Same as almost every year, January brought numerous changes in employment law. Some of the new rules will apply to all-in contracts, starting on 1 January 2016.
Lump-sum compensation for overtime has become a prevailing practice not just for executive-level employees, but is deemed to be legally acceptable also for non-executive employees. As a basic rule for all types of lump-sum compensation for additional working hours, employees must not be worse off than when paid for by actual overtime put in. Employers therefore need to observe some rules when negotiating lump-sum contracts.
A key point is that a lump-sum payment mode must not be automatically deduced when a salary exceeds the collective bargaining agreement, even when the excess payment is substantial. It requires an agreement between employer and employee, which preferably should be in writing, given the current amendments to employment law.
Basically, an agreement on the lump-sum payment of additional working hours can be made in two modes: a lump-sum payment for overtime or an all-in contract. The former covers only a given number of overtime hours as expressly specified in the employment contract, while the all-in clause names a total payment (in excess of the collective bargaining agreement) which covers any and all additional performance. Either mode regulates only the type of payment for additional work put in but neither obliges the employee to actually work overtime. Employers are therefore recommended to include an obligation to this end on the part of the employee in the employment contract.
Both lump-sum payment for overtime and all-in salary are due regardless of whether or not overtime is actually put in. The lump-sum payment offers an advantage to employers inasmuch as the employer can reserve the right to revoke it. If an employer does not expressly reserve this right, the payment must not be unilaterally cancelled. The all-in salary is impossible to revoke unilaterally.
As already mentioned, employees must not be worse off in their lump-sum overtime compensation than they would be if paid the minimum collective bargaining agreement salary plus additional working hours paid individually. Both modes require an examination whether the payment to the employee is at least identical to the basic hourly rates and other payments due under the law or collective bargaining agreement. This examination compares the lump-sum payment to the fictitious amount that the employee would have received if these hours had been compensated individually. Unless otherwise agreed, this examination is carried out for a period of one year. If the additional hours/overtime actually put in are/is not covered by the lump-sum payment the employee is entitled to an additional payment. Lump-sum agreements are permissible only for as long as the payment is not below the minimum pay specified in the collective bargaining agreement.
In order to carry out this comparison, court rulings have already in the past required a clear split by basic salary and all-in salary. Aiming at greater transparency in salary agreements, Section 2 (2) 9 of the Austrian Law Amending the Labour Contract Law (AVRAG) makes it clear that the employment contract/ slip expressly needs to show the amount of the basic salary. Reference to the applicable provisions in laws or collective bargaining agreements regarding the basic salary is no longer sufficient.
It is also important to note that the employee must be informed of any change in the basic salary in writing not later than one month after it becomes effective, except when the change was made due to amendments in the law or collective bargaining agreement or is the direct consequence of seniority-dependent advancements in the same employment or occupational group.
Section 2g AVRAG moreover provides that, if no basic salary is stated in an all-in contract, the employee is entitled to a basic salary, including additional payments customary in the sector and location, as is due to comparable employees working for comparable employers at the location of the workplace ("actual basic salary"). This actual basic salary as is customary in the sector and location needs to be used in calculating the requisite parts of the pay, except if otherwise provided in the collective bargaining agreement.
Given the new legal situation, employers are advised to state the minimum collective bargaining salary as the basic salary in the employment contracts. This complies with the law and allows utilising the maximum financial leeway with regard to the examination. Employees enjoy greater transparency under the new rules and are provided with a clear underpinning for asserting any overtime put in in addition to the all-in payment.
In conclusion, it should be noted that neither lumpsum overtime payments nor all-in contracts allow waiving the statutory obligation to keep records of working hours. For more details on how to keep records of working hours see our P) News issue of October 2015.
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.