Annualised salaries

There’s been a lot written recently about the above topic. It’s pretty confusing so let’s try to make some sense out of it.

  • Firstly, the change is happening from 1st March this year so there’s less than a week to go. What is changing exactly?
    • Annualising an employee’s salary means that you calculate how much overtime and shift penalties etc would normally apply to each pay and make an assumption that your employee will normally receive this amount every payday. It saves you the trouble of manually calculating overtime and shift penalties each payday. You annualise the salary then divide that number by the number of paydays in a year to work out how much your employee earns each payday
    • From 1st March 2020 more Awards will allow this form of paying employees
    • You may already be doing this and that’s fine – see below for more information
  • As an employer you will need to ask yourself a number of questions. Your answers to these questions will determine how much this legislative change is going to affect your business:
    • Do you have any employees covered by a Modern Award? Chances are you do but you mightn’t know it. Get advice if you don’t know the answer to this question
    • If the answer is yes, do you know which of the 122 Modern Awards cover your staff? Refer to the list of 22 Awards which have had annualised salary clauses recently added. Again, you may need to get advice on this one
    • If any of the Modern Awards that cover your employees are on the list of 22 you will need to make a decision as to whether you want to annualise your employees’ salaries or simply pay them as per the Award with all the penalty rates, overtime and other loadings that may apply.
  • Why would you want to annualise? A lot of employers do this to ease the administrative burden of having to work out each pay as it arises. With annualised salaries, the pay is the same every payday because the variables like overtime and penalty rates have all been pre-calculated and taken into account, to a certain extent
  • What if I’m already doing this? That’s fine and you can continue to do so but there are a lot of extra safeguards you’ll need to consider to meet the new legislative requirements. These are mainly concerned with time-keeping and regular salary reconciliations to ensure that your employees are better off being paid an annual salary than being paid via the Award.

Feel free to drop me an email or call to discuss further. It’s a bit of a minefield and each case will be different.

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