• Shannon

Salaries v. Wages

We so often hear from clients that employees are paid a salary which is "inclusive of overtime or penalty rates'. The ICB (Institute of Certified Bookkeepers) tells that this can be very dangerous territory.

According to ICB and Workforce Guardian, if an annual salary is being paid to an employee in this situation, it's absolutely critical that:

  1. the employee is issued with a contract - or some other form of written agreement - which makes it expressly clear that their salary has been calculated os as to include all Award-based monetary entitlements (such as overtime and penalty rates), and

  2. the employee is at all times, paid a salary which is at least equal to or more than the amount they are entitled to received under their applicable Modern Award for the actual hours they've worked.

Furthermore, if the applicable Modern Award does contain terms dealing with annual salaries, these clauses must be strictly followed. For example, clause 17(b) of the Clerks-Private Sector Award 2010 states:

"Where an annual salary is paid the employer must advise the employee in writing of the annual salary that is payable and which of the provisions of this award will be satisfied by the payment of the annual salary."

A failure to comply with this require could result in maximum potential penalty of $54,000.

More from ICB:

A 40 hour week is not ok.

Assuming the employees are covered by the Fair Work Act 2009, the ordinary working week is set at a maximum of 38 hours (and maybe less if the employee is covered by an award or agreement).

You should instead refer to an ordinary working week or 38 hours plus reasonable additional hours (and confirm that the request to work these additional hours is 'reasonable'). If the employee is covered by an Award or Agreement, they will almost certainly be entitled to receive overtime or penalty rates for the additional hours.