Australia: Amendments to Professional Employees Award 2020 Will Require Overtime Pay and Penalty Rates for Engineers, IT Professionals and Scientists

On January 20, 2023, Australia’s Fair Work Commission (FWC) issued an important decision that makes significant amendments to the Professional Employees Award 2020 (Award). Documents known as “modern awards” in Australia are statutory terms and condition of employment that apply to certain employees in the information technology, medical research, quality auditing or telecommunications services industries. The FWC addressed two issues in respect of the Award: (1) hours of employment and overtime and (2) the coverage of the Award.  

The FWC found that full-time professional employees covered by the Award, such as consulting engineers, IT professionals, and scientists, frequently work hours well above 38 per week, either on a regular basis or during peak work periods. Such employees are usually paid an annual salary that is intended to cover all hours worked, and often do not have any fixed hours of work. They are usually not paid any overtime payments for hours worked exceeding 38 per week and are only rarely granted time off in lieu of overtime pay (TOIL) for additional hours.

The FWC considered it necessary to prescribe special rates of compensation for additional and unsociable hours for full-time employees for the Award to meet the modern awards objective of establishing a fair and relevant safety net.

The FWC intends to adopt a “minimalist” approach to remedy the status quo where “award-reliant” employees at the lower classification levels may be “low paid” when they work significant additional hours without disrupting the degree of flexibility appropriate for professional salaried employment. Specifically, the Award will be amended to include the following:

  • The employee will be paid the appropriate hourly rate in clause 14 of the Award for all hours worked in excess of 38 in a week or receive TOIL in addition to the minimum annual wages in clause 14. This will include work on or in connection with call-backs and work performed on electronic devices or otherwise remotely.
  • 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.
  • A penalty rate of 150% will be payable for rostered hours (whether ordinary or overtime hours) worked on a Sunday or public holiday.
  • With respect to both penalty rates, for casual employees, this is in addition to their casual loading. All casual workers are entitled to a 25% loading (additional payment) to be applied on top of their hourly rate of pay for each hour of work to compensate for the fact that there is no certainty of ongoing work and that casual workers do not receive most paid leave entitlements to which permanent employees are entitled.
  • For compliance purposes, the employer shall 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.

The above requirements will not apply to employees covered by the Award who have a contractual entitlement to an annual salary that is 25% or more in excess of the minimum annual wage for the appropriate classification in clause 14.

Regarding the second issue (coverage of the Award), the FWC clarifies that the classifications will apply to all employees who perform professional engineering duties, professional scientific duties, professional information technology duties or quality auditing unless the person holds a position that is principally managerial in nature. There will be no need to apply the “principal purpose” test. The FWC deemed the variation necessary to clarify the coverage of the Award in a manner consistent with the current classification definitions.

We expect the variations to become effective in the coming months. For employers that have employees that are covered by the Award, we recommend taking the following steps:

  • Conduct an audit on current employee contracts and salary levels as well as overtime practices of their employees that are covered by this Award, and
  • Develop and implement appropriate plans ahead of these changes taking effect.

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.