Annualised wages and salaries
Under some awards and agreements, employees can be paid an annualised wage. Other employees may be paid a salary.
Find out about annualised wage arrangements, salaries and how they work.
On this page:
- Annualised wage arrangements
- Awards with annualised wage arrangements
- Check your industry rules
- Offsetting entitlements in a salary
- Tools and resources
- Related information
Our information is a guide
The information on this page is general guidance only.
You may wish to seek independent advice about an annualised wage arrangement, salary or offsetting agreement. Find out how at Legal help.
Annualised wage arrangements
Some awards and registered agreements allow employers and employees to have an annualised wage arrangement (annualised wage).
An annualised wage is where an employer pays their employee a fixed regular amount each pay period over a year. Paying an employee an annualised wage is an alternative to paying them an hourly wage for each hour worked in a pay period.
An annualised wage must follow the rules contained in the relevant award or agreement. Read more about annualised wages in awards at Awards with annualised wage arrangements.
Annualised wages are different to being paid a salary under an employment contract. For more information, go to Offsetting entitlements in a salary.
Awards with annualised wage arrangements
Awards that allow annualised wages contain their own rules that must be followed. These rules may allow an annualised wage to cover entitlements like:
- minimum pay rates
- penalties
- overtime
- allowances
- annual leave loading.
Generally, an annualised wage must not be less than the amount an employee would have received from wages and other entitlements under the award for the work performed during the year. This amount includes their minimum wage and any entitlements covered by the annualised wage. It can be for a lesser period if the employment ends before the year is completed.
The award may also have rules about the maximum number of penalty rate or overtime hours that an employee can work before they’re entitled to an additional payment on top of the annualised wage.
Reviewing an annualised wage arrangement
Awards usually provide that an annualised wage has to be reviewed every 12 months or when the arrangement or employment ends, if this is before the end of the 12-month period. The review is to check if the employee was paid at least what they would have been entitled to under the award if they hadn’t been paid the annualised wage.
Employers should also check their annualised wage arrangements when:
- award entitlements or pay rates change (such as annual wage reviews)
- the employee’s working arrangements change (such as changing classification or a significantly different pattern of hours).
When reviewing the annualised wage, if the total amount the employee was paid in that period was less than what they would have been paid under the award, the employee must be paid the difference.
Employees and employers should carefully review the award that applies to understand the specific rules for annualised wage arrangements.
Check your industry rules
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 Clerks Award
Sally owns a signwriting business and is employing a new full-time payroll officer to work in the office. Sally decides that paying an annualised wage would work best for the business.
Sally considers the role and identifies that the Clerks Award would apply. Sally also determines the relevant classification level for the role.
Sally checks the Clerks Award and confirms it allows for annualised wage arrangements. The Clerks Award says an annualised wage can cover entitlements like annual leave loading and allowances.
Sally uses the Pay and Conditions Tool to work out what the employee would be paid under the award if they weren't being paid an annualised wage.
Sally then calculates an annualised wage amount that will cover the relevant award entitlements. This calculation includes:
- minimum pay rates
- annual leave loading
- relevant allowances.
Sally records the annualised wage arrangement in writing and gives a copy to the employee. The record includes:
- the annualised wage amount
- which award entitlements are included in the annual wage
- how the annualised wage was calculated
- the maximum number of penalty rate hours and overtime hours the employee can work in a pay period or roster cycle without extra payment.
Sally will need to record the employee's starting and finishing times and unpaid breaks for each pay period or roster cycle. At the end of the period, the employee will need to sign in writing or electronically to confirm the hours are correct. These records will help Sally with the annual reconciliation of the employee's annualised wage.
Offsetting entitlements in a salary
An employment contract can contain an agreed salary which may cover minimum entitlements under an applicable award or agreement, including:
- minimum pay rates
- penalties
- overtime
- allowances
- annual leave loading.
If an award or agreement doesn’t apply, a salary must provide for at least the National Minimum Wage and the National Employment Standards. For more information, go to Awards and agreement free employees.
Some employers may try to rely on an employment contract or a separate agreement to offset above-award or agreement pay rates or salaries against award or agreement entitlements. For more information, see our Library article Rules about when and how to pay employees.
Employers should seek independent advice before attempting to enter into these arrangements to ensure that they comply with all their obligations under the Fair Work Act and any applicable award or agreement. For resources, visit Legal help.
Record keeping
Employers must meet record-keeping and pay slip obligations. If an employee is being paid a salary, their pay slips must include the employee’s annual rate of pay. For more information, visit Paying wages.
Employer and employees recording their hours
Employers should use timesheets to record an employee’s hours. This can assist with reviewing the actual hours worked during a period.
Employees can also record their own hours to ensure they are paid correctly. They can do this by using our Record my hours app.
