It has been 12 months since the Fair Work Commission implemented new Annualised Wage Arrangements for 18 Modern Awards.
Those businesses who have introduced Annualised Wage Arrangements are reminded that they will need to conduct an ‘audit’ on the anniversary of the date the business entered into an Annualised Wage Arrangement with an employee(s), in order to comply with their obligations.
An audit requires an employer to compare the remuneration actually paid to the employee under the Annualised Wage Arrangement against the amount the employee would have been paid if simply paid according to the relevant Award.
If the amount actually paid to the employee is less than the employee would have received under the Award (noting entitlements such as overtime, penalties and allowances must be considered), then the employer has 14 days to pay the shortfall to the employee.
There are 5 minimum compliance requirements for Annualised Wage Arrangements:
- An Annualised Wage Arrangement can only be paid in lieu of minimum wage, allowances, overtime, penalty rates and annual leave loading (other Award obligations must be met)
- An Annualised Wage Arrangement must be set out and notified in writing (specific details required under the Award must be included)
- Employees must acknowledge in writing the specific hours worked and breaks taken
- An annual audit must be undertaken to determine whether the employee has been paid less than would have been paid under the Award
- Any shortfall identified by an audit must be rectified within 14 days
- Record keeping requirements (including the written record of the arrangement, the hours worked and employee acknowledgement)
These compliance requirements are important because failing to meet any one of them can expose the business to civil penalties of up to $66,600 per breach under the Fair Work Act 2009.
Alternatives to Annualised Wage Arrangements
To avoid penalties under the Fair Work Act 2009 for underpayments and ‘wage theft’ of Award covered employees, the alternatives to Annualised Wage Arrangements include:
- Individual Flexibility Arrangements under Modern Awards (employee must be ‘better off overall’ than under the Award)
- Guarantee of Annual Earnings under the Fair Work Act 2009 (employee must be paid the High Income Threshold amount, currently $153,600 excluding compulsory superannuation)
- Common Law Contract with appropriate set-off clause (employee must be paid at least what they are entitled to under the relevant Award in any given pay period)
- Enterprise Agreement under the Fair Work Act 2009 (requires a collective bargaining process and must result in all employees being better off overall than under the Award)
How can Humanforce help you?
Humanforce helps businesses to meet their compliance requirements for Annualised Wage Arrangements in the following ways:
- The availability of varied ways to set up an Annualised Wage Arrangement
- Accurately costing a planned roster
- Identification and payment of any shortfalls arising as a result of an annual audit
- Easy to generate reports arising from audits
- Meet record keeping requirements.