An annualised salary (also known as an annualised wage arrangement) is provided for in some awards. It allows an employer to pay the employee a fixed amount each pay period over a year instead of paying them hourly, and instead of paying other award entitlements, such as entitlements to overtime, penalty rates and allowances. It is not the same as being paid a salary under an employment contract.
Legislation: Fair Work Act 2009; Modern Awards | Category: Wages & Payment
What is Annualised Salary?
An annualised salary (also known as an annualised wage arrangement) is provided for in some awards. It allows an employer to pay the employee a fixed amount each pay period over a year instead of paying them hourly, and instead of paying other award entitlements, such as entitlements to overtime, penalty rates and allowances. It is not the same as being paid a salary under an employment contract.
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 consistent with the requirements of the relevant award.]
- Annualised salaries should be reviewed when award rates change
- Many awards require annual reconciliation within a set period after the anniversary date. This must be complied with.
- Outer limit clauses in some awards may specify maximum overtime/penalty hours the salary is intended to cover. Employees may be entitled to receive top up payments once they reach a certain point.
- Records of actual hours worked must be kept and may need to be verified by the employee
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 understanding Annualised Salaries important for employers?
Understanding annualised salary helps employers comply with Australian employment law, avoid penalties, and maintain fair workplace practices.
