Annualised Salary Changes

Published on Thursday, 5 November 2020 at 4:16:26 PM

Is my local government organisation impacted by the annualised salary changes?

If you have employees covered by Fair Work’s Local Government Industry Award 2010, then your organisation needs to be aware of the annualised salary changes that came into effect on Sunday 1 March 2020.

If you are still unsure about whether it impacts your local government organisation or what to do if it does, we have some tips to help you out.

What is the new annualised salary clause?

Although the Local Government Industry Award 2010 already had an annualised salary clause, the new clause requires greater actions and obligations by the employer.

The Local Government Industry Award 2010 contains model clause 3 (that’s right there is more than one model clause). Model clause 3 has been produced for employees who work highly variable hours or significant ordinary hours that attract a penalty rate.

For more information and background on the annualised salaries changes, read the dedicated article on Definitiv’s website.

Are other awards being affected?

Yes, the new annualised salary model clauses will be added to 22 awards in total but were initially only added to an 18 modern awards from 1 March 2020.

For more information on the awards impacted, visit the Fair Work website here.

Tip 1: Assess whether you have employees impacted by the changes

The first place to start is to eliminate employees that are not covered by the annualised salary changes, this should include the following;

  • Employees not employed in a permanent full-time role;
  • Employees that receive a guaranteed annual earnings rate above the high income threshold;
  • Employees covered by a registered agreement, i.e. EA or EBA; and
  • Employees not covered by the Local Government Industry Award 2010 or any other impacted modern award (See Fair Work website).

If you are unsure whether you have employees covered by the updated awards, the best place to start is an award’s coverage clause and the classifications the award covers. The coverage clause details which types of employers and employees are covered by that respective award.

For the Local Government Industry Award 2010, see the following sections for the required information;

  • Clause 4 – Coverage
  • Clause 12 – Classifications
  • Schedule A – Classification Definitions

When you have determined an employee is covered, it is also important to check the annualised salary clause(s) in the award as not every classification or position can be entered into an annualised salary arrangement.

In relation to high income earners, the high income threshold currently stands at $153,600 as at 1 July 2020 (this value is adjusted annually). Guaranteed earnings does not include items such as super and variable items such as commissions and non-guaranteed bonuses.

Tip 2: Review employment contracts

If you have employees covered by the annualised salary changes, the next step would be to review their employment contracts to make sure the remuneration clauses are in-line with the new annualised salary terms.

It is important to pay special consideration to the remuneration and offset clauses. When it comes to the remuneration, you need to specify the annualised salary amount, provisions of the award that is being compensated with the annualised salary and how the annualised salary was calculated.

The annualised salary can cover any or all of the following items;

  • Minimum wages;
  • Overtime, weekend and other penalty rates;
  • Allowances; and
  • Annual leave loading

On top of documenting the method of calculation, you need to specify the outer limits of what the annualised salary covers.

As defined by Fair Work in the Local Government Industry Award 2010, this includes;

'the outer limit number of ordinary hours which would attract the payment of a penalty rate under the award and the outer limit number of overtime hours which the employee may be required to work in a pay period or roster cycle without being entitled to an amount in excess of the annualised wage...'

Tip 3: Capturing time and attendance

As part of the updated recordkeeping requirements, you will need to record the start and finish times of your employees as well as any unpaid breaks.

If you don’t already capture time and attendance, this may be a major cultural shift within your organisation. However, adopting a solution that offers timesheets or time clock  functionality within your workforce doesn’t need to be a hassle. Most payroll software providers have an employee self-service portal with time and attendance capability.

As part of Altus Payroll platform, we supply multiple options for our customers to suit the needs of different employers and employees, these include;

  • Personal TimeClock: Our Personal TimeClock option allows employees to clock on and off, change duties and register breaks from the comfort of their own phone.
  • TimeClock: Our TimeClock app, to be placed on site, allows employees to register an event using face capture or NFC technology to tap ‘n’ go.
  • Timesheets: Our timesheets option is available via our mobile app and online.

For more information on our time and attendance options, please speak with your IT Vision Account Manager.

Tip 4: Annual Reviews

As part of the new requirements, an employer is required to conduct an annual review on the anniversary of the employee’s commencement date.

Although this may sound like you will need to conduct individual annual reviews every second day, your contract dates can be aligned if updating employment contracts or when conducting annual wage reviews. We suggest picking a start date during a quieter period in the year, i.e. not during EOFY.

Remember when doing the review, you will need to compare an employee’s annualised salary to what they would have made under the modern award. It is important to note when conducting your annual review that you may not be able to offset an overpayment in one pay period with an underpayment in another.

If an employee would have been better off under the award, then you will need to make sure they are recompensated the difference within 14 days.

This review will also need to be carried out within 12 months of an employee’s termination of employment or their annualised salary arrangement.

Tip 5: Managing additional payments throughout the year

If an employee goes beyond their outer limits during a pay period or roster cycle, you may want to be able to compensate them for these hours, which are outside of their annualised salary arrangement, within the same pay period or roster cycle. This will help prevent your business from having to pay out a larger lump sum at the end of the annual review.

If for example, in the employment contract you have stated that you will pay the employee at a specified hourly rate once they go beyond their outer limits, this can be automated in Altus Payroll.

Tip 6: Keep on top of outer limits in real-time

It’s always best to address and prevent potential compliance issues as they happen rather than dealing with it after the fact. With the Altus Payroll Work Restrictions module you can now track items such as employee’s outer limits or overtime in real-time.

Altus Payroll’s Work Restrictions module helps with fatigue management, overtime, manage annualise salary outer limits and ensuring employees are working their contracted hours

With the Work Restrictions module you can do the following;

  • Configure policies for minimum and maximum hour threshold limits;
  • Set up automatic reminders to make sure employees haven't forgotten to clock on and/or off;
  • Attach work restriction policies to a project or individual employee;
  • Create custom work restrictions policies for specific employees;
  • Define your own warning, critical and breach thresholds;
  • Notify specified users when an employee reaches a threshold level; and
  • Automate instant push notifications and emails on maximum alerts


Information provided in this article is general information, not legal advice and should not be relied upon as such. Definitiv and IT Vision do not accept liability for any loss or damage arising from reliance on the content of this article.

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