The recent changes to the Banking, Finance and Insurance Modern Award (BFIA) follow a Fair Work Commission decision of 4 July 2019.
The changes to clause 14 of the BFIA comprise a codification of the already existing obligations on employers but impose new record-keeping and administrative obligations that did not exist previously.
Who the changes apply to
The changes will apply to employees that are:
- Covered by the BFIA
- Employed on a full-time basis
- Paid an annualised salary
The changes do not affect employees that are paid wages and other entitlements (such as allowances and overtime penalty rates) as per BFIA rates as and when they fall due on an hourly basis.
The new annualised salaries provision
As a result of the changes to the BFIA, you must advise employees on annualised salaries and keep a record of:
- Which provisions of the BFIA are satisfied by payment of the annualised salary
- The method by which you calculated the annualised salary
- The outer limit of ordinary hours which would attract the payment of a penalty rate under the award and the outer limit of overtime hours which the employee may be required to work in a pay period or roster cycle without being entitled to an amount in excess of the annualised wage.
You must also keep a record of:
- Every 12 months, the amount of remuneration that would have been payable to the employee under the provisions of the BFIA and compare this to what the employee was actually paid under the annualised salary.
- The start and finish times (including unpaid breaks) of each employee subject to an annualised salary, which must be signed by the employee each pay period or roster cycle.
Effect of the changes
Employers have always been required to ensure that employees on an annualised salary are paid greater than or equal to their entitlements under the BFIA. Indeed the recent underpayment issue affecting Woolworths is an example of an employer failing to keep track of whether an annualised salary meets award obligations.
However the new provisions impose record-keeping and administrative obligations that did not exist previously.
The most significant of these is the requirement to calculate outer limits for ordinary hours and overtime hours in the calculation of the annualised salary. Not only does this change require you to set assumptions around the number of hours an employee is likely to work but it requires you to perform several calculations for each employee at the time of engaging them on an annualised salary basis.
You may offer an employee an annualised salary. The employee in question will work as follows:
- 8.30 a.m. to 5 p.m. Monday to Friday with an hour for lunch
- Once per month, will work a half day on Tuesday and half day on Saturday morning
- A maximum of twice per week may be required to stay back until 6.00 p.m.
You must therefore factor into the annualised salary that the employee will work 12 Saturday shifts per year and a maximum of two hours overtime per week including the penalty and overtime rates these hours attract. If employees work more than this (say an extra Saturday morning each month) then this will be picked up in the annual reconciliation and backpay will be required.
Alternatives to Annualised Salaries
Annualised salary provisions have been commonly used in the past due to their administrative ease and relatively low compliance requirements.
Given the new administrative burden imposed on the use of annualised salary provisions, financial sector employers may wish to consider alternatives to the use of the annualised salary provisions which are available under the BFIA which give the benefit of an annualised salary but without the strict compliance regime.
If you wish to explore the options available to you, Dentons can advise you on the range of options available to you to achieve your business outcomes and the relevant compliance requirements.
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