Employ staff on a salary? Here’s what you need to know

It is a common misconception that once an employee is paid a salary, a modern award no longer applies to their employment. Whether a modern award applies to a person mostly depends on the duties they perform, and while their salary can be indicative of their level of responsibility, it is by no means determinative.

Some modern awards (for example, the General Retail Industry Award 2010) do not provide any heightened obligations when an employee is paid a salary compared to when they are paid on an hourly basis. Under these awards, the general rule is that an employee being paid a salary must be no worse off than had they been paid for the hours they actually worked. While not technically required, it has been strongly recommended that employers who pay staff a salary conduct a reconciliation at least annually to ensure that compliance issues do not arise.

However, there are specific obligations imposed on employers who pay their staff a salary under some modern awards, including:

• Clerks – Private Sector Award 2010 (Clerks Award);
• Hospitality Industry (General) Award 2010 (Hospitality Award);
• Manufacturing and Associated Industries and Occupations Award 2010 (Manufacturing Award); and
• Restaurant Industry Award 2010 (Restaurant Award).

Until recently, there had been minimum consistency across different modern awards about how these obligations had been dealt with. However, late last year the Fair Work Commission varied 21 different modern awards to change how these requirements operate and, in some cases, expand upon the requirements for engaging salaried staff.

Here’s what you need to know about engaging staff on a salary in the clerks, hospitality, manufacturing and restaurant industries.

Clerks Award

From the first full pay period after 1 March 2020, employers who engage salaried staff under the Clerks Award will be required to provide employees in writing the method by which the salary has been calculated.

Employees must also be informed as to the ‘outer limit’ of hours that they can work in a week without an entitlement to payment beyond the amount of the salary. For example, an assumption in the calculation of an employee’s salary may be that they will work a maximum of 40 hours a week, including 2 hours of overtime (the ‘outer limit’). If this employee were to work 42 hours, then to ensure that the salary does not result in the employee being worse off, they would need to be paid the applicable penalty or overtime rate for those 2 hours worked beyond the outer limit.

Finally, employers are required to reconcile every 12 months, or upon the termination of an employee, what an employee earned compared to what they would have earned under the award.

There is however, some good news about these changes. The changes will permit time and attendance records to be approved by the employee by electronic means. This enables employers to make use of online messaging, work chats or electronic rostering systems to fulfil their record keeping obligations.

Manufacturing Award

The Manufacturing Award’s annualised wage clause will also be varied on 1 March 2020. As with the current annualised salary clause in the Manufacturing Award, the scope is restricted to employees who are Supervisor/Trainer/Coordinator Level I or II.

The changes will increase the clarity concerning the range of provisions that can be satisfied by payment of an annual salary, including overtime and penalty rates.

Like the changes to the Clerks Award, the employer will have an obligation to inform the employee in writing as to the method of calculation of the salary as well as consideration of the ‘outer limits’ of ordinary hours that will be worked without the payment of a penalty.

Finally, the new clause more clearly outlines the employer’s obligations concerning time and attendance recordkeeping for salaried employees as well as the need to reconcile annual salary in comparison to what earnings would be under the award.

Hospitality Award and Restaurant Award

While the Hospitality Award and Restaurant Award have been earmarked to receive similar changes, some specific issues arising under those awards remain outstanding.

As a result, the implementation of any changes has been delayed.

The Hospitality Award is slated to undergo a significant shift with an expansion of the annualised salary clause to include many of the recordkeeping and reconciliation requirements outlined above. Currently this clause goes no further than setting the bare minimum salary payable to managerial staff in hotels at $49,025 per annum.

In contrast, the Restaurant Award’s annualised wage clause already has outlined recordkeeping and reconciliation requirements but further changes are proposed to make it more consistent with annualised salary clauses in other awards and to address matters such as the ‘outer limits’ of hours that can be worked under a salary.

Summary

Navigating the recordkeeping and reconciliation obligations when administering a salary arrangement can be complex and time consuming. However, it is important that these processes are performed correctly to ensure compliance with the applicable award and to ensure that no compliance issues arise.

If you have any questions about annualised salaries or are concerned about a compliance issue affecting your business, contact the legal team on 1800 572 679.

By Andrew Piper and Calum Woods, NRA Legal