Many employers are unaware their engineers may be covered by a Modern Award, namely the Professional Employees Award 2020 (Professionals Award).
The Fair Work Commission recently amended the Professionals Award to entitle engineers to overtime pay, effective 16 September 2023, unless they are paid an annual salary that is 25% or more than the minimum annual salary.
This article will help you identify whether your engineers are covered by the Professionals Award and what to do to prepare for the changes on 16 September 2023.
Are you engineers covered by the Professionals Award?
Yes – provided they are required to use a formal engineering degree to perform their duties and they are not covered by another, industry-based award which covers engineers (for example, the Black Coal Mining Industry Award 2020 or the Electrical Power Industry Award 2020)
But not if they are employed in a wholly or principally managerial position. This is an exception the Fair Work Commission introduced into the award on 23 March 2023.
If your engineers are covered by the Professionals Award they will be entitled to all the benefits of the award, including overtime from 16 September 2023.
They will also be entitled to make an unfair dismissal claim. Employees who are covered by a modern award are protected from unfair dismissal if they have been employed for at least 6 months (or 12 months for a small business with fewer than 15 employees) no matter how much they earn.
The clarification regarding managers should prevent unfair dismissal claims by senior engineers who are principally employed in a managerial position but perform some engineering work – for example reviewing the work of more junior engineers.
Overtime & penalty rates apply from 16 September 2023
Currently, the Professionals Award does not provide any entitlement to overtime or penalty rates for working over 38 hours per week.
This will change on and from 16 September 2023. The Award will provide:
- That employees must be paid their minimum hourly rate for all hours worked in excess of 38 hours per week or an average of 38 hours per week over an agreed period (this must include work on or in connection with call-backs and work performed on electronic devices or otherwise remotely);
- for time off in lieu (TOIL);
- a penalty rate of 125% for all hours worked before 6:00am or after 10:00pm on any day Monday to Saturday;
- a penalty rate of 150% for rostered hours worked on a Sunday or public holiday; and
- that employers must keep records of all hours worked by an employee in excess of 38 hours per week, or worked before 6:00am or after 10:00pm on any day Monday to Saturday, or worked at any time on a Sunday or public holiday.
Importantly, these requirements will not apply in respect of 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.
So, if you pay your professional engineers an annual salary that is 25% more than the minimum salary under the Award, you are not required to pay overtime or penalty rates.
A link to the current minimum rates is available here. These rates are generally updated at the end each financial year.
What about a set-off clause?
It is common for employers to pay an all-inclusive, above-award rate to employees and contractually agree to apply the above-award amount to satisfy any entitlement they have under the award.
Employers who pay their engineers less than 25% above the current minimum rates can rely upon this practice, provided they have a properly drafted set-off clause and are paying employees at least what they would otherwise receive under the Award in each pay-period (e.g. each fortnightly, if employees are paid fortnightly).
Even if your engineers are not caught by the changes outlined above, we recommend including an effective set-off clause in their contract in case you ever need to rely upon it.
What should you do to prepare for 16 September 2023?
We recommend employers:
- Identify which of your engineers are covered by the Professionals Award.
- Determine whether you pay those engineers 25% or more above the minimum annual wage for their classification, to identify any engineers that are entitled to overtime and penalty rates from 16 September 2023.
- For those who are entitled to overtime and penalty rates, either:
- pay those amounts when applicable; or
- if you intend to rely on a set-off clause – ensure it is properly drafted and that you pay employees at least what they would receive under the award in each pay period.
- Make sure you have properly drafted set-off clause in your contracts with your engineers in case you ever need to rely upon it.
Batch Mewing Lawyers can assist with identifying whether any of your employees are covered by a modern award, the appropriate classification, and ensuring your set-off clauses are compliant.