An annualised salary arrangement is where an employee receives a set annual salary intended to cover overtime, penalty rates, and allowances under an award.
Legislation: Fair Work Act 2009; Modern Awards | Category: Wages & Payment
What is Annualised Salary?
An annualised salary arrangement is where an employee receives a set annual salary that is intended to cover various entitlements such as overtime, penalty rates, and allowances that would otherwise be payable under an award or agreement.
Following significant underpayment scandals involving annualised salaries, the Fair Work Commission introduced strict requirements for annualised wage arrangements in many Modern Awards from March 2020. These requirements vary by award but typically include mandatory record-keeping, reconciliation, and outer limit provisions.
Compliance Warning
Annualised salary arrangements are a high-risk area for underpayment. Many major wage theft cases have involved employees on annualised salaries who were actually worse off than if paid under the award. Employers must conduct regular reconciliations to ensure the annualised salary covers all award entitlements.
Key Compliance Points for Employers
- The annualised salary must be sufficient to cover all award entitlements the employee would otherwise receive
- Many awards require annual reconciliation within a set period after the anniversary date
- Outer limit clauses specify maximum overtime/penalty hours the salary is intended to cover
- Records of actual hours worked must be kept and verified by the employee
- Any shortfall identified must be paid within 14 days
Frequently Asked Questions
What is Annualised Salary?
An annualised salary arrangement is where an employee receives a set annual salary intended to cover overtime, penalty rates, and allowances under an award.
Why is Annualised Salary important for employers?
Understanding annualised salary helps employers comply with Australian employment law, avoid penalties, and maintain fair workplace practices.
