The Fair Work Commission has recently determined to introduce compulsory overtime and penalty rates into the Professional Employees Award for the first time. There will be a limited exception for employees who are paid at least 25% above the minimum annual salary set by the Award.

This will have a major impact on employees covered by the Award who currently can be engaged on salaries but with no clear extra entitlements when working long or unsociable hours. For many employers the new provisions will mean it is necessary to undertake a detailed review of how they engage and pay employees.

For employees who are currently paid the minimum annual salaries set by the Award, but who work long or unsociable hours, their employers may need to consider increasing their salary by 25% if they wish to avoid paying additional overtime and penalty rates.

 

Who does the Professional Employees Award cover?

The Award covers a distinct set of professional employees, namely:

  • Engineers (across all industries) 
  • Scientists (across all industries);
  • Medical researchers employed by employers in the medical research industry;
  • IT professionals, quality auditing professionals and telecommunications professionals working in the IT, quality auditing or telecommunications industries.

The Award would therefore not apply to an IT professional working in, for example, a bank. But would cover an IT professional working in the IT industry (such as a software company).

 

How does the Professional Employees Award currently operate?

Unlike virtually every other modern award, the Professional Employees Award does not contain specific entitlements for employees who work long hours (eg over 38 hours a week) or at unsociable times (eg late in the evening or on weekends).

Rather the Award just says this:

13.1 For the purpose of the NES, ordinary hours of work under this award are 38 per week.

[…]

13.3 Employers must compensate for:

(a) time worked regularly in excess of ordinary hours of duty;

(b) time worked on-call-backs;

(c) time spent standing by in readiness for a call-back;

(d) time spent carrying out professional engineering duties or professional scientific/information technology duties outside of the ordinary hours over the telephone or via remote access arrangements; or

(e) time worked on afternoon, night or weekend shifts.

13.4 Compensation may include:

(a) granting special additional leave;

(b) granting special additional remuneration;

(c) taking the factors in clause 13.3 into account in the fixation of annual remuneration; or

(d) granting a special allowance or loading.

The existing provisions of the Award give no clear indication of how much additional pay an employee should be paid over the minimum annual salaries set by the Award for employees who work over 38 hours per week, or whose regular work pattern includes working late night or at the weekend.

The Fair Work Commission found that this risked employees being required to work excessive or unsociable hours but with no clear safety net of entitlements of additional pay to compensate them for doing so.

 

How is the Professional Employees Award changing?

Going forward, the Professional Employees Award will operate as follows:

  1. The minimum annual salaries set in the Award will cover 38 ordinary hours of work per week, although employees must be paid additional amounts where any such hours are at unsociable times or at the weekend (see below); 
  2. Employees can be required to work additional hours over 38 hours per week, where this is reasonable, subject to the extra payment provisions below.
  3. Employees must be paid their ordinary hourly rate for any hours worked in excess of 38 hours per week. The FWC stated that “this shall include work on or in connection with call-backs and work performed on electronic devices or otherwise remotely” and so will presumably also apply to employees performing work at home, or traveling to work, on laptops, tablets, and mobile phones. In other words, if an employee works 40 hours in a week they must be paid for 40 hours.
  4. A penalty rate of 125% will be payable for all hours worked (whether ordinary or overtime hours) before 6.00 am or after 10.00 pm on any day Monday to Saturday. For casual employees, this is in addition to their casual loading. This includes any hours included within their 38 ordinary hours.
  5. A penalty rate of 150% will be payable for hours worked (whether ordinary or overtime hours) worked on a Sunday or public holiday. Again, for casual employees, this is in addition to their casual loading. This includes any hours included within their 38 ordinary hours.
  6. The employer must keep records of all hours worked by an employee in excess of 38 per week, or worked before 6.00 am or after 10.00 pm on any day Monday to Saturday, or worked at any time on a Sunday or public holiday. 
  7. A standard clause allowing employees to agree to paid time off in lieu (TOIL) instead of payment for overtime will be introduced into the Award.

 

There will be an exception to all the obligations set out above for employees who have a contractual entitlement to an annual salary that is 25% or more in excess of the appropriate minimum annual salary set by the Award.

 

What are the consequences of the changes for employers?

Going forward employers will have to make choices in respect of how they engage with and pay employees under the Award.

One choice will be to keep a record of all hours worked by employees which are in excess of 38 per week, and/or are worked before 6.00 am or after 10.00 pm on any day Monday to Saturday, or worked at any time on a Sunday or public holiday. 

Employees will then need to be paid for all such hours at the appropriate rates set by the Award. 

The introduction of strict record-keeping and time-sheeting is likely to be a significant change for many employees and employers.

An alternative choice will be to contract with employees to pay them at least 25% more than the minimum annual salaries set by the Award, in which case the above provisions will not apply. In that case it would seem to be possible to pay a “flat” annual salary to cover all these provisions mentioned above (although noting that none of these provisions deal with the obligation at clause 18.2 of the Award to pay annual leave loading over and above the regular salary).

For employers who are used to paying salaries close to the minimum rates set by the Award, but with the expectation that this covers all overtime or work at unsociable hours – these new provisions may mean increasing salaries.

 

What else is changing in the Award?

The Fair Work Commission also determined to make a minor amendment to the Award to make clear that the Award does not apply to employees “employed in a wholly or principally managerial position” (such employees would likely be considered award-free).

 

When are the changes coming into effect?

The Fair Work Commission published a draft determination of exactly how it intended the changes to look in the Award which interested parties were able to comment on. The FWC is currently considering those responses as well as the date the changes will come into force, with some employer groups arguing that businesses should be given at least 12 months to prepare for the changes.

We of course will keep you updated as soon as we hear anything further.

You can read the Fair Work Commission’s decision here and the draft determination here.

 

Need more help with the Professional Employees Award?

We have recently published a free downloadable guide to the Professional Employees Award which you can download here.

 

About HR Connect

HR Connect is one of Australia’s leading providers of HR and workplace safety advice service, designed to help small business owners make confident and compliant business decisions.

If you need any guidance on these changes or how to apply these to your employees, please reach out to the HR Connect team for further assistance.

 

Disclaimer

The information provided in these blog articles is general in nature and is not intended to substitute for professional advice. If you are unsure about how this information applies to your specific situation we recommend you contact HR Connect for advice.

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