How the 2020 Modern Award changes affect annualised wages

Update: 3 March 2021

On 1 March 2020, the Fair Work Commission rolled out changes to several Modern Awards as part of their four-yearly review. These updates relate to how employees on annualised wages are paid and reported on, including employer obligations surrounding record-keeping, pay entitlements, annual reconciliations and notifying or agreeing on the employee’s salary. 

The new rules mean greater record keeping responsibilities for employers to ensure their workers are being renumerated correctly.

What awards are affected?

A full list of Modern Awards affected can be accessed here. Specifically, the pre-built awards available in KeyPay that are affected by this decision are:

• Banking, Finance and Insurance Award 2010
• Clerks Private Sector Award 2010
• Manufacturing and Associated Industries and Occupations Award 2010
• Horticulture Award 2010
• Hospitality Industry (General) Award 2010 (effective date is yet to be determined)
• Pastoral Award 2010
• Pharmacy Industry Award 2010
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The changes

While there will be slight differences between awards, all will require a written record of:

• The annualised salary you pay
• Which provisions of the award you satisfy by paying the annualised salary
• The method you used to calculate the annualised salary, including the methods used to calculate each component such as overtime and penalty assumptions
• Overtime hours which the employee may have to work
• Timesheet start and finish times (including any unpaid breaks) that employees must then sign or acknowledge stating the records are correct
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Auditing

Along with these new changes, employers will also be required to conduct employee audits every 12 months from the commencement of the annualised salary arrangement or upon the termination of the individual’s employment.

The audit must calculate the amount of remuneration the employee would have received had they been paid in accordance with the award provisions. Any shortfall identified in the audit must be paid to the employee within 14 days.

It’s important to understand that failure to comply with these new changes will be treated just like any other breach of a Modern Award, meaning employers may be subject to significant penalties if they fail to comply.
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The solution

Of all these new changes being introduced, the most complex obligation for employers is undertaking the annual reconciliation and ensuring all award provisions have been accounted for. Fortunately, KeyPay's pay conditions rules tester allows the ability to:

• Set up an employee with annualised wage arrangements so the recurring salary payment can be automated, while ensuring the annual award reconciliation process is as simple as possible
• Import an employee’s timesheets using a 12-month date range.
• Undertake annual reconciliation of any wage shortfalls. This is done by automatically interpreting timesheet costs based on the award provisions and pay rate template (that would have otherwise applied to the employee had they not been on an annualised wage arrangement).

• Export the data to Excel.
• Easily process any wage shortfalls in the pay run
  

The added benefit of using the rules tester is the ultimate transparency provided to the employer and employee. How? The results will include a list of the specific rules activated by each timesheet and clarifying how the timesheet cost was determined. Upon completing this audit, employers can then easily compare the results to what the employee was actually paid using our extensive suite of payroll reports.

This solution provides a hassle-free method of ensuring employers meet their obligations under the new annualised salary provisions in the affected Modern Awards. 

Check out our webinar with Employment Innovations, covering the March 1 changes, employer obligations, and best practice for payroll.
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Ensuring compliance with KeyPay

With these added enhancements to the rules tester, employers will now be able to self audit their annualised employees without the need for any manual calculations or interpretation of award provisions. An annual reconciliation for one employee will take no longer than 8 minutes!

If you don’t currently have a payroll platform that offers award solutions then this might be the time to try out KeyPay! Not only do we offer a seamless automated payroll experience but with award interpretation and responsive industry feature updates (like above) we ensure all our clients are always up to date and compliant!