Understanding the Ruling in Plain English

In simple terms, the Court ruled that for employees covered under an Award, employers can no longer rely on ‘annualised salary’ arrangements to average out pay across the year. Every pay period must stand alone and correctly reflect the hours worked in that period.

Even if you pay a higher salary, that’s intended to include overtime or penalties, it’s not enough. Accurate time records must be maintained and each pay period reconciled individually, otherwise, you could be found to be non-compliant. In the past, certain clauses in contracts have assumed that a higher salary will cover extra hours, but these clauses will no longer be valid.

Example: If an employee works extra hours one week and fewer the next, you can’t simply pay a standard salary and have a running balance for those extra hours in lieu, as has been a practice in some industries in the past. Now, each pay cycle must show the actual hours worked and the correct number of hours, plus any calculated overtime and allowances, must be paid in that specific period.

This is a big shift for some smaller employers who have long operated on good faith, flexibility and practical arrangements, rather than complex time-tracking systems.

The Administrative Impact

For many small organisations, this change is a fundamental shift in how payroll is managed. The effects could include, (but are not limited to):

More detailed recordkeeping: Timesheets for all staff, even those on fixed salaries.

Increased payroll processing time: Each pay run must reconcile exact hours, allowances and entitlements.

Underpayment risks: Employers may need to review their systems over the last few years, to ensure there has been no underpayments.

Greater legal and reputational risk: A Fair Work complaint could now trigger a detailed audit.

At WestBAS, we see this as part of a broader move from a trust-based model to a data-driven one. For many small business owners, the system now demands a level of precision and documentation that was built and designed for much larger organisations.

Next Steps — What Employers Can Do Now

The best way forward is to treat this as an opportunity to strengthen the foundation of your payroll. Here’s a practical checklist to get started:

Audit Employment Contracts: Ensure all contracts reflect the current Fair Work expectations. This could mean updating contracts for all employees to ensure they are fully compliant with the new ruling. Contracts should clearly state that salary payments are intended to satisfy award entitlements within each pay period, not across multiple periods.

Implement Accurate Time Tracking: Even salaried employees must record their working hours in a way that can be verified. Is your time tracking software capable of tracking start and finish times, overtime, penalty rates, and allowances for each employee in each pay period?

Review Pay Structures: If annualised salary models have been in use, be sure they fully comply with modern award requirements.

Educate Managers and Team Leaders: Ensure all staff understand the implications of non-compliance. Documentation of rostering, overtime approvals and leave processes must be consistent.

Seek Professional Support: Partner with a professional bookkeeper or payroll expert who understands how to implement practical systems to ensure compliance.

At WestBAS, we’re already supporting our clients to establish simple, digital time-tracking systems that integrate with their bookkeeping software and reduce manual errors without adding administrative burden.

The Bigger Picture

While accuracy and accountability are essential, there’s a growing recognition that small businesses, NDIS providers and NFPs operate in a very different world from large corporations. Bookkeepers and industry associations across Australia are calling out for fairer, more flexible rules that will still uphold employee rights.

We believe compliance shouldn’t come at the cost of practicality. The challenge is to find fair ways for small organisations to protect their employees, as well themselves, without sacrificing time or service quality.

Until that reform happens, the best defence is clear, compliant documentation.

All of these rules and regulations around payroll compliance can sometimes feel overwhelming for small businesses but try not to let them overly impact your day-to-day operations. With the right systems and guidance, compliance can become a routine part of business.

At WestBAS, we continue to monitor legislative changes and support our clients to create simple, workable steps towards full compliance. Whether it’s maintaining employment records, setting up time-tracking tools or reviewing payroll systems, our goal is to ensure you stay updated, confident and in control.