Salary payments

An annual salary can't be less than the minimum entitlements an employee is entitled to under the award or registered agreement that applies and the National Employment Standards.

The requirements that need to be met when agreeing to an annualised salary can be outlined in an award, employment contract, enterprise agreement or other registered agreement.

An employer and employee can agree that an annual salary covers entitlements like:

  • minimum weekly wages
  • penalties
  • overtime
  • allowances
  • annual leave loading.

Find out the rules in your award about making an annual salary agreement by selecting from the list below.

Clerks Award

Temporary Clerks Award flexibility

On 28 March 2020, the Fair Work Commission varied the Clerks Award by adding a new Schedule I.

The Commission has extended Schedule I and it now applies until 30 June 2021.

Schedule I adds award flexibility to the Clerks Award during the impact of coronavirus. It changes entitlements relating to:

  • span of hours while working at home
  • hours of work for full-time and part-time employees
  • annual leave.

Schedule I applies to employers and employees covered by the Clerks Award.

While Schedule I operates, an employee’s usual terms and conditions of employment under the Clerks Award continue to apply, unless they’ve been changed by Schedule I. If they have, Schedule I applies instead.

These changes may affect the information on this page.

Go to Clerks Award flexibility during coronavirus for more information about Schedule I and when it applies.

Based on what you've told us, it looks like you're covered by the Clerks - Private Sector Award [MA000002].

Employers can pay their full-time employees under an annual wage arrangement. Employers need to make sure their employees annual wage is high enough to cover the award entitlements that they've included in the arrangement, which can include:

  • minimum wages
  • allowances
  • overtime and penalty rates
  • leave loading.

An employee's annual wage can't be less than what they would've been paid over the year if they were paid all of their award entitlements for their work.

Employers can still pay all employees an annual salary without using annual wage arrangements in an award, as long as it covers all of their minimum entitlements. Employers should consider getting independent advice to make sure they're paying their employees enough.

Record-keeping

Employers need to record the annual wage arrangement in writing and give their employees a copy. This has to include:

  • the annual wage that will be paid
  • which award entitlements are included in the annual wage
  • how the annual wage has been calculated, including any assumptions used in the calculation
  • the maximum (or ‘outer limit’) number of penalty hours and overtime hours the employee can work in a pay period or roster cycle without extra payment.

The employer must also record the employee’s:

  • starting and finishing times
  • unpaid breaks taken.

Employees have to acknowledge the record of hours they've worked is correct by signing in writing or electronically at the end of every pay period or roster cycle. This record is used for annual reconciliations.

Use our Annualised wage arrangement template to record the details of your annual wage arrangement.

Overtime and penalty rates

A salary doesn't mean an employee misses out on overtime or penalty rates.

An employee's annual wage will generally include an amount for penalty rates and overtime. However, sometimes the annual wage isn't enough if the employee is working extra hours or at times they don't usually work.

If an employee works more than the ‘outer limit’ of hours in a pay period or roster cycle, they're entitled to be paid at their award overtime or penalty rate.

Annual reconciliations

Employers have to undertake a reconciliation of their employees' annual wages:

  • every 12 months after the arrangement starts, or
  • when the employment ends.

Employers have to make sure their employees have been paid at least the same amount they would've been paid under the award if they weren't on an annual wage, for all the hours they worked.

If an employee's annual wage is less than the award payments that they would have received, their employer has to pay them the difference within 14 days. Check the Clerks Award for all entitlements for employees who are paid an annual wage.

To find out more about who this award applies to, go to the Clerks Award summary.

Source reference: Clerks - Private Sector Award [MA000002] clause 18 external-icon.png

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Best practice tip

Check your employment contract for details of any annual salary arrangements.

Records of annual salary arrangements

Salary agreements should be documented in writing, and identify which entitlements are included in the payment.

The employer and the employee should keep a copy of the agreement.

Help for small business

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