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Fair Work Act 2009
s.156 - 4 yearly review of modern awards
4 yearly review of modern awards - Annualised Wage Arrangements
(AM2016/13)
VICE PRESIDENT HATCHER
DEPUTY PRESIDENT DEAN
DEPUTY PRESIDENT SAUNDERS SYDNEY, 27 FEBRUARY 2019
Review of annualised wage arrangement provisions in modern awards.
Introduction
[1] On 20 February 2018 we issued a decision1 concerning the issue of annualised wage
arrangements, one of a number of “common issues” being dealt with as part of the current 4
yearly review required to be conducted pursuant to s 156 of the Fair Work Act 2009 (Cth)(FW
Act).2 In that decision (2018 decision) we stated eight conclusions concerning what is
necessary for annualised wage arrangement provisions in modern awards to form part of the
fair and relevant minimum safety net of terms and conditions required by s 134(1) of the FW
Act taking into account the matters identified in paragraphs (a)-(h) of that provision. We then
set out four variant model annualised wage arrangement provisions which we provisionally
considered would give effect to our conclusions, with the first two (Model Clause 1 and
Model Clause 2) being suitable for a modern award which covers employees who work
reasonably stable hours, and the second two (Model Clause 3 and Model Clause 4) being
suitable for modern awards which cover employees who work highly variable hours or
significant ordinary hours which attract penalty rates under the award. We also expressed
conclusions (some provisional in nature) concerning applications to vary the following
modern awards in respect of annualised wage arrangements:
National Farmers’ Federation (NFF): Pastoral Award 2010 and Horticulture Award
2010;
Australian Services Union (ASU): Clerks - Private Sector Award 2010 (Clerks
Award), Legal Services Award 2010 and Contract Call Centres Award 2010;
Russell Kennedy and 20 other law firms (Law Firms): Legal Services Award 2010;
1 [2018] FWCFB 154 (2008 decision)
2 Section 156 was repealed by the Fair Work Amendment (Repeal of 4 Yearly Reviews and Other Measures) Act 2018
effective retrospectively from 1 January 2018, but clause 26 of Schedule 1 to the FW Act (which was added by the
amending Act) requires the Commission to continue to apply s 156 to the current review as if had not been repealed.
[2019] FWCFB 1289
DECISION
E AUSTRALIA FairWork Commission
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Australian Industry Group (Ai Group): Health Professionals and Supported
Services Award 2010 (Health Professionals Award);
Chiropractors’ Association of Australia (CAA): Health Professionals Award;
United Voice: Hospitality Industry (General) Award 2010 (Hospitality Award) and
Restaurant Industry Award 2010 (Restaurant Award);
Restaurant and Catering Industrial (RCI): Restaurant Award;
Aurizon Holdings Ltd and five other employers (Rail Employers): Rail Industry
Award 2010 (Rail Award).
[2] We invited interested parties to file further written submissions in response to the
provisional views expressed in the 2018 decision, and also allowed the parties an opportunity
to file written submissions in reply. In addition, at the request of a number of parties, we
conducted a further hearing on 8 June 2018 in order to receive further oral submissions from
interested parties.
Further submissions
Chiropractors’ Association of Australia
[3] The CAA advised that it wished to withdraw its application to include an annualised
wage arrangement provision in the Health Professionals Award because any requirement for
annual reconciliation would obviate the benefit of administrative simplicity which employers
sought to obtain in an annualised wage arrangement and would be impracticable for micro
and small businesses. It submitted that Model Clause 3 and Model Clause 4 would not be
suitable for chiropractic employers because their employees work predicable hours outside of
the hospital environment. It also submitted that it saw no reason why annualised wage
arrangements might not apply to part-time employees.
Health Services’ Union (HSU)
[4] The HSU submitted that it was neither appropriate nor necessary to include an
annualised wage arrangement in the Health Professionals Award because such arrangements
had never been a feature of the hospital or health system and the sector was characterised by
high proportions of shift work and work attracting penalty rates that was performed during
evenings, weekends and public holidays and as overtime. In the alternative, with respect to
managerial and supervisory-level employees, the HSU submitted that any annualised wage
arrangements provision should be confined to Level 4 health professional employees under
the award since only they could properly be described as managerial and supervisory-level
employees. The HSU further submitted that if Model Clause 3 or Model Clause 4 were to be
added to the Health Professionals Award, they should be modified so that:
the agreement must have been genuinely made without duress;
the agreement can only be entered into after the individual employee has
commenced employment with the employer;
reconciliations should be conducted quarterly, not every 12 months; and
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only three months’ notice should be necessary to terminate an annualised wage
arrangement.
[5] The HSU also submitted that annualised wage arrangements have no practical
application to part-time employees.
Rail Employers
[6] The Rail Employers submitted that, apart from clause 18.4, the current annualised
wage arrangements provision in clause 18 of the Rail Award contained appropriate safeguards
for employees and promoted flexible modern work practices. There was no evidence of any
difficulty with respect to the operation of clause 18, and clause 18.3 dealt with a situation
where an employee’s pattern of work diverges from the assumptions upon which the
employee’s annualised wage was calculated. If an employee, it was submitted, considered that
the annualised wage is not reflective of the actual hours worked, the employee could seek to
have the matter resolved via the award dispute resolution procedure. In respect of Model
Clause 3 specifically, the Rail Employers submitted that:
the “outer limit” provision beyond which penalty rates would be payable was
unnecessary, since the current provision is prescriptive in terms of its overtime and
penalty assumptions and gives the employee a clear reference point against which they
may assess the hours worked, with the “make good” obligation in clause 18.3 and the
disputes procedure ensuring that the employees would always be paid for the time
actually worked;
the “outer limit” provision would also be onerous and inflexible;
the record keeping and reconciliation requirements would give rise to inflexible work
practices not in keeping with the modern awards objective;
of the three mechanisms identified in the 2018 decision as ensuring that the employee
would not be underpaid, it was not necessary to include more than one, and clause 18
of the Rail Award already required identification of the way in which the annualised
wage was calculated (which was one of the three identified mechanisms); and
in the alternative if it was considered necessary to insert an “outer limits” clause, then
there was no need to require the payment of an increment above the base rate or an
annual reconciliation.
[7] The Rail Employers submitted that the Rail Award should be varied to add its
proposed clause 18.4 in line with the conclusion in the 2018 decision that the proposed
variation had substantial merit.
National Road Transport Association (NRTA)
[8] The NRTA made submissions principally in relation to the Road Transport and
Distribution Award 2010 and the Road Transport (Long Distance Operations) Award 2010
(which are awards which do not currently contain any annualised wage arrangement
provisions). The NRTA submitted that the model clauses proposed in the 2018 decision were
too complex and onerous, and were not appropriate for the identified awards.
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Community and Public Sector Union (CPSU)
[9] The CPSU submitted that an annualised wage arrangement which could be introduced
without employee consent would not be consistent with a fair and relevant safety net
regardless of whether the pattern of hours of work was reasonably stable or otherwise. In
relation to the model clauses, it submitted that:
it opposed Model Clause 1 and Model Clause 2 because they lacked any
requirement for employee consent;
it supported the requirements for employee consent in Model Clause 3 and
Model Clause 4;
it supported the requirements for record-keeping and annual reconciliation in the
model clause;
the notice period of 12 months for the termination of annualised wage
arrangements in Model Clause 3 and Model Clause 4 was too long; and
the requirement for a minimum percentage above the minimum weekly wage
was an attractive measure of protection, but was concerned that the prescription
of any such percentage might become the default amount, discourage wage
increases or not properly reflect the variable hours worked.
[10] In respect of the Contract Call Centres Award and the Telecommunications Services
Award 2010, the CPSU submitted that Model Clause 3 or Model Clause 4 should replace the
current provision, provided that they remained confined to the top three classifications and the
issues it had identified were addressed. The CPSU did not support any of the model clauses
being added to any award which did not currently contain an annualised wage arrangement
provision nor the extension of any such provision to part-time employees.
Law Firms
[11] The Law Firms did not consider that any of the model clauses proposed in the 2018
decision were appropriate for adoption in the Legal Services Award. They submitted that the
legal services industry was a highly sophisticated working environment in which staff worked
in a highly autonomous manner, and the controls proposed under each model clause would
give rise to an unreasonable level of administrative burden. It was submitted that the existing
provision in clause 30 should be retained save that clause 30.1(a) should be varied to permit
an annualised wage to be paid in satisfaction of shift work allowances as well as the other
entitlements currently specified. In relation to part-time employees, the Law Firms submitted
that clause 30 currently applied to such employees and should continue to do so. This had
utility in particular to full-time employees on an annualised wage who returned to work after
parental leave on a part-time basis. Such employees would be paid a percentage of their
annualised wage based on the proportion of full-time hours worked.
Australian Services Union
[12] The ASU made submissions in relation to the Clerks Award, the Legal Services Award
and the Contract Call Centres Award. It supported the inclusion of Model Clause 3 in these
awards to replace the existing annualised wage provisions. The ASU submitted that the
capacity for employers to implement annualised wage arrangements without employee
consent entrenched discrimination against the female majority covered by these awards, the
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criterion of stability of hours as a basis to exclude a requirement for consent had never been
raised before, and there was a lack of evidentiary support for the assumption that the hours of
employees covered by the three awards were more (or less) stable than for employees under
other awards. The ASU pointed to a number of clerical enterprise agreements which provided
for wide spans of hours and the capacity to work outside these on shifts or on weekends as
evidence that clerical work did not necessarily involve a stable pattern of hours. The ASU
submitted, in the alternative, that if its position concerning employee consent was not
accepted, Model Clause 1 should be placed in the three clerical awards.
[13] In relation to the Contract Call Centres Award, the ASU submitted that if Model
Clause 3 was adopted it should like the current provision be restricted in its operation to the
highest three classifications. In relation to the Rail Award, the ASU submitted that the
existing requirement for employee consent should be retained and that clauses X.2 and X.3 of
Model Clause 3 should be added to the existing provision.
Australian Council of Trade Unions (ACTU)
[14] The ACTU submitted that high rates of award non-compliance, as demonstrated in
reports published by the Fair Work Ombudsman (summarised by the ACTU in a table) which
showed that using mean values 28 per cent of audited employers did not pay their employees
correctly and 21 per cent did not comply with record-keeping requirements, should lead to the
following conclusions:
there could be little confidence that any new record-keeping requirements would
be complied with at anywhere near acceptable levels;
there could be little confidence that the annualised salaries paid under any of the
model terms would meet the requirement that they do not disadvantage
employees;
there would be real enforcement difficulties, given that employees would be
unable to take advantage of the presumption in s 557C of the FW Act and,
except under Model Clause 3 and Model Clause 4, would have to terminate their
employment if they wished to recoup the losses they had suffered over a period
of less than 12 months;
there would be reluctance to allow annualised wage arrangements to proliferate
across the award system; and
there would be reluctance to allow some annualised wage arrangement
provisions to be retained in their existing terms.
Australian Manufacturing Workers’ Union (AMWU)
[15] The AMWU submitted that annualised wage arrangement provisions should not be
added to any modern awards which did not already have them, and supported the removal of
the existing annualised wage arrangement provision in the Manufacturing and Associated
Industries and Occupations Award 2010 (Manufacturing Award). It submitted that there was
already poor compliance with awards and safety net entitlements, and employees often had a
poor understanding of their award rights. In relation to the model clauses proposed in the
2018 decision, the AMWU submitted that they were all deficient in certain respects. In
particular it submitted that:
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Model Clause 1 and Model Clause 2 did not require the agreement of the
employee;
any model clause should require agreement not just by the individual but by a
majority of the workforce where the employer intends on making such
agreements with 50 per cent or more of the workforce;
any model clause should have a requirement that the agreement must have been
made genuinely and without coercion and duress, such as in cl 24(1)(g) of the
Manufacturing Award;
it should contain safeguards for employees for whom English is a second
language, such as in cl 24(1)(g) of the Manufacturing Award;
annualised wage arrangement provisions in award should not have general
application;
employees should be paid their annualised salary while on annual leave and
personal leave, and the provision in each model clause which provide for a
definition of the base rate of pay for the purpose of NES entitlements should be
removed;
awards with existing clauses should be varied only if the Commission provides
increased levels of protection; and
annualised wage arrangements are not applicable or capable of adaptation to
part-time employment.
Pharmacy Guild of Australia (PGA)
[16] The PGA submitted, in respect of the Pharmacy Industry Award 2010 (Pharmacy
Award), that the existing annualised wage arrangement provision (cl 27) met the modern
awards objective and that there was no evidence that the provision did not ensure that
employees were not disadvantaged. In respect of the proposed model clauses, the PGA
submitted that they did not meet the modern awards objective because:
the proposed “outer limit” requirement was not necessary to ensure that
employees are not disadvantaged, and would be onerous and remove the
flexibility that cl 27 of the Pharmacy Award was intended to achieve;
the proposed record-keeping and reconciliation requirement would give rise to
inflexible work practices, would be administratively onerous and remove any
benefit to the employer of entering into an annualised wage arrangement, and
was also unnecessary given that cl 27.3 of the Pharmacy Award requires that an
annualised wage not result in an employee being paid less over a year; and
the reconciliation requirement would require the employer to perform
calculations on an ongoing basis throughout the year rather than in line with the
annual wage review as was the current common practice.
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National Farmers’ Federation
[17] Having regard to the three reasons stated in paragraph [136] of the 2018 decision as to
why the NFF’s proposed clause for the Pastoral Award and Horticulture Award did not
satisfy the requirements of s 139(1)(f)(iii) of the FW Act, the NFF submitted that it was not
opposed to the following additional safeguards to address the Commission’s concerns:
a requirement that the method by which the annualised wage has been calculated
be set out in writing;
permit termination of the arrangement; and
a requirement for the arrangement to be reviewed and any underpayment
rectified.
[18] In respect of Model Clause 3 and Model Clause 4, the NFF raised the following
matters:
the requirements for record-keeping and annualised reconciliation removes the
benefits to the employer of managing cash flow, predictability of labour costs and
administrative simplicity;
there was also special difficulties in record-keeping in the pastoral and horticultural
industries, where work could often be unsupervised, employees might determine their
own working hours, and the work might be carried out at remote locations;
it would be less burdensome for employers to record the number of hours each day as
opposed to the times worked, which went beyond the current record-keeping
obligations in the Fair Work Regulations 2009 (Cth)(Fair Work Regulations);
the requirement for the employee to sign off on the records each pay period or roster
cycle was unduly burdensome and would discourage compliance and the use of
annualised arrangements;
a period of 14 days was too short to rectify underpayments and would have cash flow
implications, and a period of 30-90 days would be more appropriate;
there should be a facilitative provision to permit employee reconciliations to occur at
the same time each year for all employees;
the proposed “outer limit” requirement was not necessary given the other protections
in the clause and it was not clear how it would operate where hours of work fluctuated
significantly across the year in accordance with seasonal requirements; and
the fixed percentage amount contemplated by Model Clause 4 might limit the capacity
of annualised wages to absorb fluctuations and would limit the level of flexibility
required for the different sectors covered in the Pastoral Award.
[19] Subject to the modifications it proposed, the NFF submitted that Model Clause 3
should be inserted in the Pastoral Award and the Horticulture Award. In relation to part-time
employees, the NFF submitted that annualised wage arrangements could be entered into on
the same basis as for full-time employees, that is, on the basis of an agreed number of hours
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of work and with the annualised wage compensating for any overtime, allowances, penalty
rates and annual leave loading that the part-time employee would otherwise be entitled to.
Restaurant and Catering Industrial
[20] RCI submitted that it was not necessary to replace the existing provision in the
Restaurant Award with any of the model clauses in order to achieve the modern awards
objective. There were sufficient safeguards already in place to protect employees, and while
RCI acknowledged issues of non-compliance in the restaurant industry which it was
continuing to address, there was little evidence before the Commission of non-compliance
with the current annualised wage arrangements clause. RCI submitted that adoption of any of
the model clauses would impose a significant regulatory burden on employers in the sector,
who largely consisted of small operators with limited resources. The existing provision
applied to all permanent employees, and this further supported the need to maintain the
existing provision.
Maritime Union of Australia (MUA)
[21] On 26 March 2018 (the day before it was de-registered as part of the amalgamation
process which formed the Construction, Forestry, Mining, Maritime and Energy Union), the
MUA filed submissions addressing the annualised wage arrangements provision (cl 13.2) in
the Marine Towing Award 2010. The MUA accepted in light of the 2018 decision that there
were three improvements that could be made to the existing provision:
the addition of a requirement that the agreement be in writing with the individual
employee rather than the majority of employees;
the addition of a further requirement for the employer to keep pay records; and
allowing annualised wage agreements to be terminated on one month’s written
notice.
[22] The MUA submitted that there was not otherwise any difficulty with the existing
provision or any evidence of a lack of compliance requiring any further amendment to cl 13.2.
Australian Business Industrial and The NSW Business Chamber Ltd (ABI/NSWBC)
[23] In their submissions ABI/NSWBC took issue with some of the eight conclusions
which were reached in that decision. In relation to the third conclusion that, where an
annualised wage arrangement was by agreement, it should be terminable by either party,
ABI/NSWBC indicated that it was strongly opposed to this because the benefit of the
arrangement in terms of certainty of labour costs, flexibility and administrative ease could
only be realised in the arrangement was “locked in” and could not be unwound. Termination
might also cause difficulty and complexity if the annual wage arrangement was incorporated
into the underlying contract of employment. In respect of the fourth conclusion, while
ABI/NSWBC accepted that s 139(1)(f)(iii) required the Commission to include appropriate
safeguards to ensure that individual employees are not disadvantaged by entering into
annualised wage arrangements, the proposed safeguards in the model clauses went beyond
what was necessary through the imposition of multiple and overlapping administrative
safeguards. ABI/NSWBC did not oppose annual reconciliations and submitted that practical
experience suggested that they were more efficient than a calculation every pay cycle for
employees engaged in the ordinary way. A reconciliation requirement rendered the other
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safeguards proposed by the Commission, including a percentage premium payment and an
“outer limit” of hours redundant and overly burdensome.
[24] In respect of a record-keeping requirement that was incidental to an annual
reconciliation, it was submitted that such a requirement “would need to pass through [the]
extremely narrow jurisdictional ‘window’ provided by s 142 in being essential for the purpose
of making the reconciliation operate in a practical way”, and that ABI/NSWBC were “not
convinced” that the form of the requirement in the model clauses did this. However no
alternative provision was proposed.
[25] ABI/NSWBC did not propose the extension of annualised wage arrangement
provisions into awards which were not currently the subject of a specific application, and
submitted that the Commission should be cautious of implementing award provisions in
industries in which no evidence had been heard and no industry-specific considerations had
been identified. The application of annualised wage arrangements to part-time employment
was supported, and there was no reason why such a system could not equally apply to such
employees, including where an employee under an annualised wage arrangement moved from
full-time to part-time hours (perhaps after returning from parental leave) and the annual wage
could continue to apply on a pro-rata basis.
Australian Hotels Association and others
[26] The Australian Hotels Association, the Accommodation Association of Australia and
the Motor Inn and Motel Accommodation Association (Hospitality Associations) accepted the
proposition that a permissible annualised wages term must guarantee that, over the course of a
year, an employee does not receive any less remuneration under the arrangement than would
otherwise be payable under the provisions of the award. The Hospitality Associations did not
regard Model Clause 2 or Model Clause 4 as being appropriate for the Hospitality Award, but
submitted that some parts were appropriate. In particular they submitted:
the minimum threshold should be 25 per cent above in accordance with the
current award and past awards which have applied to the hospitality sector;
the proposed “outer limit” provision was not appropriate because it was too
complex, was at odds with the conclusion that an annualised wage arrangement
guarantee operated over the course of a year and not during a particular pay
period, and did not account for periods when an employee might work
significant numbers of hours below the outer limit;
the reconciliation requirement was excessive and not appropriate because it
would obviate many of the benefits of an annualised wage arrangement, would
require the employer to run two payroll systems, and because there was no
evidence which demonstrated any widespread underpayments throughout the
hospitality industry;
the requirement for employees to counter-sign times and wage records was
excessive and did not take into account the prevalence of electronic time
recording tools utilised by employers;
a 12 month termination period was excessive and not appropriate, and an
annualised wage arrangement should be terminable by agreement at any time or
upon four weeks’ notice; and
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they supported the requirements that an annualised wage arrangement be in
writing, specify the annualised wage payable and the provisions of the award
satisfied by the payment of the annualised wage, and be retained as a time and
wages record.
[27] Any annualised wage arrangement provision, the Hospitality Associations submitted,
needed to strike a fair balance between providing for appropriate safeguards for employees to
ensure they are not worse off and ensuring that such a provision does not unnecessarily or
excessively impose an administrative burden or employment costs on employers, and if the
provision was too complex or burdensome it would not be used. The current provision in the
Hospitality Award which applied to non-managerial staff (cl 27.1) required a minimum 25 per
cent increment, provided that an annualised wage would satisfy penalty rates and overtime
and other specified award monetary entitlements, required daily time and wages records to be
met, and required the annualised wage to be sufficient to cover what the employee would
otherwise have been entitled to. The Hospitality Associations submitted that if these
safeguards were considered inadequate, this could be remedied by requiring the arrangement
to be in writing, providing the employee with a right to request a reconciliation every 12
months, requiring an employer to provide a copy of the annualised wage arrangement
provision in the award to the employee at the commencement of the arrangement, and
allowing the parties to terminate the arrangement on four weeks’ notice. The Hospitality
Associations made a similar submission in relation to cl 27.2 of the Hospitality Award, which
applies to managerial staff in hotels. Finally, the Hospitality Associations submitted that
annualised wage arrangements may be practical for part-time employees, particularly those
classified as managerial staff in hotels.
Australian Industry Group
[28] The Ai Group sought to take issue with a number of the eight conclusions expressed in
the 2018 decision which, it submitted, would have a “very significant adverse impact upon the
flexibility contained within the award system, to the detriment of employers and employees”.
In this connection it submitted:
there was no current statutory requirement to keep records of overtime hours
worked by an employee covered by an annualised wage arrangement where no
penalty or loading was payable for the overtime hours, and the establishment of
such a requirement in an award provision would be unworkable, particularly for
managerial, professional and other employees who performed work outside the
workplace;
where an annualised wage provision exists in an industry or occupational award,
it can safely be assumed that it reflects the patterns of work in the relevant
industry or occupation in accordance with s 139(1)(f)(i) of the FW Act, and thus
they would not lightly be altered;
s 139(1)(f)(iii) allows annualised wage provisions that have “appropriate”
safeguards, and a record-keeping requirement which imposed an unnecessary
and unduly onerous burden on employees would be inappropriate and therefore
not allowable;
the word “ensure” used in s 139(1)(f)(iii) was used in other contexts in the FW
Act where it was impossible to achieve absolute certainty that the requirement is
achieved for every employee, and a practical judgment was required to assess
what safeguards were appropriate to ensure that employees were not
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disadvantaged, including the matters in s 134(1)(f), (g) and (h) and the need to
avoid unnecessary technicalities consistent with s 577(a);
in considering issues of disadvantage, it was centrally important that if the
safeguards were too onerous, annualised wage arrangements would not be
offered, which would disadvantage employees and might operate as a barrier to
businesses retaining existing employment levels and to productivity and
competitiveness;
“disadvantage” in s 139(1)(f)(iii) should not be applied in an unduly narrow
sense and needed to be considered holistically;
where employees did not under a particular award have an entitlement to
overtime or other penalties or allowances, these were not relevant to any
consideration of employee disadvantage;
nor for the purpose of assessing disadvantage was it relevant to take into account
overtime not directed or required to be performed by the employer;
existing provisions which required a “review” of annualised wage arrangements
did not require the conduct of a reconciliation and were not intended to operate
as a mechanism for an employee to claim back-pay;
the FW Act contained protections against unreasonable overtime (s 62) and
unreasonable requests to work on public holidays (s 114), and they needed to be
taken into account in assessing whether safeguards in an annualised wage
arrangements provision were appropriate; and
existing annualised wage provisions should not be altered absent a solid basis
(such as evidence that such provisions have in reality resulted in relative
disadvantage to employees), and existing flexibilities should not be disturbed
contrary to the modern awards objective.
[29] In light of the above propositions, the Ai Group submitted that there was no need for
model annualised salary clauses across the award system, and it did not seek that any existing
provision be varied to reflect the model clauses proposed in the 2018 decision. It considered
that there might be a benefit in the inclusion of annualised wage provisions in a greater
number of awards, and the need for such provisions might increase once the outcome of the
separate 4 yearly review proceedings concerning the payment of wages was finalised.
[30] In respect of the proposed model clauses, the Ai Group submitted:
the inclusion of multiple safeguards in the clauses was unwarranted and not
appropriate;
if, contrary to the Ai Group’s submissions, the reconciliation safeguard was
introduced, there was no need for the other safeguards;
in respect of the proposed requirement that the components and overtime and
penalty rate assumptions of an annualised wage arrangement be set out in writing,
in many circumstances annualised wage arrangements were established having
regard to market conditions rather than award-related matters, making compliance
with the requirement unworkable;
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subclause X.1(c) in each model clause inappropriately included additional hours
that an employee may choose to work rather than just the additional hours the
employer requires an employee to work;
the requirement for a reconciliation upon termination of employment was
inappropriate where the termination was at the initiative of the employee, and
would remove the benefit to the employer of a wage arrangement which operated
over the course of an entire year;
it was unclear whether the “annual wage” contemplated by the model clauses
captured all contractual arrangements concerning the payment of an annualised
salary, or just those implemented pursuant to the relevant award clauses; and
there was no reason why annualised salary arrangements were incapable of having
practical application to part-time employees, and for example the current provision
in the Clerks Award (cl 17.2) did so.
[31] In respect of the Horticulture Award, the Ai Group opposed the inclusion of Model
Clause 3 or Model Clause 4. The Ai Group submitted that the current provisions in the Clerks
Award, the Legal Services Award and the Contract Call Centres Award should be maintained.
In respect of the Health Professionals Award, the Ai Group opposed the inclusion of Model
Clause 3 or Model Clause 4.
United Voice
[32] United Voice submitted that, in relation to the Hospitality Award and the Restaurant
Award, annualised wage arrangements were used to minimise the payment of penalty rates
and overtime, and could result in an employee working excessive unsocial hours without
receiving appropriate compensation. United Voice accepted that the model clauses went some
way in minimising abuses of annualised wage arrangements, but made the following specific
submissions:
whether the minimum 25 per cent pay increment required under the Hospitality
Award and the Restaurant Award was fair would depend on the utilisation of the
employee within the framework of unsocial work hours that could lead to a variety
of remuneration outcomes;
appropriate reconciliation provisions and an ability for “overs” to be paid made the
increment above the base rate less important, and the model clauses contained
satisfactory provisions to this effect;
the “outer limit” requirements in clause X.1(c) of the model clauses was an
important protection;
a minimum 25 per cent threshold increment was of utility to guarantee the
employee was not worse off and the employer did not benefit from the deferral of
payments awaiting reconciliation;
clause X.3 of the model clauses should be amended to require annualised wage
amounts to be increased in line with adjustments to the minimum wage;
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annual leave loading should not be a matter permitted to be encompassed in
annualised wage arrangements;
in respect of the Hospitality Award and the Restaurant Award, non-wage related
allowances should not be permitted to be encompassed in annualised wage
arrangements;
provision should be made for an employee to be able to inspect and copy the
records referred to in clause X.2(c) of the model clauses; and
the proposed notice period of 12 months was too long, and should be reduced to
three months.
[33] United Voice submitted that the Commission should not vary modern awards which
do not currently provide for annualised wage arrangements to add any such provision. In
respect of part-time employees under the Hospitality Award and the Restaurant Award, it was
submitted that because the part-time employment provisions in those awards had recently
been varied to make them more flexible, annualised wage arrangements should not be
available for them. Those awards should, it was submitted in conclusion, be varied to provide
for Model Clause 4 for non-managerial employees.
Shop Distributive and Allied Employees’ Association (SDA)
[34] The SDA submitted that the Commission should not extend annualised wage
arrangements into awards that did not currently contain them unless there was a specific
application to do so and a thorough explanation of the industry.
Consideration
[35] The above summary of the submissions discloses that interested parties have taken
diverse positions about the issues to be resolved, even where the nominal interests of parties
are aligned. There is no consensus, even among employer parties on one hand or unions on
the other as to the proper approach to be taken. Accordingly it is necessary for us to resolve
the outstanding issues identified in the 2018 decision.
Reconciliation versus annual review
[36] In paragraph [121] of the 2018 decision, we concluded that the annual review
provisions contained in a number of annualised wage provisions in current modern awards
were imprecise as to the obligations which they imposed (if any), and were not such as to
ensure that employees are not disadvantaged as required by s 139(1)(f)(iii). We further
concluded in paragraph [129] that a reconciliation requirement would be an effective means
of ensuring there was no employee disadvantage, notwithstanding that the administrative
burden associated with such a requirement would diminish some of the advantages to
employers in entering into annualised wage arrangements (see paragraph [119]). No party
which made submissions opposing the introduction of a standard reconciliation requirement
identified any other means by which disadvantage to the employee could be avoided or
explained how a mere “review” could achieve that objective. We note the Ai Group’s
concession that the current annual review requirement in annualised wage arrangement
provisions did not require or involve any notion of the rectification of financial disadvantage
suffered by the employee. We reject the Ai Group submission that the requirement in s
139(1)(f)(iii) for “appropriate safeguards to ensure that individual employees are not
disadvantaged” can in some way be read as meaning less than a requirement that every
14
employee under an annualised wage arrangement must not suffer the relevant kind of
disadvantage, and the Ai Group did not articulate how an alternative interpretation of s
139(1)(f)(iii) was available on the language of the provision. We also reject the Hospitality
Associations’ submission that it would be sufficient to give employees the right to request
reconciliation on an annual basis. Providing an opportunity for an employee to obtain
rectification of any disadvantage is not the same thing as ensuring that such disadvantage does
not occur. The position in this respect is analogous to that discussed in the Full Bench
decision in Shop, Distributive and Allied Employees Association v Beechworth Bakery
Employee Co Pty Ltd3 in relation to whether “make good” provisions in enterprise agreements
which operated on employee request could satisfy the better off overall test:
“[43] Such obligation to “make good” any shortfall arises only if an employee makes a
request for a review. If no such request is made, whether through ignorance or design,
or perhaps because an affected employee simply lacks the time, information or ability
to form a view, then no obligation to conduct a review, much less “make good” any
shortfall, arises. Any concern that an employee or prospective employee would not be
better off overall if the Agreement applied to the employee than if the relevant modern
award applied to that employee cannot be met by such an undertaking.”
[37] We also reject the PGA’s submission that a reconciliation requirement was not
necessary because the current annualised wage arrangement provision in the Pharmacy Award
(similar to all modern awards containing an annualised wage arrangement provision, as
discussed in paragraphs [122]-[123] of the 2018 decision) required in clause 27.3 that the
employee not receive less under the annualised wage than under the modern award
provisions. Clause 27.3 of the Pharmacy Award currently provides:
“27.3 An annualised salary must not result in an employee being paid less over a year
(or, if the employment is terminated before a year is completed, over the period of that
employment) than would have been the case if an annualised salary had not been
agreed.”
[38] The PGA did not explain in its submissions how clause 27.3 could be complied with
without the calculation annually of a comparison between the remuneration an employee has
received under the annualised wage arrangement and the remuneration the employee would
have received under the normally-applicable provisions of the Pharmacy Award and without
the employee then being paid any shortfall. Clause 27.3, like the equivalent provisions in
other modern awards, prescribes the same outcome as the reconciliation provision in the
proposed model clauses in the 2018 decision, but does not prescribe the means for achieving
the outcome. In the absence of any alternative means of achieving the outcome being
identified, a reconciliation provision does no more than make explicit what clause 27.3 in
substance already requires for compliance.
[39] Accordingly we confirm our provisional conclusion in the 2018 decision that a
reconciliation requirement must be a fundamental requirement of any annualised wage
arrangement provision. While, as earlier stated, the requirement to conduct such a
reconciliation may be more administratively burdensome than under existing provisions
which do not contain such a requirement, it is nonetheless the case as ABI/NSWBC submitted
that is remains less onerous than calculating wages weekly, fortnightly or monthly in
accordance with the normal requirements.
3 [2017] FWCFB 1664
15
[40] We reject the submission of the HSU that reconciliations should be required on a
quarterly basis. As explained in paragraph [105] of the 2018 decision, the implicit
requirement in s 139(1)(f)(iii) is that employee be assessed over the course of a year.
[41] We also reject the submission of the Ai Group that there be no reconciliation
requirement applicable upon a termination of employment at the initiative of the employee.
That an employee chooses to resign his or her employment should not deprive the employee
of the right not to be financially disadvantaged by entering into an annualised wage
arrangement.
Record-keeping requirement
[42] As earlier set out, a number of employer submissions opposed the introduction of a
requirement to keep a record of the hours worked by employees on annualised wage
arrangements. However, none of these submissions explained how a reconciliation exercise,
or the existing requirements that employees not receive less pay under an annualised wage
arrangement than under the normal modern award provisions, could operate without a record
of the hours worked by the employee. Nor was it contended, contrary to the conclusion stated
in paragraphs [123] and [124] of the 2018 decision, that the Fair Work Regulations already
prescribed a requirement to keep records of hours worked. Accordingly we maintain our
conclusion that a record-keeping requirement is a necessary incident of the requirement to
conduct an annual reconciliation.
[43] We note the NFF’s submission that because employees under the Pastoral Award and
the Horticultural Award often work unsupervised and in remote locations, there were special
difficulties in keeping records of hours worked. However we do not understand why it would
be less burdensome for employers to record only the numbers of hours worked and not
starting and finishing times, since the employer would need to know the latter in order to be
able to record the former. The NFF submission in this respect is therefore not accepted.
However, we do accept the proposition that, for remote workers, there may be difficulty in
having employees sign records of hours each pay period or roster cycle. Therefore for the
Pastoral Award and the Horticultural Award we will modify the model provision to simply
require a written acknowledgment of the record by the employee each pay cycle or roster
period, which may be done remotely by electronic means.
Termination of annualised wage arrangements
[44] The submissions concerning the termination of annualised wage arrangements entered
into by agreement were wildly divergent, particularly on the employer side. As set out above,
some employers wanted annualised wage arrangements to be terminable on much shorter
periods of notice, while others wanted them not to be terminable at all. On the union side,
there was general support for shorter notice periods for termination. We are not persuaded that
we should depart from the provisional view expressed in the 2018 decision and encapsulated
in the proposed model clauses that annualised wage arrangements, where entered into by
agreement, should be terminable at any time by agreement or on 12 months’ notice. We
consider that because entry into an annualised wage arrangement constitutes a major change
in remuneration arrangements, there should be a substantial degree of stability in the
maintenance of those arrangements. The capacity for a party unilaterally to opt out of an
annualised wage arrangement at short notice would tend to de-stabilise such arrangements,
and the lack of certainty this would engender would tend to make entry into such
arrangements unattractive. From the perspective of employees’ interests, if the protective
mechanisms contained in the model clauses proposed in the 2018 decision are adopted,
employees will not suffer any financial disadvantage during a lengthy notice period. We reject
16
however the submission advanced by ABI/NSWBC that annualised wage arrangements
entered into by agreement should not be terminable at all. It offends basic principle that an
agreement is incapable of termination by a party and, for the reasons explained in the 2018
decision, it is necessary to protect the legitimate interests of both employers and employees to
allow a capacity for termination.
Specification of method of calculation of the annualised wage
[45] We are not persuaded to depart from the provisional view stated in the 2018 decision
that the calculation method of any annualised wage should be specified in writing. This will
serve to ensure that the quantum of the annualised wage to be introduced is the subject of
some degree of mathematical analysis vis-à-vis the award entitlements it is intended to
supplant, which will assist in ensuring that annualised wage arrangements which are likely to
lead to the employee being financially disadvantaged will not be introduced. It will also make
transparent to the employee the extent of any overtime, weekend and other hours that attract
penalty rates under the relevant modern award that may on average have to be worked without
additional remuneration under the annualised wage arrangement.
The proposed requirement for an outer limit on hours
[46] We are also not persuaded to depart from the view we expressed in the 2018 decision
that annualised wage arrangements should specify an outer limit on the number of hours that
would attract penalty rates under the relevant modern award that may be worked pursuant to
the arrangement. An annualised arrangement pursuant to which an employee may be required
to work an unlimited number of such hours per pay or roster cycle without additional
remuneration is likely to lead to financial disadvantage to the employee and be oppressive.
We emphasise, as we did in paragraph [129(6)] of the 2018 decision, that an outer limit of
such hours is not intended to be the same as the average number of such hours upon which the
calculation of the annualised wage is based. For example, where an annualised wage
arrangement is intended to satisfy the entitlement to the payment of overtime penalty rates,
the quantum of the annualised wage may be calculated on the basis of an average of five
overtime hours per week, but the specified outer limit of overtime hours may be ten per week,
thus allowing for reasonable fluctuations in the amount of overtime per week that may be
covered by the payment of the annualised wage. Alternatively, an annualised wage
arrangement may be calculated on the basis that an eight hour shift will be worked, on
average, every weekend, but the outer limit may be twelve hours.
Requirement for employee consent
[47] The ASU’s submission concerning a universal requirement for employee consent is
largely repetitious of the case which it advanced at the hearing of this matter and which was
rejected in the 2018 decision. We do not consider that any new matters were raised in this
connection which would justify reconsideration of the conclusion stated in the 2018 decision.
The AMWU’s submission that a requirement for a majority of the workforce to agree to
annualised wage arrangements be added to a requirement for individual agreement is also
rejected. We do not consider that the views of persons in the workforce who may or may not
be subject to annualised wage arrangements themselves are relevant as to whether any
particular individual employee should enter into an annualised wage arrangement. We further
consider that in the one award in which there is a requirement for majority agreement, namely
the Marine Towage Award, this should be replaced by a requirement for individual
agreement.
17
Requirement for a minimum pay increment
[48] In the 2018 decision, we identified that a requirement for a minimum percentage pay
increment above the award base rate of pay might be one way of protecting employees from
financial disadvantage under an annualised wage arrangement. Such a requirement is
currently found in the annualised wage provisions in the Restaurant Award (25 per cent), the
Hospitality Award for non-managerial staff (25 per cent) and the Marine Towage Award (40
per cent). Model Clause 2 and Model Clause 4 were constructed on the basis that there would
be a requirement for such a minimum percentage pay increment. However no party expressed
support for the extension of such a requirement to any other award and no party engaged with
the question of what the quantum of such a pay increment might be. In those circumstances,
we will not impose such a requirement in any award where it does not currently apply, and
accordingly Model Clause 2 and Model Clause 4 will not be adopted for use beyond the
Restaurant Award, the Hospitality Award and the Marine Towage Award.
Extension of standard annualised wage provisions to other awards
[49] No party supported the adoption of any of the model clauses proposed in the 2018
decision as standard provisions to be added to modern awards generally. Accordingly we do
not propose to vary any modern award which does not currently contain an annualised wage
arrangement to include any of the model clauses except those awards which were the subject
of specific consideration in the 2018 decision, namely the Pastoral Award, the Horticultural
Award and the Health Professionals Award. However, it will remain open for interested
parties to apply for a specific modern award to be varied to include Model Clause 1 or Model
Clause 3, as appropriate.
Applicability to part-time employment
[50] There were differing submissions received concerning the applicability of annualised
wage arrangements to part-time employment. While some parties supported such
arrangements being made applicable or made available to part-time employees, we do not
consider that any workable, specific proposal to that end has been advanced. It is not possible
to formulate any standard provision which might apply to part-time employees because of the
wide divergence in part-time employment provisions as between different modern awards.
The course we propose to take is to adopt standard annualised wage provisions for full-time
employees, and then interested parties may if they wish make an application with respect to a
specific modern award to vary the provision to extend its operation to part-time employees.
Other matters
[51] A range of other matters were raised in the submissions made by interested parties as
summarised above. We have considered them but we are not persuaded to further depart from
the provisional views we expressed in the 2018 decision.
Standard annualised wage arrangement clauses
[52] For the reasons stated above, we will not proceed with standard clauses in the form of
the proposed Model Clause 2 and Model Clause 4. The specific provisions which will apply
to the three awards which currently contain requirements for a minimum percentage
increment to be added to the base award rate in any annualised wage arrangement (that is, the
Restaurant Award, the Hospitality Award (with respect to employees other than managerial
staff) and the Marine Towage Award are discussed later in this decision.
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[53] We have determined that Model Clause 1, as set out in paragraph [130] of the 2018
decision, will, subject to some specified modifications for specific awards, become the
standard annualised wage arrangements provision for those awards which currently contain an
annualised wage arrangements provision and under which employees generally work
relatively stable hours of work. We will proceed on the prima facie basis that this category of
awards (Category 1) consists of those which currently do not require the agreement of the
employee to enter into an annualised wage arrangement, namely:
Banking, Finance and Insurance Award 2010
Clerks - Private Sector Award 2010
Contract Call Centres Award 2010
Hydrocarbons Industry (Upstream) Award 2010
Legal Services Award 2010
Mining Industry Award 2010
Oil Refining and Manufacturing Award 2010 (clerical employees only)
Salt Industry Award 2010
Telecommunications Services Award 2010
Water Industry Award 2010
Wool Storage, Sampling and Testing Award 2010
[54] Model Clause 1 sets out in paragraph (a) of subclause X.1 five classes of award
entitlement for which an annualised wage may be paid in satisfaction thereof: minimum
weekly wages, allowances, overtime penalty rates, weekend and other penalty rates, and
annual leave loading. Where a modern award in Category 1 currently allows a wider range of
award entitlements to be encompassed in an annualised wage arrangement, those award
entitlements may be added to subclause X.1. In the case of the Legal Services Award, having
regard to the conclusions stated in paragraph [140] of the 2018 decision, shift allowances will
be added to the classes of award entitlements in subclause X.1.
[55] In addition, to the extent that any existing annualised wage arrangement provision is
limited in its application to specified classifications of employees, such a limitation will be
retained and Model Clause 1 will be modified as necessary.
[56] Model Clause 3, as set out in paragraph [132] of the 2018 decision, will become the
standard annualised wage arrangements provision for those awards which currently contain an
annualised wage arrangements provision and under which employees work highly variable
hours or significant ordinary hours which attract penalty rates under the award, as well as for
the Pastoral Award and the Horticultural Award. This will again be subject to specified
modifications for specific awards. The awards in this category (Category 2) will, again on a
prima facie basis, include the following awards (in addition to the Pastoral Award and the
Horticultural Award):
Broadcasting and Recorded Entertainment Award 2010
Local Government Industry Award 2010
Manufacturing and Associated Industries and Occupations Award 2010
Oil Refining and Manufacturing Award 2010 (non-clerical employees)
Pharmacy Industry Award 2010
Rail Industry Award 2010
[57] Model Clause 3 will be the subject of the same modifications for individual awards in
Category 2 as for those in Category 1 (see paragraphs [54] and [55] above). In addition, in
respect of the Pastoral Award and the Horticultural Award, clause X.2(c) of Model Clause 3
will be modified to read:
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“(c) The employer must keep a record of the starting and finishing times, and any
unpaid breaks taken, of each employee subject to an annualised wage arrangement for
the purpose of undertaking the comparison required by clause X.2(b). This record must
be signed by the employee, or acknowledged as correct in writing (including by
electronic means), each pay period or roster cycle.”
[58] With respect to the awards currently listed on a prima facie basis in Category 1 and
Category 2, we will provide interested parties with an opportunity to advance a case that any
particular award should be placed in the opposite category. We emphasise however that the
category in which an award has been placed will only be altered on the basis of a substantive
case, supported by evidence, that the pattern of working hours of employees generally under
the relevant award merits it being placed in the opposite category. Further, this opportunity
will not apply in respect of the Clerks Award, the Legal Services Award or the Contract Call
Centres Award which, based on our conclusions in paragraph [139] must fall within Category
1. In addition, based on our conclusions in paragraphs [136] to [138] of the 2018 decision, the
Pastoral Award and the Horticultural Award will definitely remain in Category 2.
[59] With respect to the Health Professionals Award, we are prepared to vary that award to
include an annualised wage arrangements provision that is applicable to managerial or
supervisory employees only and is otherwise in the form of Model Clause 3. We will invite
further submissions from interested parties as to whether we should proceed to take this
course or otherwise, having regard to the conclusions stated in paragraph [141] of the 2018
decision, we should simply dismiss the Ai Group’s application for an annualised wage
arrangements provision to be added to this award.
[60] In relation to the Restaurant Award, the Hospitality Award and the Marine Towage
Award, we consider that the following course should be taken:
(1) Model Clause 2 will apply to the Hospitality Award in respect of employees
classified as managerial staff.
(2) Model Clause 4 (as set out in paragraph [133] of the 2018 decision) will apply
to the Restaurant Award, the Marine Towage Award and the Hospitality Award in
respect of non-managerial staff.
[61] Subclause X.1(a) of the respective model clauses will however be modified to contain
the full range of award entitlements which may currently be encompassed in an annualised
wage arrangement.
[62] Subject to the proper consideration of any further evidence and submissions
concerning the categorisation of awards as discussed in paragraphs [53] and [56], the existing
annualised wage arrangements in the 19 modern awards which currently contain them will be
replaced by the specified model clauses in the manner discussed above, and in addition the
specified model clause will be added to the Pastoral Award and the Horticultural Award and,
subject to further submissions as discussed, the Health Professionals Award. For the reasons
given in this decision and the 2018 decision, we consider that this course is necessary to
ensure that annualised wage provisions comply with the conditions specified in s 139(1)(f).
We also consider that the inclusion of annualised wage arrangements clauses in these forms is
necessary to meet the modern awards objective in s 134(1). In reaching this conclusion, we
have taken into account the matters specified in s 134(1)(a)-(h) in the following way (using
the lettering for each paragraph in the subsection):
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(a) To the extent that annualised wage arrangements may apply to the low paid, it
is necessary for certainty that they cannot be worse off under an annualised wage
arrangement than under the normally-applicable provisions of the modern award. This
is a consideration which weighs significantly in favour of the adoption of the new
standard provisions.
(b) This is a neutral consideration.
(c) We do not consider that the form of annualised wage arrangements provisions
in a limited number of awards could have a discernible effect upon workforce
participation, so this is a neutral consideration.
(d) We do not consider that annualised wage arrangement provisions affect work
practices or the productive performance of work, so this is a neutral consideration.
(da) To the extent that current annualised wage provisions do not ensure that
annualised wage arrangements which provide for an annualised wage to be paid in lieu
of penalty rates for overtime, weekend work, work at unsocial hours or work on public
holidays, or in lieu of shift allowances, do not disadvantage employees compared to
remuneration payable under the relevant modern award, they may have the effect of
allowing employees not to be provided the additional remuneration referred to in
s 134(da). This will be rectified under the new standard provisions and accordingly
this consideration weighs in favour of the adoption of the new provisions.
(e) This is a neutral consideration.
(f) The new provisions are likely to increase the regulatory burden insofar as they
require the keeping of pay records and the conduct of an annual reconciliation
exercise, and this may have some consequential effect on employment costs. However
this is a necessary result of compliance with the requirements of s 139(1)(f)(iii). We
do not consider that there will be any effect upon productivity and accordingly that is a
neutral consideration.
(g) We consider that the new standard provisions will make clearer the precise
obligations which employers are required to discharge in relation to annualised wage
arrangements, and in that sense will be easier and simpler to understand. Otherwise we
consider this to be a neutral obligation.
(h) We do not consider that any discernible macro-economic consequences will
flow from the adoption of the new standard provisions.
[63] There may be a need for a transitional provision to apply to existing annualised wage
arrangements upon the identified modern awards being varied to include the new standard
provisions. We will invite further submissions in relation to this.
Next step
[64] Interested parties shall, within 28 days of the date of this decision, file:
(1) any evidence and submissions concerning whether any of the modern awards
listed in paragraph [53] of this decision, other than the Clerks Award, the Legal
Services Award or the Contract Call Centres Award, should be moved to Category 2,
or whether any of the modern awards listed in paragraph [56] of this decision, not
21
including the Pastoral Award and the Horticultural Award, should be moved to
Category 1;
(2) any submissions concerning whether the Health Professionals Award should
be varied to include Model Clause 3 or whether the application of the Ai Group in
respect of this award should be dismissed; and
(3) any submissions concerning the need for transitional provisions consequent
upon the adoption of the standard annualised wage arrangement provisions.
VICE PRESIDENT
Printed by authority of the Commonwealth Government Printer
PR705358
OF THE FAIR WORK MISSION THE
