Annualised Wage Arrangement and Potential IR Changes

In this article, we discuss the new Award clause on annualised wage arrangement and some IR changes the new Labor government planned to implement.

Annualised Wage Arrangement

Under the Health Professionals and Support Services Award 2020, an employer and a full-time employee in the classification of Support Services employee Level 8 or 9 (for instance Practice Manager) or Health Professional employee Level 2, 3 or 4 (for instance Oral Health Therapist or Hygienist) may enter into a written agreement for the employee to be paid an annual salary in satisfaction of the minimum Award rate, allowances, overtime, penalty rate and annual leave loading.

The Award provision (clause 22) places some obligations on the employer to ensure that the employee is not underpaid or disadvantaged as a result of this arrangement.

The written agreement must specify:

  • the annualised wage that is payable;
  • which Award provision(s) (i.e. entitlements) will be satisfied by the payment;
  • 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; and
  • the outer limit number of ordinary hours which would attract penalty rate and the outer limit number of overtime hours in a pay period or roster cycle.

If an employee works in excess of the outer limit amounts specified, those hours will not be covered by the annualised wage and must separately be paid. For instance, if the outer limit number of overtime hours under the agreement is 5 hours per week and the employee worked 8 overtime hours that week, the additional 3 hours worked must separately be paid in accordance with the Award overtime provision.

The employer must, each 12 months from the commencement of the arrangement or, within any 12-month period upon the termination of employment / the agreement, calculate the amount of remuneration that would have been payable under the applicable Award clauses and compare with the annualised wage actually paid. If there is any shortfall, the employer must backpay the employee within 14 days. Hence it is very important to keep proper records of the hours the employee worked (i.e. timesheet signed or acknowledged by the employee).

For the purposes of the NES (i.e. payment of annual leave etc), the base rate of pay of an employee under an annualised wage arrangement comprises the portion equivalent to the minimum Award rate and excludes any incentive-based payments, bonuses, loadings, monetary allowances, overtime and penalties.

Potential IR Changes

The intended changes below are not finalised or legislated yet, but it is good to be aware of them. ClinLegal will keep you updated in due course.

Criminalising wage theft

The Labor government has indicated that they will legislate to make wage theft a criminal offence. A few States and Territories (including Victoria and Queensland) already have legislation in place to tackle wage theft and punish employers who deliberately and dishonestly underpay employees or withhold employee entitlements (such as unpaid superannuation). The punishment can be fine or even imprisonment.

As such it is important for employers to take reasonable steps to ensure that they are paying employees all entitlements. Employers should also keep proper records on payments made and employees’ entitlements. This is because in the event of an underpayment claim, the onus is on the employer to prove that they maintain proper records.

Casual employees

In order to achieve the goal of job security, the Labor government has indicated that they will amend the current definition of casual employment.

The current definition of casual employment is that if both parties agree there is no firm advance commitment to continuing and indefinite work according to an agreed pattern, the employment is casual even though the employee is actually working regular hours each week.

This definition might change soon. The likelihood is that we may need to assess the actual arrangement in determining the nature of the relationship (i.e. permanent employee if working predictable or regular hours).

This Circular is produced for guidance purposes only and is not a substitute for legal advice. Legal advice should be sought for individual circumstances. For tailored advice for your Practice, please contact us at [email protected]