If I pay my employees above-award rates, do I still have to pay penalties ...

Written on the 4th of April 2012 by Gavin Hanrahan and Andrew Bull

If I pay my employees above-award rates, do I still have to pay penalties, allowances, loadings and overtime rates due to them under a modern award?

Many employers pay above-award rates either to attract good quality employees or because the demand for labour outstrips supply.

In addition to paying above-award rates, employers are then obligated to pay all of the other award monetary entitlements, the cost of which is inflated because the amounts are calculated using the higher wage rate. This need not be the case as it is possible for an employer to absorb payment for award monetary entitlements such as penalty rates, annual leave loading, shift loadings, overtime rates and allowances by offsetting all or some of these amounts against the above-award component of the employee’s pay rate.

It is important that any such arrangement be properly documented and agreed to by the employer and the employee; otherwise the arrangement can be deemed invalid. Absorption arrangements are commonly dealt with by way of a written employment contract or an individual flexibility agreement pursuant to a modern award.

Whichever method you choose, it is critical that each specific monetary entitlement being absorbed is clearly expressed in the document so that everyone is clear about what monetary entitlements are included in the above-award pay rate. Needless to say the above-award rate must be sufficient to cover the value of the entitlement that is being absorbed.

If you would like more information about offsetting above-award payments, please don't hesitate to email us or call on 1800 994 279. A member of our Workplace Relations & HR Services team will endeavour to respond to your enquiry within 24 hours

See Also > Workplace Relations & HR Services

Author: Gavin Hanrahan and Andrew Bull

Protecting High Income Employees by Providing a Guarantee of Annual Earnings

Why should I provide a Guarantee of Annual Earnings? Together with the 2.9 % increase to minimum wages, the high income threshold has increased from 1 July 2012. This is because the high income threshold is indexed on 1 July each year. The threshold was $118,100 with an unfair dismissal compensation limit of $59,050. Now, as of 1...

How can the Paid Parental Leave scheme help employers?

What is the Paid Parental Leave scheme? The Paid Parental Leave scheme is set up to help employers retain valuable staff by providing financial support for parents while they're off work caring for a newborn or recently adopted child. If you're an Employer, you will receive funds from the Department of Human Services before...

Resign or be fired?

Resign or be fired? When faced with the need to terminate the employment of a worker, sometimes employers will offer the employee the option to resign or face termination of employment. In this situation the employee may feel like they are being forced to resign. Often this approach is taken for two main reasons: The employer...

Dad and Partner Pay (DAPP)

New law provides Dads and Partners with paid leave… Fathers of new babies can now look forward to payment of two weeks’ leave following the passing of legislation in federal parliament on 28 June 2012. The Paid Parental Leave Act 2010 will now include a payment called ‘Dad and Partner Pay’...

6 Things You Can Do To Improve Employee Attendance

Employee Absenteeism - What can you do about it? Excessive absenteeism can be costly for business in terms of both replacement costs and lost productivity. If not managed properly, chronic offenders can also be a source of frustration for those employees who generally do the right thing.

Below are 6 things that you can...

If I pay my employees above-award rates, do I still have to pay penalties ...