If you have employees earning above the high-income threshold, have you provided them with a guarantee of annual earnings (GAE)?
If not, it’s worth asking yourself why not?
Employment contracts are your business’ first line of defence. A well-drafted employment contract doesn’t just outline roles and responsibilities, it’s a strategic tool designed to minimise risks, protect your business, and provide clarity for both you and your employees.
A GAE, for example, can play a critical role in managing your obligations. It’s a mechanism that can help your business navigate award entitlements for high-income earners, but it’s often overlooked.
What is a Guarantee of Annual Earnings?
A GAE is a formal written agreement between an employer and an employee that guarantees the employee will receive a specified annual amount of earnings, regardless of variations in their working hours or other factors. This arrangement is particularly relevant for employees earning above the high-income threshold.
When a GAE is in place, high-income employees are exempt from certain provisions of modern awards under the Fair Work Act 2009 (Cth), such as penalty rates and overtime. This can provide greater flexibility for both employers and employees.
How Does a GAE Protect Your Business?
1. Shield Against Unfair Dismissal
One of the most significant benefits of a GAE is that it can protect your business from unfair dismissal claims. Employees who earn above the high-income threshold and are covered by a GAE are generally excluded from making unfair dismissal claims under the Fair Work Act. This can provide peace of mind and reduce the risk of costly and time-consuming disputes.
2. Minimised Legal Risks
By clearly outlining the terms of employment and guaranteeing a minimum annual income, a GAE helps to reduce ambiguity and potential disputes over entitlements. This can safeguard your business from claims related to award breaches or underpayment.
3. Compliance with Workplace Laws
A GAE ensures your business complies with workplace laws while providing flexibility in managing high-income employees. It’s a proactive step in maintaining a compliant workplace.
4. Attract and Retain Top Talent
Offering a GAE demonstrates your commitment to providing financial security and stability for high-income employees. This can be a key factor in attracting and retaining skilled professionals in competitive industries.
Get in touch to discuss your options with our team.
Disclosure statement: This information is general in nature and does not take into account any individual’s or business’ specific circumstances. You should obtain independent legal advice before making any decisions based on this information. Liability limited by a scheme approved under Professional Standards Legislation.