The basics

In 2019, the Minimum Wage Order 2019 (the Order) provides for a range of minimum wage rates for adult workers. For waged workers, the minimum wage rate is $17.70 per hour. An employer of a waged worker must pay that worker at least $17.70 for every hour worked.

However, the Order recognises that employers may pay workers by the day, week, or a longer period, and provides different minimum rates of wages depending on the worker’s pay period. Clause 4 of the Order provides that the minimum rates of wages for workers who are not paid on an hourly basis are:

Salaried workers paid by the fortnight fall into (d) above, the “in all other cases” category. There are two requirements (and two calculations) under (d) – a worker must be paid $1,416 per fortnight, and $17.70 per hour for each hour exceeding 80 hours worked in a fortnight.

The averaging approach

Some employers have interpreted the Order to mean that they can comply by paying a worker an average of the minimum wage for each hour worked in a pay period. For example, an employer might:

  • pay a worker who is on an hourly wage $16 per hour for one week, and $20 per hour for a second week – on average, the worker would receive more than $17.70 per hour over that fortnight; or
  • pay a worker a fortnightly salary (with no contractual overtime provision) that can be averaged out to at least $17.70 across all hours worked by that worker in the fortnight, but without making additional hourly payments for each hour worked over 80 hours in the fortnight.

The Court of Appeal expressly rejected the averaging approach to minimum wage compliance in Idea Services v Dickson. The respondent, Mr Dickson, argued that “for every hour of work, he was entitled to the minimum wage, regardless of whether he received more than the minimum wage for other hours worked” (at [32]). The Court agreed with him and dismissed the appeal, also noting that, “if averaging was intended [by the minimum wage legislation], the omission of any express reference to it is remarkable” (at [35]).

What if the employee is paid a salary?

The Employment Court applied Idea Services to salaried workers in the 2014 case of Law v Board of Trustees of Woodford House. Notably, the Court commented that:

[52] Low and modestly paid employees seeking new employment are not in a strong position to negotiate terms and conditions and would be even less so as to whether remuneration is salarised. It would be outrageous that an employee could be paid less than a MW Act equivalent, simply because his or her remuneration was expressed, at the employer’s stipulation, as an annual salary. The Court should strive for an interpretation that would avoid such an egregious and cynical undermining of the philosophy of minimum code legislation.

[210] The judgment of the Court of Appeal in Idea Services is not distinguishable. An “averaging” approach to determining whether the defendants complied with the MW Act is therefore wrong.

[210] To the extent that any sleepovers worked fell within the first 40 hours of a plaintiff’s working week, the defendants were obliged to pay the plaintiffs at least the minimum weekly rate under cl 4(c)(i) of the relevant Minimum Wage Order. To the extent that any of the sleepover hours worked meant that these exceeded 40 in any one week, the defendants were obliged to pay the plaintiffs at least the hourly rate specified in cl 4(c)(ii) of the relevant Minimum Wage Order for such hours.

If not an average wage, then what?

In light of Idea Services and Woodford House, as well as other cases such as Pretorius, the calculation required for salaried workers is two-fold:

  • First, workers must be paid at least the minimum fortnightly amount (currently $1,416) prescribed under the Order for the first 80 hours that they work in a fortnight.

In effect, employees must be paid at least the same amount as a salary for 80 hours of work as they would be if they were paid by the hour at the minimum wage.

  • Secondly, workers must be paid at least the minimum hourly rate prescribed under the Order (currently $17.70) for each hour worked over 80 hours in a fortnight.

This is essentially statutorily-mandated overtime – it cuts across the view that a salary “buys” all of a worker’s time and makes them available to an employer regardless of their contracted hours. Instead, the Order limits a salary payment to compensation for a full-time workload of 40 hours per week. Hours worked in excess of this workload must be remunerated at an hourly rate of at least the minimum wage.

ALWU’s minimum wage compliance policy

ALWU recognises that this approach has not been taken by many legal employers, who rarely have formal overtime provisions in their employment contracts and often require workers to work extra hours “as and when required”. To assist with compliance, ALWU has prepared a minimum wage best practice policy for employers. The key aspects are:

  1. Establishing accurate time recording practices that record all hours worked by employees, not just billable time.
  2. Paying workers at least the minimum sum per fortnight required by the Minimum Wage Order (currently $1,416 per fortnight).
  3. In addition to the salary payment above, paying workers at least the minimum hourly rate required by the Order for each hour over 80 hours worked in a fortnight (currently $17.70 per hour).