Employers who pay annualised salaries need to be certain that they adequately compensate employees for the specified Hospitality Industry General Award 2010 (Award) entitlements. Failure to do so could result in the employer being faced with an underpayment claim.
What you need to know
- An annualised salary is an all-inclusive yearly wage which is intended to take into account, and compensate employees for, all Award entitlements including minimum wage rates, penalty rates and overtime. Annualised salaries are generally paid in weekly, fortnightly or monthly instalments.
- The payment of annualised salaries can relieve employers of the obligation to pay things like penalties and overtime, provided that the salary paid will be sufficient to cover what the employee would have received under the Award for the work performed.
- It is essential that annualised salary be accurately documented and includes all entitlements to ensure compliance.
One of the useful functions of the Award is that it permits annualised salaries to be paid. However, it is important for employers to be aware of the legal parameters surrounding the payment of annualised salaries in order to minimise the risk of being faced with an underpayment claim or similar.
Importantly, arrangements such as annualised salaries are only allowed if each part of the annualised salary clause of the Award has been complied with – in every respect. This will generally involve ensuring that the relevant employment contract:
- clearly identifies the Award;
- meets the requirements of the Award as to the payment of an annualised salary; and
- sets out exactly which provisions of the Award are to be satisfied by the payment of the annualised salary.
What are the advantages to annualised salary payments?
The payment of annualised salaries can be beneficial for employers as it reduces the complexities associated with calculating weekly/fortnightly/monthly wages where employees may be entitled to varying penalty rates and/or overtime during that period. Further, the payment of annualised salaries provides certainty regarding the employee’s take home pay which assists the employer in predicting labour costs.
Are you compliant?
Failure to ensure that the annualised salary clause of the Award has been adequately complied with could result in an employer being required to back-pay unpaid overtime and other entitlements (irrespective of the fact that the employee has been paid an annual salary intended to absorb those entitlements). This is a strong incentive to ensure compliance with the annualised salary clause in the Award!