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Updates to Modern Awards and the High-Income Threshold
In addition to the recent announcement about increasing the national minimum wage, the Fair Work Commission (the FWC) has made further announcements about changes that may impact your organisation from 1 July 2020. The changes relate to modern awards and high-income threshold. Specifically, the changes relate to the award provisions inserted as a response to the COVID-19 pandemic and to annualised salaries and the high income threshold.
1. ANNUALISED SALARIES AND THE HIGH INCOME THRESHOLD
From 1 July 2020, the high income threshold will increase from $148,700 to $153,600.
Under the Fair Work Act 2009 (Cth) (the FW Act), an employee will not be protected from “unfair dismissal” if the employee earns more than the high income threshold, unless the employee is covered by industrial instrument and has served the minimum period of employment of 12 months (or six months for small business employers). Employers with employees on salaries of around $150,000 p/a should consider increasing those salaries above $153,600 to mitigate against the risks relating to unfair dismissal applications.
The high income threshold is also relevant for determining whether an employer can provide an employee with a “guarantee of annual earnings”. Under the FW Act, if an employer formally guarantees and ensures that an employee receives a salary that exceeds the high income threshold, a modern award that “covers” the employee’s employment will no longer “apply” to the employee. As a result, the employer will no longer by required to apply the various award obligations to the employee’s employment (for example, the employee will no longer be entitled to receive penalty rates or annual leave loading under the award).
With respect to annualised salaries and the high income threshold, we understand that a number of employers have been providing employees with guarantees of annual earnings as an alternative to dealing with the increasingly onerous “annualised salary” provisions in modern awards. In order for the guarantee to remain effective, employers will need to ensure that their relevant employees earn more than $153,600 from 1 July 2020.
2. AWARD SCHEDULE X SET TO EXPIRE
By way of background:
• on 8 April 2020, acting on its own initiative, the FWC inserted “Schedule X – Additional Measures during the COVID-19 Pandemic” (Schedule X) into the majority of modern awards;
• Schedule X provides eligible employees with up to two weeks’ unpaid “pandemic” leave; and
• Schedule X provides all employees with the ability to reach an agreement with their employer about taking twice as much annual leave at half pay (a similar arrangement is available to employers and employees participating in the Government’s JobKeeper Scheme).
On 23 June 2020, the FWC stated that it would not, on its own initiative, propose an extension of the operation of Schedule X beyond 30 June 2020. As a result, unless an interested party makes a successful application to extend the operation of Schedule X, the Schedule X entitlements will no longer apply.
Please contact PCS for assistance with managing the impacts of these changes to modern awards and high-income threshold and updating employment agreements with respect to annualised salaries and the high income threshold.