satisfied by the annualised wage. At this stage, the new clauses will allow annualised salaries only for full-time employees.
Step 2 – Calculate the annualised wage
The new award clauses require you to determine “the method by which the annualised wage has been calculated, including specification of each separate component of the annualised wage and any overtime or penalty assumptions used in the calculation”.
This type of modelling is easy in Tanda. Just create a test roster for a month (or even a full year). It is better to slightly overestimate the overtime hours and penalty rate hours that might be worked. Don’t forget about allowances, or about penalty rates that might apply at irregular intervals (e.g. for work on public holidays).
Some awards also require the annualised salary paid to non-managerial staff to be greater than a certain percentage of the minimum weekly award wage that would have been paid to the employee. If your award includes that requirement, you should also check your employee’s annual salary against that percentage.
Step 3 – Set the “outer limits” for penalty and overtime hours
The new award clauses will require you to set a limit on how many overtime and penalty rate hours that the annual salary covers in each pay or roster cycle. Any hours worked beyond the outer limit within the same cycle will need to be paid in addition to the annualised wage.
The same awards that require the annualised wage be a set percentage greater than the minimum award wage will also have a maximum number of outer limit hours that may be covered by the annualised wage. However, most awards do not specify the maximum number of outer limit hours. We suggest employers regard the following guidance from the Fair Work Commission about how to set the outer limit hours:
- The outer limit hours per pay cycle can be greater than the average number of overtime and penalty rate hours that the annualised wage is calculated to cover under Step 2. Example: if the annualised wage assumes the employee will work an average of 5 overtime hours per week over the year, the specified outer limit of overtime hours may be 10 per week.
- Although not expressly stated in the new clause, the FWC anticipates that the outer limits will allow only “reasonable” fluctuations in the amount of overtime or penalty hours per week. That is, you should be prepared to justify why the outer limit hours that you set are a reasonable “flex up” for the employee for that pay cycle. As above, the outer limits can be set so that the employee is paid less in that pay or roster cycle than they would have been paid under the award.
- The FWC has provisionally set the following maximum number of outer limit hours that may be worked for the awards mentioned above:
- where the annualised wage must be at least 25% greater than the minimum award wage, the maximum outer limit of ordinary-time penalty rate hours is an average of 16 per week, and the outer limit of overtime hours under is an average of 10 per week.
- where the required pay uplift is 40%, the respective maximum outer limits were provisionally set at 20 and 15 per week.
Step 4 – Document the terms of the annualised salary
You must keep a written record of:
- the amount of the annualised salary (see Step 2);
- which award conditions will be covered by the annualised wage (see Step 1);
- the method by which the annualised wage has been calculated, including specification of each separate component of the annualised wage and any overtime or penalty assumptions used in the calculation (see Step 2);
- the outer limit overtime and penalty rate hours (see Step 3).
This record must be given to the employee. Some awards also require that the employee agree to being paid the annualised wage. Remember that you can store this record against the employee using files on the Tanda Platform™.
Step 5 – Employee confirmation of their time and attendance
The new award rules require you to keep a record of the employee’s starting and finishing times of work, and any unpaid breaks taken. This record must be signed by the employee, or acknowledged as correct in writing (including by electronic means) by the employee, each pay period or roster cycle.
Tanda has a workflow to electronically manage this requirement, whether or not you require the employee to clock in and out using Tanda’s Time Clock. Workplaces who traditionally don’t use an attendance device can manage this by exception.
Step 6 – Checking the outer limits and other amounts not included in the annualised wage
Each pay or roster cycle, you will need to check whether the employee has worked in excess of the outer limit overtime or penalty rate hours. You will also need to check whether the employee should be paid any other amount that is not covered by the annualised wage, e.g. if the annual salary does not cover all award pay rules.
You can easily check this in Tanda by comparing the Salaried amount against the equivalent Full-Time Classification. Tanda is also leading the charge in building automation into this process to allow businesses to manage by exception.
You will need to pay an employee for the overtime and penalty rate hours that they work in excess of the outer limits. The additional payment will be due in the same pay or roster cycle that the hours were worked.
Step 7 – Wage review
The new clause requires you to calculate the amount that the employee would have been paid under the award and compare this to the annualised wage actually paid to the employee.
This comparison must be undertaken:
- each 12 months from the commencement of the annualised wage arrangement; or
- upon the termination of employment of the employee.
You can easily do this in Tanda by comparing it to the equivalent full-time classification for the annual period. Ensure that the employee’s award entitlements are properly configured, including classification and allowances. Tanda can also provide an exportable report that details the breakdown of the gross wages by pay condition.
If the employee would have been paid more under the award than under the annualised wage, you must pay the employee the amount of the shortfall within 14 days of the review.
At the time of writing, the Fair Work Ombudsman (FWO) has not issued any guidance about how the new annual salary requirements should be applied. Tanda has assembled a project team who are actively liaising with stakeholders, including employers and industry bodies, to create a staged feature release that is consistent with the requirements of the annualised salary changes taking effect in March 2020. The backbone of this release is a powerful reporting tool that aims to eliminate the additional admin burden brought by the changes.
For updates on the project, enter your details below:
Project Updates: Register your interest
List of awards affected by this decision
- Banking, Finance and Insurance Award 2010
- Broadcasting, Recorded Entertainment and Cinemas Award 2010
- Clerks – Private Sector Award 2010
- Contract Call Centres Award 2010
- Health Professionals and Support Services Award 2010
- Horticulture Award 2010
- Hospitality Industry (General) Award 2010
- Hydrocarbons Industry (Upstream) Award 2010
- Legal Services Award 2010
- Local Government Industry Award 2010
- Manufacturing and Associated Industries and Occupations Award 2010
- Marine Towage 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
If you have questions about how Tanda can assist you with these new requirements, register on the link above. If you’re unsure about the legal effects of these changes to your business, call the Fair Work Infoline on 13 13 94.
Awards & Rostering |
How much do full-time staff really cost?
Being in the business of managing staff costs, we often hear people say that casual staff just cost so much more than their full time equivalents. I mean, that extra 25% is a killer, right? Especially for staff who work a fairly consistent schedule each week, it’s almost like free money. For a while there I went along with that, not really giving it much thought. But today the thought struck me – casuals miss out on plenty of benefits afforded to full and part timers, so are they really better off? I decided to investigate further. What follows may surprise you. First – how many days in a year does a full time employee work? Weeks in a Year: 52 Working Days in a Year: 260 So far so good. We’re going to ignore the 1 or 2 days that we’re off by, for the sake of a nice round number. Next, let’s look at this full time employee’s entitlements, in days. Annual Leave: 20 (4 weeks) Personal Leave: 10 (2 weeks) Public Holidays: 10 We’ll assume a 7.6 hour work day and 17.5% leave loading. So how many hours of leave are we paying? Annual Leave – Base: 152 Annual Leave – Loading: 26.6 Personal Leave: 76 Public Holidays: 76 Total Hours of Leave Paid: 330.6 Earlier we calculated how many days of work one can work in a year, now let’s subtract leave taken to get a more accurate figure. Days of Leave Taken: 40 Actual Days Worked in a Year: 220 Actual Hours Worked in a Year: 1672 Divide 330.6 (hours of leave paid) by 1672 (hours worked) and we get 19.77%. Remember, we are comparing this to the 25% loading paid for casual staff. So from this perspective, yes, your full time and part time staff are still cheaper – but only by 5.23%. And even that number is probably on the low side. We ignored long service leave and maternity leave because they are a bit more unreliable. Both they are also costs (or accruals) that can definitely add up! When you take into account the fact that you only have to pay casuals when you need them, it’s easy to see why more and more Australian employers are turning to casual staff. According to the ABS, this has been growing steadily since the 90’s, and today over 1 in 5 jobs in Australia are casual.
Industry Insights |
Why Brisbane is Australia’s Best City for Startups
Since we’ve started flogging time and attendance software at Tanda, our team has bought over 40 airline tickets across Australia. We’ve been to every capital city and done business at hundreds of locations all around Australia. One thing really hit home: Brisbane is the best place to be a startup. Here are five reasons why: 1. Cost of living This is by far the biggest benefit of being in Brisbane; housing and office space are so much more within the price range of a business that’s just starting. This has allowed us to bootstrap to a considerable size without using external funding. 2. Transport This may sound like a small thing. The best advice we got when we were starting our business was “it takes a lot of shoe leather”, meaning we’d spend a lot of time on our feet talking to anyone who’ll meet with us. Driving around Brisbane is so much better than other capital cities. It’s affordable enough, and nothing is too far away. Despite what philosopher Alain de Botton might say about the Riverside Expressway, it’s one of my favourite features of the city. Because Brisbane’s not that big, we can justify having an office outside of the inner city where rent is a bit cheaper, without feeling like we are out of the loop. 3. BCC Brisbane City Council is making a very concerted effort for the future of the city to be digital. I was lucky enough to receive the Lord Mayor’s budding entrepreneur grant and have heard Cr Quirk talk about the city’s plan for the future and I’m excited about growing a business here. 4. Business community There are a number of great communities around start-ups really getting some traction in Brisbane such as River City Labs and iLab. But the other great thing about the city is how many innovative business people are willing to talk to you and lend a hand – which is particularly good for a B2B business! 5. Talent Brisbane has two great technology courses at QUT and UQ, which makes it much easier to attract and retain young talent to help build and grow our business. It’s a much tougher market for employers in other capital cities, especially those with only one technology-focused university. I’d recommend Brisbane as a great place to start a business for anyone considering starting out. The team at Brisbane Marketing & Digital Brisbane have a lot of support available to you on top of the many other benefits.
Awards & Rostering |
Easter Penalty Rates 2015 — What you need to know about paying staff
Easter is coming up soon, and that means two things! A new season of Game of Thrones to feast on, and – perhaps less excitingly – public holiday rates to pay staff. As a business owner, accountant, or bookkeeper, it’s important to be aware of how public holiday rates over Easter and ANZAC Day should be paid in your state. First, let’s see when the holidays will be in 2014. You might be surprised! If your business is open on any of these public holidays, you’ll need to pay staff the appropriate public holiday rates. You should check your award, which will tell you exactly what multiplier or penalties to apply, often under a Public Holidays section. A common multiplier is 2.5x. Some businesses pay staff salaries, or pay casually “above award”. Public holiday penalties still apply! If you have a contract, it should cover this – check with Fair Work if you are unsure. Staff who don’t work on a public holiday If you have full or part time staff who should have worked on any of the weekday public holidays – Good Friday, Easter Monday, and Easter Tuesday in specific cases – they are still entitled to pay, even if they do not work. Generally you’ll pay at base rate for the hours staff would have been entitled to. Of course, if staff do work on the day, you’ll pay at a higher rate as dictated by the award (see above). But keep in mind: this only applies if they usually work on that day. For example, a part timer in Queensland who generally works Tuesday to Thursday probably wouldn’t get paid the public holidays because there’s no public holiday on those weekdays. Check your award/agreement to be sure! If your award dictates how rostered days off work, you should check to see if staff with an RDO on a public holiday are still paid. In some states, some kinds of businesses are not permitted to open on public holidays due to trading regulations. If this applies, you will probably still be required to pay staff who would otherwise work on that weekday. Again, if you’re not sure, it’s best to ask. Staff who work on a day that isn’t a public holiday Keep in mind that the rest of the award doesn’t shut off just because it’s Easter. For example, if you are in Tasmania and pay Saturday rates, you’ll still need to pay these on Easter Saturday (which is not a public holiday for you). Did you know… If an employee takes sick leave around a public holiday (eg. Thursday April 24 to Monday April 28), they still get paid the public holiday if they were otherwise supposed to work that day (ie. full/part time) If an employee takes annual leave, public holidays during the leave period don’t count towards their annual leave balance Public holidays do not need to be paid for staff on unpaid leave Staff cannot be forced to work on a public holiday if they have reasonable grounds for doing so. Common reasons include: the amount of notice given, family responsibilities (especially over Easter), and whether one could reasonably expect the business to be open on a public holiday. Tanda’s employee time clocks automatically interpret industry awards – including public holidays – so you can be sure you paid staff right, without tedious manually data entry Add the Fair Work Infoline to your speed dial, they are always happy to help. The number to call for any payroll queries is 131 394. Note: none of the above constitutes formal payroll advice. Always check with your accountant, bookkeeper, or Fair Work.