Salaried Employees

According to the Fair Work Ombudsman website (June 2016), an annual salary is an agreement about the amount of pay for work over a 12 month period.

They are often included in employment contracts.

An employer and employee can agree that an annual salary covers entitlements like:

• Minimum weekly wages,
• Penalties,
• Overtime,
• Allowances,
• Annual leave loading.

An annual salary can't be less than the minimum entitlements an employee is entitled to under the award or registered agreement that applies and the National Employment Standards.

The requirements that need to be met when agreeing to an annualised salary can be outlined in an award, employment contract, enterprise agreement or other registered agreement.

Pay Advice

Ticking the "Salaried Employee" check box on the Pay Details tab in Employee Maintenance will replace the Standard Hours & Hourly Rate on Pay Advice with the Annual Salary as per Fair Work Australia guidelines.

How to enter a salaried employee

Sample employee details:

• John Smith is a salaried employee earning $60,000 p.a.
• John works 42.50 hours per week, including 4.5 hours on Saturdays, and is paid $1474.04 every week (i.e. $76650 / 52)
• John is entitled to accrue 170 hours of annual leave each year (i.e. 42.5 hours x 4 weeks) and 85 hours of Personal Leave each year (i.e. 42.5 hours x 2 weeks).
• When John takes a week of leave, 42.5 hours are deducted from his accrued leave balance

You would configure John as shown below:

Standard Pay Rate: John's annual salary amount of $76650 is entered as the Standard Pay Rate per Year and Year is selected as the Per period. Because John is paid Weekly, pay runs will automatically divide the annual amount of $76650 by 52 and pay John $1474.04 each week.

Pay Frequency: Weekly is the correct option here as John is paid on a Weekly basis.

Normal Hours per Pay: John's 42.50 hours are entered as his Normal Hours Per Pay (at Standard Rate) because all of these hours are paid at the same rate.

Salaried Employee: Tick this checkbox so that John's annual salary is printed on pay advice instead of an hourly rate and number of hours worked.

Normal Days Worked at Standard Pay Rate: In addition to Monday to Friday being ticked, Saturday is ticked and 4.50 hours entered as the number of hours worked on Saturdays at standard rate. This enables leave entries to automatically calculate the correct number of hours normally worked between any two dates and to deduct this number from John's accrued balance when the pay run is processed.

Earnings (Standard Hours): In the Earnings section you should enter 42.50 on Standard Hours to match the 42.50 hours entered for Normal Hours per Pay. This ensures that 42.50 Standard Hours are automatically added to each week's pay run. Because Standard Hours is configured as Ordinary Time Earnings, John will earn the Superannuation Guarantee on these hours. When a leave entry is entered for a particular week, the hours on the leave entry will automatically be deducted from these Standard Hours. For example, if John took the full week as annual leave, he would be paid zero Standard Hours and 42.50 annual leave hours that week (the pay advice would simply print John's annual salary as normal).

Leave Entitlements: On the Entitlements tab you would enter 170 hours for Annual Leave (i.e. 42.5 hours x 4 weeks) and 85 hours for Personal Leave (i.e. 42.5 hours x 2 weeks).

Leave Entries

When entering a leave entry for John, be sure the dates you enter reflect any Saturdays that he took off so that the correct number of hours are deducted from his leave balance.