September 2023 changes to the Professional Employees Award 2020

The Fair Work Commission (FWC) announced changes to the Professional Employees Award 2020 (PE Award) in relation to coverage of employees, overtime, penalty rates and associated record keeping obligations in March 2023. Whilst changes to coverage provisions took effect earlier this year, remaining changes are due to commence on 16 September 2023.

Overview

From 16 September 2023:

• some employees covered by the PE Award will be entitled to payment for overtime (or time off in lieu of overtime) for working in excess of 38 hours per week, and penalty rates for working outside of the span of 6am to 10pm, and on weekends and public holidays; and
• employees and employers will be required to keep records of hours attracting overtime and penalty rate obligations.

The above changes will not impact employees with a contractual entitlement to an annual salary of at least 25% above the minimum annual wage for their classification.

Coverage of the PE Award was previously clarified by changes to Schedule A that took effect on 23 March 2023. Schedule A was amended to confirm that persons employed in management positions are not covered by the PE Award (see underlined language below), where Schedule A now states:

‘An employee performing professional engineering duties, professional scientific duties, professional information technology duties or quality auditing must be classified in one of the following classifications provided that the employee is not employed in a wholly or principally managerial position.’

New overtime and penalty rate provisions

The PE Award has historically required employers to compensate employees for all hours of work (including time worked in excess of ordinary hours, on call, on weekends or at other times outside of ordinary business hours). However, to this point the PE Award has not prescribed the manner in which these hours must be compensated. Employers have tended to compensate professional employees covered by the PE Award by way of annualised salary arrangements.

The Commission undertook a review of salary arrangements in a number of Modern Awards as part of its 4 Yearly Review of Modern Awards commencing in 2016 (see [2016] FWC 3520), but deferred considering the PE Award until earlier this year (see [2023] FWCFB 13). The Commission ultimately determined that employees covered by the PE Award should benefit from specific overtime and penalty rate provisions, although in terms that are quite different to overtime and penalty rate provisions in other Modern Awards.

The varied PE Award contains the following new provisions:

• Under a new clause 18.2, an employee will be entitled to receive payment for hours worked in excess of 38 hours per week, which can be averaged over a period of up to 13 weeks. However, payment for overtime hours will be at base rates of pay only. The new provisions expressly refer to providing payment for ‘work on or in connection with call-backs and work performed on electronic devices or otherwise remotely’. The language of this new clause refers to hours ‘worked’ rather than hours that an employer directly requires to be worked. As such, there is potential for this new clause to encompass discretionary after-hours work.
• Employees will be able to enter arrangements to take time in lieu of receiving payment for overtime pursuant to a new clause 18.3.
• Employees will also be entitled to penalty rates for working at particular times. Employees working Monday to Saturday outside of the span of 6am to 10pm must be paid a loading of 25% of the minimum hourly rate of pay. This loading increases to 50% on Sundays and public holidays. The span of hours and weekend/public holiday penalty rates are not described as overtime. As such, care should be taken in considering related employment tax and superannuation obligations attached to payment for penalty rates.

The varied PE Award provides 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 their employer will not be required to pay overtime (or provide time off in lieu), pay penalty rates, or keep a record of hours worked for the purposes of new payment provisions.

Record Keeping

The varied PE Award includes new, specific record keeping obligations requiring an employer to keep records of all hours worked by an employee of more than 38 hours per week, before 6 am or after 10pm Monday to Saturday, and on a Sunday or a public holiday.

The new clause 18.2 also makes an employee responsible for maintaining (and providing to their employer) a record of out-of-ordinary hours of work performed remotely.

Practical steps for compliance

In anticipation of changes from 16 September 2023, employers with PE Award covered employees should review current remuneration arrangements to determine whether new overtime, penalty rates and record keeping obligations will apply to them.

Where the changes will apply, employers will need to review current payment practices, and may need to consider introducing time recording and hours-of-work practices to address new requirements (including in relation to handling self-reporting of hours worked remotely).

If you found this insight article useful and you would like to subscribe to Gadens’ updates, click here.

Bryony Binns, Partner
Grant Klemm, Associate