Key changes employers must understand
With set-off clauses being the norm in different industries, employers and business owners must keep the following in mind:
- Assess salaries pay period by pay period. Salaries must now be assessed per pay cycle. Annual “blanket” salaries are no longer enough if they don’t offset award entitlements in each pay cycle.
- No balancing out quiet and busy periods. Overpayments in quiet weeks can’t be used to cover underpayments in busier ones.
- Risk of underpayments. Even annual salaries on the higher end of the bracket may result in underpayment. This can happen if in any single pay cycle, the amount doesn’t fully cover award entitlements for actual hours worked.
- Contracts and set-off clauses. Set-off clauses still remain valid, however, they’re only valid within the pay cycle that they relate to. Employment contracts have to clearly state which award entitlements are being offset.
Need a review of your employment contracts to ensure they’re compliant with this stipulation? Our team can help.
Why does this matter for all businesses?
While the retailers involved in the ruling were large ones, it doesn’t mean that the decision is limited to large retailers. For businesses of all sizes, it has the following implications:
- Highly-paid staff may still need top-ups if their hours in a given period exceed their salary coverage.
- Both full-time and part-time salaried employees are affected when additional hours go beyond the contracted ordinary hours.
What about “reasonable additional hours” under the National Employment Standards (NES)?
The Court clarified that “reasonable additional hours” under the NES aren’t the same as overtime under awards.
- Overtime must be directed by the employer and recorded
- Hours worked voluntarily or for convenience don’t count as overtime in general. However, they still need to be monitored.
- Where additional hours are required to perform the role, these may have cause to be treated as overtime.
What employers should do now
While the decision might be subject to appeal, it currently represents the law.
We encourage businesses to go through the following steps to ensure compliance:
- Review record-keeping systems: are salaried employees’ hours being tracked accurately?
- Identify high-risk roles: are there roles in your business that require staff to work significant additional hours?
- Sync with payroll: do award entitlements match against the actual pay each pay period?
- Review and update contracts: do your employment contracts specify which entitlements are included in salaries?
Ensuring compliance with the Federal Court ruling
Need help with the changes, or with reviewing your current arrangements to make sure they’re in line with the ruling? Contact our team now.
