Changes to Award Creates Challenges for Annualised Salary Calculations.

Not for Inzenius customers.

Inzenius’ Award Interpreter can help with complex annualised salary payroll award interpretation challenges.

The systems can duplicate interpretation of the employee’s salary and comparable Award entitlements directly from its electronic timesheet for each pay run and annual analysis for the legislated Better Off Overall Test (BOOT) and Annualised Salary comparison requirements. ?

An annualised salary arrangement is an agreement that is made where a fixed annual wage is paid, that will remunerate the employee for some or all of the separate payments they would be entitled to under an Award (e.g. hours of work, penalty rates, overtime, allowances, loadings etc.).

The Fair Work Commission has varied the Hospitality Industry (General) Award 2020 (HIGA) terms that relate annualised wage arrangements. Similar changes will also take effect from 1 September in relation to the Restaurant Industry Award. We see other awards to follow.

This award now requires:

? Separate payment to employees, in addition to the amount of annualised salary paid, when “outer limits” of penalty rates and overtime are exceeded in a particular pay period.

? Employers to conduct a reconciliation every 12 months or upon termination of employment, calculating the difference between what the employee would have earned in separate entitlements compared to salary paid, with any shortfall being back paid with 14 days.

? Annualised salary agreements to specify certain details, including the amount of annualised wage, the award entitlements that the salary includes, and the outer limits that apply.

? The additional records of time worked on different work periods to be maintained.

The changes introduced include “outer limits” of penalty rates and overtime hours that can be included in Annualised salary arrangements. These outer limits when exceeded will attract additional payments based on loaded rates of pay for:

? more than 18 penalty rate hours per week; or

? More than 12 overtime hours per week.

The weekly limits specified may be averaged over a period of up to four weeks, if the employer operates a roster cycle over such a period.

Where the outer limits are exceeded, hours worked are not covered by the annualised wage, and are in addition to the annualised wage payment made, an employer is required to pay the hours worked beyond the relevant rates of pay.

Employers will need to conduct reconciliations:

? after each 12 months of the annualised wage arrangement, or

? within any 12-month period upon the termination of employment of the employee or termination of the agreement, with any shortfalls identified to be paid within 14 days.

This new obligation builds upon existing BOOT provisions which require an employee not to be disadvantaged by an annualised salary.

In addition to retaining start and finish times of each working day, employers are required to record any unpaid breaks taken. These records need to be signed off by employer and employee or acknowledged as correct by signing or by electronic means in each pay period or roster cycle.

Annualised wage employee work on a public holiday will be treated as penalty rate hours, with up to 18 being able to be worked per week. If this outer limit is exceeded, these hours will need to be paid separately at the relevant public holiday penalty rate.

Employers that already have employees on non-managerial annualised wage arrangements should:

• Ensure that payroll systems and processes will be able to accommodate outer limit payments that may need to be made in any given pay period.
• Ensure that accurate records are being made of working times, including breaks of annualised wage employees, (Timesheets) and that these records are signed and acknowledged by the employee as correct in each pay period.
• For existing salary employees – If you wish to continue using an annualised wage arrangement obtain their agreement to amend their employment terms.?

www.inzenius,com