Employment and Industrial Relations
'Guarantee of Annual Earnings' agreements
24 June 2010
Authors


With the inception of Modern Awards under the Fair Work Act 2009 (Act) from 1 January 2010, various previously ‘Award free’ employees are now caught up in the wider industry scope of these Awards.  The Act however, permits employers and their ‘high income’ employees to avoid the application of a relevant Award by entering into a ‘Guarantee of Annual Earnings’ agreement with each other.

A ‘high income’ employee is currently a person who earns at least $108,300 per annum.  This figure is indexed annually and any forthcoming increase will be effective from 1 July 2010. 

The following items are included in the calculation for the ‘high income’ earnings:

  1. salary;
  2. other amounts such as those ‘salary sacrificed’ or otherwise dealt with as directed by the employee;
  3. the agreed value of non-monetary benefits received by the employee; and
  4. the amount of the employer’s superannuation contribution which exceeds the statutory 9% superannuation guarantee rate. 

Bonuses and incentives do not count in the calculation of the ‘high income’ threshold.

The effect of a 'Guarantee of Annual Earnings' agreement is that an employer is no longer required to comply with an Award but only comply with the terms and conditions agreed with the employee.  These terms and conditions must however, always equal or exceed the minimum set by the National Employment Standard and exceed the financial ‘high income’ threshold.  The Award coverage also still entitles the employee to bring an unfair dismissal application in Fair Work Australia.

The implementation of a 'Guarantee of Annual Earnings' agreement is by formal written offer and acceptance between employer and employee, and no more than 14 days is permitted to elapse between the offer by the employer and the acceptance by the employee.

Should you wish to know more about Award coverage or 'Guarantee of Annual Earnings' agreements, please contact either Ian Curlewis, Partner, on 9288 6756 or ian.curlewis@lavanlegal.com.au or Michael Jensen, Senior Associate, on 9288 6944 or michael.jensen@lavanlegal.com.au