Find out about annualised wage arrangements and how they work.
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An annualised wage arrangement is where an employer pays their employee an annual wage under the terms of their award or registered agreement that is more than the minimum award rate.
An annualised wage arrangement was previously called an ‘annualised salary’ under some awards.
Paying an employee an annualised wage is an alternative to paying them an hourly wage for each hour worked in a pay period. It’s also different to being paid an annual salary under an employment contract.
The requirements that need to be met when entering into an annualised wage arrangement can be found in:
An award can allow an annualised wage arrangement to cover entitlements like:
- minimum weekly wages
- annual leave loading.
Employers should use rosters or timesheets to record an employee’s hours. They should also update these to:
- reflect the hours actually worked and any unpaid breaks
- have these documents signed off or acknowledged by the employee at the end of the pay period or roster cycle.
Employers should keep these records for 7 years.
Find out the rules about making an annualised wage arrangement in your award by selecting from the list below.
Example: Setting up an annualised wage arrangement under the Restaurant Award
Jess owns a busy restaurant in a tourist area and is employing a new full-time cook to work in the kitchen. Jess decides paying an annualised wage would work best for her business. She has looked at her budget and worked out an annualised wage amount that she would like to offer the new employee but wants to check if it’s enough to meet legal minimums.
Jess checks the Restaurant Award and confirms it allows annualised wage arrangements. The Restaurant Award says that the annualised wage must be at least 25% above the minimum weekly award wage.
Jess considers the role and identifies the relevant classification in the award and the award entitlements that can be covered by the annualised wage. Jess calculates what the minimum annualised wage amount is by applying 25% on top of the minimum weekly wage, then multiplying by 52.
Jess also looks at her rosters and booking records to determine her restaurant’s needs including seasonal peak periods, and when she wants the new employee to work. Jess checks the rules in the award and creates a 4 week roster reflecting the hours for the position to base her calculation of expected annual entitlements on.
Jess then uses the Pay and Conditions Tool to work out what the employee would be expected to be entitled to over a year under the award if they’re not on an annualised wage (including penalty and overtime hours that exceed the ‘outer limits’, and allowances).
Jess realises that the amount she calculated is higher than the minimum annualised wage of 25% on top of the minimum weekly wage. She decides to pay the employee an annualised wage that reflects the higher amount, which will reduce the potential that she will have to pay extra shortfall amounts at the end of each year that the agreement is in place.
Jess hires Darryl, and they make a written agreement to pay Darryl the annualised wage.
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