Annualised salary changes: What you need to know as a small business owner

The Fair Work Commission is about to implement the most onerous and widespread change to Australian employment law since the Fair Work Act was introduced over ten years ago. 

In less than a fortnight, the obligations of many employers that pay their workers an annual salary will begin to change across 22 Modern Awards, impacting up to one million Australian businesses. 

This means most business owners are at risk of serious consequences if they don’t comply by March 1. With that in mind, here is everything you need to know:

Why the Fair Work Commission is introducing annualised salary changes:

Before 2018, the Fair Work Commission was required to conduct a Modern Award Review every four years. In early 2019, the Commission’s findings and decisions from the second Award review were published – we are now seeing these changes come into effect. 

The annualised salary changes are part of the Fair Work Commission’s broader strategy to close loopholes in employment laws, and ensure Australian businesses are paying employees their full legal entitlements. 

Who it will impact:

The changes apply to a broad range of full-time workers under 22 Modern Awards. This is more complex than it seems, as the nature of the work these Awards apply to encompasses a broad definition of day-to-day tasks most employees would engage with, despite the fact that their role may fall outside of the Award’s title. 

For example, the Banking, Finance and Insurance Award covers employees engaged in over thirty tasks from telephone enquiries and transaction processing, to money changing. This means that the Award applies to any employee that engages with one, or likely more of these tasks, encompassing the majority of the workforce. 

What will change:

There are four main provisions set to change for Award-covered employees that essentially bar employers from paying their workers a salary that covers ‘all hours’ worked. The idea is to protect employees from working overtime without remuneration and their right to penalty rates. With the new changes, employers must ensure:

1. Full-time award-covered employees track and submit all hours worked each week, either in writing or electronically. This includes unpaid breaks as well as start and finish times. Depending on the Award, the employee may be required to sign these records either every week, or every pay cycle;
2. At least once per annum, or upon termination, an employer must run a report comparing an employee’s salary to their full entitlements under the Award for all hours worked in the relevant period; 
3. If there is a discrepancy between the workers’ salary and their full entitlements, the employer must reconcile any underpayment immediately. 

Why you need to be compliant:

More and more, we’re seeing the Fair Work Commission make examples out of non-compliant businesses. Their message is loud and clear: failure to follow the rules will result in significant financial and reputational damage. 

Infringement could result in fines of up to $63,000 per breach. With the Wage Theft Bill predicted to come into effect soon after March 1, this could result in company directors being held personally liable for non-compliance, with penalties as serious as up to ten-years jail time. 

Ignorance is not an excuse either – the new laws are a wake-up call for Australian business leaders to get their house in order or risk the costly consequences of compliance negligence. 

How your business can embrace annualised salary changes: 

Business owners and employers must act now. Start by conducting a comprehensive audit of their employees’ award conditions, as well as taking a long, hard look at their current systems. 

The simplest way to ensure your business is compliant is to implement a system that streamlines the new processes. If you’re unsure or still have questions, be sure to consult an expert. Another way is to invest in technology with built-in compliance support, like Employment Hero.

It is getting harder to do business in our employment law landscape, and business owners shouldn’t make it any harder on themselves.