Employment Law Update

On 4 July 2019, the Fair Work Commission announced changes to the annualised salaries provision of the Clerks–Private Sector Award 2010 (Clerks Award) which has the potential to impact hundreds of thousands of clerical workers across numerous industries.

The now common practice of employing clerical staff on an annualised above-Award wage, which is specified to include entitlements such as leave loading and overtime (for instance), will soon be much more strictly regulated.

From 1 March 2020, employers must inform employees covered by the Clerks Award that are full-time and paid an annualised salary, in writing:

1. The annual salary the employee is to be paid
2. Which entitlements in the Clerks Award are satisfied by payment of the annualised salary (for example, overtime and penalty rates)
3. The method by which the employer calculated the annualised salary (each separate component of the annualised salary should be included)
4. The outer limit of ordinary hours which would attract the payment of a penalty rate under the Award, and the outer limit of overtime hours which the employee may be required to work in a pay period/ roster cycle without being entitled to overtime payments in excess of the annualised wage.

A record must be kept of this information and in addition an employer must also:

1. Calculate and keep a record of, every 12 months, or at termination of employment (for short periods), the amount of remuneration that would have been payable to the employee in accordance with the various entitlements in the Clerks Award (e.g. overtime and weekend allowances) and compare this to the salary the employee was paid. Any shortfall must be paid within 14 days of calculation.
2. Record the start and finish times (including unpaid breaks) of each employee paid an annualised salary, which must be signed by the employee each pay period or roster cycle.

Implications

Employers have always been required to ensure that employees covered by the Clerks Award who are paid an annualised salary are paid an amount greater than or equal to their entitlements under the Award and have always had record-keeping obligations.

However, the changes impose stricter record-keeping and administrative obligations on employers - the most significant being the requirement for employers to calculate the outer limit of overtime hours before the annualised salary is exhausted.

The other administrative burden is one which is already in place (but not often observed) being the requirement for an employer to reconcile every 12 months the pay the employee would have received under an Award/ entitlement basis rather than the annualised salary.

Employers should also be aware that these changes have been made or are earmarked for at least 16 other Awards which provide for annualised salaries so the regulatory burden on employers will continue to increase.

Penalties for non-compliance can be up to AU$63000 per breach and personal penalties also apply to officers who are involved in a breach.

Dentons’ Employment team can provide expert advice around contracts which provide for annualised salaries and procedures and systems to ensure Award compliance.

Breaking news

In other breaking news, the High Court of Australia last month granted special leave to Mondelez and the Commonwealth to appeal the Full Federal Court decision in relation to the calculation of what constitutes a “day” for personal leave purposes for employees who work in non-standard arrangements such as 3 x 12 hour work weeks.

The 21 August 2019 decision by the Full Federal Court (Decision) has led to wholesale review of payroll systems and work practices involving shift workers. Under the commonly accepted past practice, someone working a 3 x 12 hour shift week would receive two weeks of personal leave per year.

The Decision provided that a “day” is a calendar day, meaning when the Act provides for 10 days of personal leave, the shift worker in the example above would receive 10 x 12 hour days of personal leave per year (ie. 3.33 weeks of personal leave instead of the assumed two weeks).

When the High Court deals with this matter later this year it will provide certainty again for employers. If the Decision is overturned then calculation of personal leave for employees working non-standard “days” will return to the previous widely practised method.