How Salary Agreements are made in Australia

Starting in March 2020 there will be some new changes to the way that annual salary arrangements are structured in Australia across a variety of industries. These changes have been developed in accordance with the federal awards that aid organizations in creating pay structures for their employees and cover a diverse range of industries throughout the country.

Common practice in Australia states that annual salaries may be paid as long as these salaries satisfy minimum weekly wages, overtime hours, weekend pay, and any other penalty rates or annual leave as specified by the Australian labor code. Every four years in Australia, the Fair Work Commission reviews current practices and makes amendments where necessary for the next four years, in a variety of industries. The industries where annual salary structures have been revised are banking/finance/insurance, clerks, contract call centers, legal services, manufacturing, pharmaceuticals and health professionals.

It is important to note that this new legislation has created clear limitations surrounding overtime hours. If an employee were to work more than the maximum number of overtime hours (as specified by their annual salary agreement), they would then be required to receive payment from their employer for the excess of overtime hours that were worked. It is also important that the employer conduct an audit of wages paid every 12 months to ensure that employees were paid the correct rate and any shortfalls (in comparison to the federal award rates) must be adjusted and paid to the employee within 14 days of the completion of the annual wage agreement.

Additionally, it is up to the employer to track the hours that the employee works each day. Employers are also responsible for ensuring that employees take the correct breaks associated with their wage agreements and labor codes. Furthermore, this new legislation will require employees to agree and sign off on these hours collected by the employer at the completion of each pay period.

There is still no standardization about how annual salary agreements come into place. In some instances, the creation of these agreements can be based on the sole discretion of the employer. Whereas, in other situations, the agreements can be decided upon by both the employer and the employee. In this situation, either the employee or employer may terminate the agreement at any time, so long as 12 months written notice has been provided.

These new regulations have been created as a way to protect employees from being underpaid for the work they are completing. However, the administrative duties of many organizations will increase dramatically to keep up with the surplus of documentation that must take place during every pay period and every 12 months after employment of each individual. While smaller businesses with fewer employees should be able to make these transitions with minimal effort, it is without a doubt that larger organizations will be hit with hundreds, or thousands, of added hours of administrative work per year based on these new procedures.

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