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UpdatesSep 04, 2013

A guarantee of annual earnings: How to contract out of a modern award

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

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:

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:

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.

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