Employers need to prepare for changes coming to the Modern Awards

Major changes to the modern awards will come into effect as early as February this year, as the Fair Work Commission (FWC) concludes its four-yearly review. Obligations on employers are set to increase and employers need to be clear on changes they may need to implement. Susan Moran, Principal of our Employment team, discusses how these changes and the conclusion of the four yearly review will affect you.

The FWC has been reviewing all modern awards over the past six years and has announced the first roll out of the new modern awards. These will come into operation on 4 February 2020. The first roll out will only include some modern awards, with the rest to be rolled out in stages later in the year. For a list of the modern awards to be rolled out in February, follow this link.

It will be essential for employers to review the modern awards applicable to their employees, to ensure that any changes relevant to their workforce are implemented. For example, when the modern awards are rolled out this year, they will no longer include the ‘Absorption Clause’ which has been commonly relied upon by employers to offset over award entitlements, effectively allowing them to fulfil their obligations under the award when paying an above award flat rate. You can read more about how to effectively set off over award payments in our recent article, here.

Annualised salaries, provided for under several modern awards, have also been revised and will result in increased obligations on employers. Annualised salaries comprise paying a fixed annual salary to the exclusion of other award entitlements which would otherwise have to be paid, including allowances, overtime and penalty rates. These arrangements vary from award to award.

While providing flexibility to employers, the volume of underpayments to employees as a result of the use of annualised salaries mean more stringent obligations are set to be imposed. These changes will be effective from 1 March 2020 and will vary to some extent depending on the relevant award.

Such obligations will include:

1. You will be required to notify your employees of how their salary is calculated

Currently, employers are required to advise an employee in writing of the annualised salary they will be paid and which provisions of the award will be satisfied by the annualised salary. As of 1 March 2020, there will also be requirements to advise the employee of:

• the method used to calculate the annualised salary, including specifying any overtime or penalty rate assumptions used in the calculations; and
• the outer limit of ordinary hours and overtime hours that have been reflected in the annualised salary before the employee is entitled to any additional payments.

If hours are worked outside of the outer limits as described above, employers will need to make additional payments to employees in respect of those hours.

2. You will be required to reconcile annualised salaries every 12 months

The new annualised salary provisions will introduce a reconciliation process where every 12 months (or following termination of employment), the employer must calculate the amount that would have been payable to the employee under the relevant award over the preceding 12 month period and compare that amount to the amount paid under the annualised salary. Any shortfall will need to be reconciled within 14 days.

3. Requirement for employee acknowledgment of certain records

Employers will be required to keep a record of the starting and finishing times worked by their employees, as well as any unpaid breaks taken. The record must be signed or acknowledged as correct in writing by the employee each pay period and used as the basis for the reconciliation set out above.

It is important to carefully review the modern awards applicable to your employees and the various changes that are being introduced. The new annualised salary clauses will be inserted into the following modern awards on 1 March 2020:

Banking, Finance and Insurance Award 2010 Broadcasting and Recorded Entertainment Award 2010 Clerks – Private Sector Award 2010 Contract Call Centres 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 any of the above modern awards apply to your employees and you pay your employees annualised salaries, you will need to ensure that by 1 March 2020 you have complied with the notification requirements and have begun keeping records as set out above.

This article was co-written by Employment Lawyer, Emma Sheen.

This article is not legal advice. It is intended to provide commentary and general information only. Access to this article does not entitle you to rely on it as legal advice.  You should obtain formal legal advice specific to your own situation. Please contact us if you require advice on matters covered by this article.