Employ­ment law myth No.6: If I pay them a salary, the award does­n’t apply”

Most employ­ees in Aus­tralia are cov­ered by an indus­try or occu­pa­tion-spe­cif­ic mod­ern award which pro­vides for min­i­mum terms and con­di­tions whilst so employed. Impor­tant­ly, the awards set min­i­mum pay rates depend­ing on the employ­ee’s clas­si­fi­ca­tion under the award. The clas­si­fi­ca­tion will (depend­ing on the award in ques­tion) be deter­mined by fac­tors such as the employ­ees’ duties, expe­ri­ence and qual­i­fi­ca­tions. In addi­tion to sep­a­rate rates of pay for ordi­nary hours”, over­time and week­end work (penal­ty rates), most awards pro­vide for employ­ees to be enti­tled to var­i­ous allowances. For exam­ple, under the Build­ing and Con­struc­tion Gen­er­al Onsite Award 2010 there are sep­a­rate allowances for work that is hot”, wet” or dirty”. Under the Funer­al Indus­try Award 2010 there is an exhuma­tion allowance” for each body exhumed (cur­rent­ly $86.57 per body).

Most awards also pro­vide that employ­ees are enti­tled to an annu­al leave load­ing (uplift) of 17.5% of their ordi­nary pay when they take a peri­od of annu­al leave.

For employ­ers, it can often be some­thing of a bureau­crat­ic headache to work out exact­ly what each employ­ee is enti­tled to be paid for each hour worked when so many vari­ables have to be tak­en into account. It is com­mon prac­tice, there­fore, for employ­ers to pay an annu­al salary which attempts to take into account all finan­cial enti­tle­ments under the applic­a­ble award. Prob­lems often arise when an employ­ee is not giv­en a writ­ten con­tract of employ­ment which spec­i­fies that the salary is direct­ed to all mon­e­tary enti­tle­ments under the award. In addi­tion, some awards have very strict require­ments about what writ­ten notice an employ­ee must be giv­en when paid an annu­alised salary (see for exam­ple, clause 17 of the Clerks – Pri­vate Sec­tor Award 2010).

It is also a com­mon mis­con­cep­tion that where an annu­al salary is paid, the award no longer applies. This is not the case. For starters, any annu­al salary paid must be at least equiv­a­lent to what the employ­ee would have received if they were paid strict­ly in accor­dance with the award. In addi­tion, pay­ing an annu­al salary – even a very gen­er­ous one – will not by itself avoid the need to com­ply with oth­er terms of the award that deal with non-mon­e­tary enti­tle­ments. An obvi­ous exam­ple is the require­ment under most awards to pro­vide employ­ee with breaks (for exam­ple the Live Per­for­mance Award 2010 decrees that employ­ees per­form­ing striptease, erot­ic danc­ing, table­top or podi­um danc­ing will be giv­en a break of no less than 30 min­utes between the end of one per­for­mance and the com­mence­ment of anoth­er per­for­mance”).

The penal­ties for breach­ing the terms of an award are up to $63,000 for com­pa­nies and $12,600 for indi­vid­u­als involved in the contravention.

There is a lim­it­ed abil­i­ty to con­tract out of the award” if employ­er and employ­ee agree to enter into a for­mal guar­an­tee of annu­al earn­ings” where the employ­ee will be paid at least $142,000 (gross) per annum. The guar­an­tee needs to be in the form of a writ­ten under­tak­ing and com­ply with var­i­ous for­mal­i­ties. A sim­ple employ­ment con­tract is unlike­ly to be sufficient.

For any advice on award oblig­a­tions please con­tact: sro@​swaab.​com.​au or rbo@​swaab.​com.​au