Provided that an "all-inclusive wage rate" is
higher than the amounts the employee would have received under an
award for hours worked, employers can use set-off clauses to pay
their employees an all-inclusive rate.
The Fair Work Ombudsman (the Federal watchdog for employees'
minimum entitlements) has confirmed that it considers set-off
clauses as a valid means of making payments to satisfy minimum
monetary award entitlements.
Guidance Note 7 (issued 31 May 2010) confirms that over-award
payments can only satisfy monetary award entitlements to which an
above-award wages payment is directed. It explains:
"Paying a higher wage rate
than the award minimum does not offset penalties or loadings in the
award unless it is clear that the parties intended to do so (and in
fact, the amount satisfies the entitlements that would otherwise be
payable to the employee). If an employer has properly
entered into an offsetting arrangement that makes it clear that
over-award payments are in satisfaction of all penalties, wages etc
due under the award, that arrangement can continue to be relied
upon to satisfy increases that arise as a result of the
commencement of modern awards. In addition, employers can agree
with their employees to enter into such an arrangement with respect
to future payments."
While awards such as the Hospitality Industry (General)
Award 2010 and the Restaurant Industry Award 2010
include clauses which expressly allow an employer pay an annualised
salary in satisfaction of certain monetary entitlements (provided
that certain conditions are met), the General Retail Industry
Award 2010, Fast Food Industry Award 2010 do not have such
Provided that an all inclusive rate is higher than the amounts
the employee would have received under an award for the hours
worked, employers covered by awards without annualised salary
clauses can use set-off clauses to pay their employees an
all-inclusive hourly wage or annual salary in satisfaction of
minimum award entitlements such as minimum wages, allowances, leave
loading, penalty rates, overtime, and weekend and public holiday
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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We discuss whether certain clauses commonly found in ordinary commercial contracts could be considered to be penalties.
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