Professional Employees Award amendments

Background

The PE Award covers qualified engineers and scientists performing professional engineering or scientific duties, qualified information technology or telecommunications employees working in the IT or telecommunications industry, qualified quality auditors working in the quality auditing industry, and qualified medical researchers working in medical research institutes, provided their roles are not wholly or principally managerial in nature.

The current (pre-variation) terms of the PE Award do not provide for specific overtime and penalty rate compensation entitlements.

Rather, the PE Award currently provides that employers must provide compensation for time worked regularly in excess of ordinary hours of duty, on call-backs (or waiting in readiness for a call-back), outside of ordinary hours over the telephone or via remote access arrangements, or on afternoon, night or weekend shifts. Such compensation may include granting special additional leave; providing special additional remuneration; granting a special allowance or loading, or taking into account overtime in the fixing of annual remuneration, but must include consideration of the penalty rates and conditions applicable to the majority of employees employed in the relevant establishment, and be reviewed annually to ensure the compensation is set at an appropriate level.

In April 2020, as part of the 4 yearly review of the PE Award, a Full Bench of the Fair Work Commission took the view that these provisions of the PE Award failed to provide a fair and relevant safety net for PE Award-covered employees working additional or unsociable hours, leading to PE Award-covered employees being disadvantaged compared to other employees.

The variation to the PE Award outlined in this article has therefore been introduced to address these concerns.

New overtime and penalty rate entitlements (on and after 16 September 2023)

The PE Award will be varied with effect from the first full pay period starting on or after 16 September 2023 to provide for specific overtime and penalty rate payment entitlements, as follows:

1. Payment for overtime

Employers must (subject to the matters below) pay a full time employee the appropriate PE Award minimum hourly rate for the employee’s classification for all hours worked in excess of 38 hours per week (or in excess of an average of 38 hours per week where the employer and employee have agreed to average ordinary hours of work over a period of up to 13 weeks). These hours include hours worked on or in connection with call-backs and work performed on electronic devices or otherwise remotely.

Part-time and casual employees are already required to be paid their hourly rate for work in excess of 38 hours per week under the current terms of the PE Award.

2. Time off instead of payment for overtime

However, an employer and employee can agree in writing that the employee will take time off instead of being paid for a particular amount of overtime that the employee has worked.

Any amount of overtime that has been worked in a particular pay period and is to be taken as time off in lieu of payment must be the subject of a separate written agreement that specifies the number of overtime hours to which it applies; when those hours were worked; that the employee can request at any time for time not taken to be paid; and that such payment must be made in the pay period following the request. It is not permitted to enter into an ongoing agreement for time off in lieu of overtime.

The period of time the employee takes off must be the same as the number overtime hours worked, and that time off must be taken within 6 months after the overtime was worked. The employee must be paid for the overtime if the time off is not taken within 6 months, or if the employee’s employment is terminated.

3. Penalty rates

Employers must (subject to 5 below) pay penalty rates for any hours worked at particular times at the direction of the employer (whether those hours fall within an employee’s ordinary hours or are overtime hours).

Full-time and part-time employees must be paid 125% of the minimum PE Award hourly rate for their classification for working before 6 am or after 10pm, Monday to Saturday, and 150% for work on Sunday or a public holiday.

Casual employees must be paid 150% of the minimum PE Award hourly rate for their classification for working before 6 am or after 10pm, Monday to Saturday, and 175% for work on Sunday or a public holiday.

4. Record keeping

In order to ensure compliance with the above matters, employers must (subject to 5 below) keep records of all hours worked by an employee in excess of 38 hours per week, before 6 am or after 10pm Monday to Saturday, and on a Sunday or a public holiday.

5. Exception where annual salary exceeds 25% of minimum annual wage

The varied PE Award does provide for a specific exemption from the above requirements.

If an employee has a contractual entitlement to receive an annual salary which exceeds the minimum annual wage prescribed under the PE Award for that employee’s classification by 25% or more, then the employer is not required to pay overtime (or provide time off in lieu), pay penalty rates, or keep records of hours worked by an employee in excess of 38 hours per week, before 6 am or after 10pm Monday to Saturday, and on a Sunday or a public holiday.

Key takeaways for employers

By 16 September 2023, employers with employees covered by the PE Award should:

• if they wish to avoid the application of the new PE Award-based overtime, penalty rate, and record keeping requirements with respect to their PE Award-covered employees:
  • determine whether each PE Award-covered employee within their business will have (as at 16 September 2023) a contractual entitlement to a salary which exceeds the minimum annual wage prescribed under the PE Award for that employee’s classification by 25% or more;
  • if not, consider offering for the relevant PE Award-covered employees salary increases which will result in a salary which exceeds the minimum annual wage prescribed under the PE Award for that employee’s classification by 25% or more; and
  • ensure that salary reviews in subsequent years maintain each employee’s salary at an appropriate level taking into account yearly increases in the minimum annual wage prescribed under the PE Award and changes in each employee’s classification under the PE Award; or
• with respect to PE Award-covered employees whose salaries will not exceed the minimum annual wage prescribed under the PE Award for the employee’s classification by 25% or more from 16 September 2023:
  • review payroll and remuneration arrangements to ensure that such employees will be compensated for all overtime worked, and work undertaken before 6 am or after 10pm Monday to Saturday, on a Sunday or on a public holiday, in accordance with the PE Award from the first pay cycle commencing after 16 September 2023;
  • ensure record-keeping practices are in place to keep records of all hours worked by such PE Award-covered employees in excess of 38 hours per week, before 6 am or after 10pm Monday to Saturday, and on a Sunday or a public holiday; and
• review and update any compensation policies dealing with overtime, and work before 6 am or after 10pm Monday to Saturday, on a Sunday or on a public holiday, for PE Award-covered employees, and ensure that employees and managers are aware of changes to when and how such work must be compensated.

Contact our Employment & Labour Team to discuss the impact of the changes to the Professional Employees Award 2020 on your organisation.