Salary Sacrifice: Clarification Given by Fair Work Australia

/Salary Sacrifice: Clarification Given by Fair Work Australia

Salary Sacrifice: Clarification Given by Fair Work Australia

Fair Work Australia (FWA) clarified a long standing anomaly in Industrial Relations Law that will have real benefits for employees wanting to sacrifice part of their wages into, for example, superannuation.

nighttruckThe anomaly arose in that there was a technical argument that without an industrial instrument, (eg Award or Enterprise Agreement) allowing such deductions to be made, that an employee could ultimately receive less gross wages than the prescribed award wage and therefore the employee could sue to recover unpaid wages and effectively ‘double dip’.

Fair Work Australia recently heard a case where a school teacher earning $80k per year, wanted to sacrifice $40k per year from her wages. The result would have been that she received less than the $54k gross prescribed in her award. Vice President Lawlor found that the arrangement could be lawfully done under the Fair Work Act, provided;

The deduction is authorised in writing by the employee and is principally for the employee’s benefit and

It was not a requirement of the employer to enter into such arrangements and

The benefit was not to the employer’s advantage or unreasonable

The commissioner said that the teacher’s proposed sacrificing arrangement wouldn’t breach the award “precisely because such an arrangement will be authorised” and that the condition to pay employees “in full” can be satisfied by the teacher entering into a written agreement for the salary sacrifice arrangement sought by the teacher.

The practical application of this decision

Often, older employees close to retirement wish to sacrifice the majority of their wage into superannuation. As explained above, whether they were able to do so depended on their award/agreement provisions and to do so without such authorisation risked the potential unpaid wages action.

FWA makes it clear that where an award or agreement is silent on salary sacrifice arrangements, the parties may enter into a written agreement authorising such deductions for the benefit of the employee even though the deductions would result in the employee receiving gross wages less that the prescribed award amount.

2017-09-13T09:43:36+00:00