Overview of Annualised Salaries and Set-off Clauses

Annualised salaries may offer a streamlined way to cover all minimum entitlements, such as penalties and overtime. This method reduces the short-term administrative burden of fortnightly payroll but requires careful management to ensure compliance with Modern Awards.

Key Considerations:

  • Modern Awards Compliance: Employers must verify that annual salaries cover all entitlements, such as overtime and allowances.
  • Record-Keeping: While employers are not generally required to keep timekeeping records of their salaried employees, several modern awards include annualised salary arrangements. In these cases, employers must maintain records of the hours each employee worked during the period.
  • Regular Audits: Conduct periodic reviews to compare salaries against award entitlements, addressing any shortfalls promptly.
  • Employment Contract Compliance: Provide up-to-date and adequate employment contracts specifying agreed terms. Some awards require annual salary letters confirming identified entitlement inclusions and the outer limits of overtime for each pay cycle.

Recent Underpayment Claims

Recent high-profile underpayment claims highlight the risks associated with poorly managed annual salary arrangements. Notably:

  • Commonwealth Bank: Fined $10.3 million for underpayments totalling over $16 million, affecting thousands of staff​.
  • Westpac: A former manager’s claim of working 100-hour weeks highlighted that their annual salary was insufficient, prompting stricter record-keeping requirements, including daily timesheets for salaried staff.

Legal and Financial Implications

With the criminalisation of wage theft, the stakes for managing annual salaries correctly are higher than ever. Employers must move beyond customary practices and good faith, ensuring compliance to avoid significant legal and financial repercussions.

Compliance Tips:

  • Maintain Accurate Records: Ensure all hours worked are logged accurately.
  • Conduct Regular Audits: Regularly compare actual payments against award requirements.
  • Clear Communication: Keep employees informed about their salary arrangements and included entitlements.

Speak to the team at Business 360 for guidance on implementing these arrangements and reviewing your current workplace arrangements. Contact us at 1300 287 360 or email info@business360.au. For a confidential discussion with one of our team, scan or click below to schedule a consultation tailored to your specific needs.

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