Annualised Salaries - Key resources for employers
With recent decisions by the Federal Court, it’s never been more important to stay on top of annualised wage compliance. If you have employees on an annualised salary agreement, it’s time to conduct an audit to make sure you’re covering all bases.
What are annualised salaries?
The Fair Work Ombudsman provides guidance on how an annualised salary or agreement works. Essentially is a fixed regular payment over the year that is intended to cover an employee’s base pay and, where permitted, award entitlements such as penalties, overtime, allowances and leave loading — provided the arrangement complies with the relevant Modern Award or employee agreement. It’s not simply paying a salary in lieu of hourly rates.
Why compliance matters more in 2026
Award rules are
detailed & specific
detailed & specific
Not all awards allow annualised wages, and those that do require robust documentation and record-keeping.
Pay period compliance
is now essential
is now essential
The 2025 Federal Court ruling clarified that employers can’t rely on being “better off overall” if any individual pay period falls short of entitlements.
Stronger enforcement
& penalties
& penalties
Non-compliance can lead to backpay liabilities, fines, and regulatory scrutiny.
Annualised Salary with Workforce Suite by ADP
Smarter and seamless solutions are essential to safeguard your business and maintain regulatory compliance. Our platform automatically compares annualized salaries to award wages, flagging underpayments or overpayments as shifts occur.
Annualised Salaries – what do I need to know?
GUIDE
Staying compliant in 2026
Plan, record, manage agreements.
GUIDE
Annualised Salary Self-Assessment
Rate your organisation.
CHECKLIST
Simple Compliance Audit
Check Award or Agreement Eligibility.
ARTICLE
Role of Technology Integration
Managing Time, Payroll and HCM solutions.
ARTICLE
Annualised Salary Overview 2026
Simplify workforce pay and budgeting.
ARTICLE
Annualised Salary Fair Work Awards
Quick reference for Modern Awards with Annualised Salary stipulations.
FAQs
Your Annualised Salary questions answered
What is the Fair Work annualised salary regulation in Australia?
The Fair Work Ombudsman provides guidance on how annualised wages or salary work. Essentially, it is a fixed regular payment over the year that is intended to cover an employee’s base pay and, where permitted, award entitlements such as penalties, overtime, allowances and leave loading — provided the arrangement complies with the relevant award or agreement. It’s not simply paying a salary in lieu of hourly rates. Visit the Fair Work Ombudsman site to confirm if your employees have an annualised salary agreement stipulation.
Are annualised salaries legal in Australia in 2026?
Yes, annualised salaries are legal in Australia in 2026 if they comply with Fair Work regulations. This includes having a written agreement, accurate time recording, defined outer limits of hours, and regular reconciliation to ensure no underpayment occurs.
Do employees on annualised salaries still need to record their hours?
Yes. Employers must keep accurate records of hours worked — including start and finish times and unpaid breaks — even when employees are paid an annualised wage. This is essential for compliance and reconciliation purposes.
What are “outer limits” in an annualised salary agreement?
Outer limits define the maximum number of ordinary hours, overtime hours, penalty rate hours, or allowances that are covered by the annualised salary. If an employee works beyond these limits, the employer must pay the additional hours separately at the applicable award rates.
How often must annualised salaries be reconciled?
Employers must reconcile annualised salaries at least annually and on termination of employment, however it is recommended to reconcile every pay period. The reconciliation compares the amount the employee was paid with what they should have received under the award for the hours worked.
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