What is an annualised salary?
An annualised salary is a flat yearly salary intended to cover all award entitlements including penalties, loadings, overtime, and allowances.
An annualised salary arrangement pays an employee a flat annual amount intended to compensate for all or most award entitlements — including penalty rates, overtime, loadings, and allowances. Many Modern Awards have specific annualised salary clauses that set out how these arrangements must work, including mandatory record-keeping and annual reconciliation requirements.
Since the Annualised Wage Arrangements changes in 2020, most awards with these clauses require employers to keep detailed records of start/finish times, conduct a reconciliation at least annually (or on termination), and pay any shortfall. If an employee would have earned more under the award than their annualised salary, the employer must make up the difference.
Key facts
- •Must cover all award entitlements including penalties, loadings, and overtime
- •Many awards require written agreement and specify outer limits on hours
- •Employer must record actual hours worked (including overtime and penalty hours)
- •Annual reconciliation is mandatory — any shortfall must be paid within 14 days
- •The annualised salary must exceed what the employee would earn under the award at all times
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Pay CalculatorFrequently asked questions
Can I be worse off on an annualised salary?
You should not be. The annual reconciliation must confirm you received at least as much as you would have under the award. If there is a shortfall, your employer must pay the difference. If you suspect underpayment, request a reconciliation.
Does my employer still need to track my hours on an annualised salary?
Yes. Under most award annualised salary clauses introduced since 2020, the employer must record your actual start and finish times and any overtime or penalty hours worked.
General information and estimates only — not legal, financial, or tax advice. Always verify with the Fair Work Ombudsman (13 13 94) or a qualified professional.