By Charles Power

Use the following checklist to put in place a guarantee of annual earnings:

Check whether the employee is eligible to make a guarantee of annual earnings

To determine whether your employee is eligible to make a guarantee of annual earnings, answer the following questions:

• Is the employee a high-income employee?
• Does a modern award cover the employee?
• Is the employee subject to an enterprise agreement? If yes, the employee would be ineligible.
• Is the guarantee of annual earnings being presented to a new employee or an employee that has agreed to vary their employment conditions? To be effective, the employee must accept the guarantee within 14 days of either of these events.

Notify the employee of the consequences of the guarantee of annual earnings

Before (or at the time) the employee signs the guarantee of annual earnings, make sure you:

• notify the employee in writing of the terms of the guarantee; and
• remind the employee in writing that by entering into the guarantee, a modern award will not apply to them while their guaranteed earnings exceed the high-income threshold.

Example: Guarantee of annual earnings

“The Banking, Finance and Insurance Industry Award (the Modern Award) applies to your employment. We undertake to pay you from 1/7/13 to 30/6/14 a base gross earnings (exclusive of SGC contributions and discretionary amounts) equal to $140,000. This amount is above the award high-income threshold, which during the year ending 30 June 2014, is $129,300. By accepting the above undertaking, the Modern Award will not apply to your employment, so long as we meet our undertaking.”

Comply with the guarantee of annual earnings

You must comply with the guarantee during any period in which the employee is a high-income employee and is covered by a modern award, except if you are required or entitled to reduce the employee’s earnings, e.g. when an employee takes unpaid leave or other leave, or during periods of industrial action.