Employment Contracts – so simple yet so important

It’s not uncommon for employers to pay an ‘annualised salary’ to employees which is intended to be an all-inclusive rate.  Sometimes employers do this because they are unaware of any award coverage and simply want to pay market rates or because they are, in fact, aware of the award and are attempting to genuinely pay an all-inclusive rate.

So, if you already pay or are considering paying annualised salaries, you need to read this case summary.

The preliminary hearing of Simone Jade Stewart v Next Residential Pty Ltd [2016] WAIRC 00756 highlighted why you need to ensure your employment contracts are accurate.  In this case, an employee claimed $29,000 in unpaid overtime and lunch breaks because the employer failed to specify the applicable award in their award contract.

Upon determining the correct award coverage, it was noted that the award stated that annualised salaries are permitted and may include payment for minimum weekly wages, allowances, overtime and penalty rates and annual leave loading.

The award also states employers must not only specify the applicable award but also the specific award entitlements included in the annual salary.  In this case, the employer used a catch all provision in the employment contract rather than specifying the specific award entitlements included in the annual salary.  It was found that the broad term created uncertainty as to which award applied and which provisions the salary intended to cover.  As a result of this decision, the employee was cleared to pursue the employer for back payment of underpaid entitlements.

A very clear message.

We are happy to review or draft your employment contracts.  Contact us here.