Paying above Award rates? Here’s what you need to know

Since the Fair Work Act came into effect in 2009, the Fair Work Commission has conducted annual wage reviews to decide whether minimum wages, both under the National Minimum Wage and within modern awards, should be adjusted.

So far, each review has resulted in an increase (with some staggered increases in 2021 for pandemic-affected industries). While it’s a positive response to changing economic conditions for employees, it can complicate business operations and pay calculations for employers, having to adjust rates each year and verify they’re paying in line with Fair Work.

Because of this, many businesses choose to pay staff above the required rate outlined by their applicable award or the national minimum wage. Common arrangements include:

• Absorbing complex overtime/penalty rates into a flat rate
  
  
• Offering higher wages to retain staff
  
  
• Reducing the backpay liability from potential calculation errors
  
  
• Ensuring compliance with Better Off Overall Tests (BOOT) under enterprise agreements
  
  

These arrangements can take the form of annualised salaries and offsetting award entitlements, Individual Flexibility Agreements (IFAs), or Enterprise Bargaining Agreements (EBAs). 

As of June 2025, around 14.93% of employees with profiles in Tanda are being paid above their applicable award rate and classification.

If you’re an employer paying staff above the minimum rate they should be receiving, here’s the key scenarios you need to keep in mind to ensure the arrangement is compliant. 

In this article, ‘above award’ refers to any arrangement where the employee earns more than the minimum rate in their applicable award classification, including annualised or offset pay structures.

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1. Don’t set and forget

Once you agree to pay above award, it’s easy to assume you’re covered for the long haul or that you can afford to ignore minimum rate increases for a few years. 

However, minimum award rates have increased by approximately 22.8% between 1 July 2021 and 1 July 2025. So if you were paying $2.00/hour above the national minimum wage in 2021 and haven’t reconciled since, you’d have fallen in the red following the 2023 increase.

What to do: Use the 1 July wage review as a reminder to re-check above award rates. Compare your employees’ current rates to their award minimums. Best case: you’re still compliant. Worst case: you’ve caught a risk before it becomes a backpay issue.

For Tanda users on managed award templates, the Pay Checks feature flags when a manually entered rate is no longer above award. Learn more about Pay Checks.

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2. Keep a compliant written agreement

If your above award agreement alters the conditions of a modern award, such as reducing scenarios where the employee would receive overtime rates, it may fall under an Individual Flexibility Arrangement (IFA). To be valid, the agreement must include certain details. These details may vary between awards, but can include: 

• Employer and employee names
  
• The award term(s) being varied
  
• How the award term(s) are being varied
  
• How the agreement results in the employee being better off overall
  
• The date the agreement is set to start
• How the agreement can be terminated
  
  

It’s good practice to update and reissue the agreement each time the conditions of the IFA change, as most awards require IFAs to be stored in the employer’s time and wages records.

Tanda clients can make use of our digital contracts feature to help send and store updates to working conditions. We’ve also recently introduced our latest IFA functionality, helping you template and configure your IFA arrangements, including which award terms no longer apply under the agreement.

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3. Consider all possible pay outcomes 

For any agreements that vary the terms of an award, you should consider every possible pay scenario that may come up for above award staff ahead of time, and have a clear answer for what the pay outcome should be. These should be made clear in the initial agreement.

It’s not uncommon for employers to come up with solutions on the spot when encountering a new scenario, but this should still be agreed upon in writing and leave the employee better off overall. 

For example, your arrangement might pay staff above award for all ordinary and non-ordinary hours of work. But are you also using this above award rate for leave loading calculations? And what about your super guarantee calculations? Regardless of your answer, it should be agreed upon in writing with the relevant employee.

If those details aren’t documented and pay disagreements arise, backpay liabilities could be significant. It’s worth engaging an employment law firm or advisory service like Tanda’s to help in drafting the agreement and ensuring you’ve got your bases covered. 

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4. Understand what’s not covered under your agreements

While some arrangements like annualised salaries are used to simplify overtime and penalty rate calculations, there’s some award scenarios that transcend these agreements.‍‍

The most common example is the Outer Limit conditions found under the Hospitality Industry (General) Award and Restaurant Industry Award. Under these conditions, salaried staff must be paid at the applicable penalty or overtime rate for any hours worked in excess of: 

• An average of 18 ordinary hours which would attract penalty rates per week (excluding some instances) or;
• An average of 12 overtime hours per week in excess of ordinary hours
  
  

If you go over those thresholds, you’ll need to reconcile a payment in addition to the salary. This limit exists to deter businesses from excessively rostering salaried staff shifts that would normally incur penalty and overtime rates, such as early mornings and weekends. That way, they’re not taking the brunt of the unfavourable shifts. 

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5. Keep systems consistent

If your HR platform, rostering tool, and payroll system each store employee rates separately, it’s easy for mistakes to creep in. 

It’s possible you might have three different rates for the same person. One on their contract in your HR system, one in the roster in your workforce management system, and one on their payslip in your payroll system.

The best solution is to use an all-in-one system like Tanda to manage the entire employee lifecycle. Without any integrations or exports, there’s nowhere for data to fall out of sync.

Otherwise, your next best bet is to be rigorous in your auditing between systems, set one system as the source of truth, and schedule regular audits to ensure everything is aligned.

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6. Understand how above award arrangements interact with EBAs and renegotiations

If your business operates under an Enterprise Bargaining Agreement (EBA), above award arrangements can still apply, but they may need extra attention.

For example, if you’re paying over the EBA rate to simplify operations or attract staff, those payments need to be clearly separated in payroll and clearly documented. Otherwise, it becomes unclear whether they’re discretionary or part of the EBA entitlement.

Additionally, when EBAs come up for renegotiation, these higher rates can influence your BOOT outcomes. If staff are already earning well above the minimums, you may have more room to negotiate, but you’ll also need to show that any proposed agreement still leaves staff better off overall, based on their actual hours worked.