Annual wage arrangements

Annual wage arrangements

Are you considering annual wage arrangements for your practice? Here is what you need to know about the new annual wage arrangements in the Health Professionals and Support Services Award 2020.

On 9 May 2022, provision was made for an annualised wage arrangement under the Health Professionals and Support Services Award 2020 (HPSSA).

An annualised salary is payment made by an employer to award-covered employees that is all inclusive of award entitlements. 

It is important to note that an annualised salary cannot be less than the minimum entitlements an employee is entitled to under the HPSSA and National Employment Standards (NES). 

You must ensure that you have annual wage arrangements documented and that you provide the employee with a copy. 

Who does this apply to?

Under the HPSSA, full time employees can agree to be paid an annual wage instead of a weekly or hourly pay rate if classified as:

• Support Services employee – level 8 or 9 
• Health Professional – level 2, 3 or 4.

Part time and casual employees cannot have annual wage arrangements under this award.

What can be included in the annual wage arrangement?

The annual wage arrangement can compensate an employee for their award minimum:

• Wages,
• Any applicable allowances, such as the uniform or laundry allowance,
• Overtime, penalty and shift rates for a limited number of hours,
• Leave loading.

The arrangement needs to be in writing and outline:

• The annual wage to be paid,
• The award entitlements included in the annual wage,
• How the annual wage has been calculated, including any assumptions used in the calculation, and 
• The maximum (or ‘outer limit’) penalty hours and overtime hours the employee can work in a pay period or roster cycle without extra payment

Employers must provide employees with a copy of the annual wage arrangement.  There is  annualised wage arrangement template on the Fair Work Ombudsman’s website to which you may wish to refer. 

What record keeping is required?

It is important to be aware that implementing an annual wage arrangement is not a matter of ‘set and forget’.  You still need to keep and maintain records. 

Employers need to record the employees:

• Start and finish times
• Unpaid breaks

Employees then need to sign the record of hours (either personally or electronically) at the end of every pay period or roster cycle. These records are required for the annual conciliation. 

How do overtime and penalty rates work?

An annual salary does not mean an employee is not paid for overtime or penalty rates. 

If an employee works for more than their agreed maximum (or outer limit) overtime or penalty hours in a pay period or roster cycle under an annualised salary arrangement, they need to be paid for the additional hours worked at the overtime or penalty rate in the award. 

What is annual reconciliation?

Employers are required to undertake a reconciliation of an employee’s annual wages:

• Every 12 months after the arrangement starts, and
• When the arrangement or employment ends.

If the amount paid to the employee is less than the award payments that the employee would have been paid under the award, the employer is required to pay the difference within 14 days. 

How do annual wage arrangements cease?

An annual wage arrangement may end at any time by written agreement between the employer and employee.

If either party wishes to cease the arrangement, they can do this by providing 12 months’ notice.   

Tips for annual wage arrangements

Annual wage arrangements will not be for everyone. If you are considering it for an employee or employees in your practice, here are some practical tips.

• When drafting a salary arrangement, make sure that you specify each entitlement the salary is intended to cover. Otherwise, there is a risk that the clause may be unenforceable in respect of each entitlement you wanted to cover.
• When determining the outer limits and setting the salary, be realistic, rather than optimistic.  Make sure it is clear how the annualised salary was calculated, including identifying each separate component.
• Ensure you keep accurate records of hours worked and regularly review the records to ensure the employee is being properly compensated.  You may wish to appoint a person responsible for monitoring annual wage arrangements.
• Where an employee works more than their agreed maximum overtime in a pay period, those extra hours should be paid at the appropriate award rate. 

Need help?

The AMA (NSW) Workplace Relations Team can help and can be contacted via email at workplace@amansw.com.au or calling (02) 9439 8822.  

ABOUT THE AUTHOR:
Lisa Bennell is an AMA (NSW) Workplace Relations Advisor