Set offs Part 1
The legitimacy of set offs is a difficult concept. A set off in this context arises when an employer seeks to rely upon an over award payment to offset the employer’s obligations under a modern award or enterprise agreement to pay other award entitlements. A simple example of this in practice to comprehend is where an employee is paid an annualized salary instead of the award wage plus other award entitlements, for example penalty rates and overtime.
Perhaps self evidently, there are no circumstances in which an over award payment can override an employer’s obligation to comply with non-monetary obligations in a modern award.
There are of course a number of statutory ways in which an employer may vary its need to strictly comply with all of the provisions of a modern award, for example with the use of individual flexibility arrangements and guarantees of high income earnings.
“Awards operate in conjunction with contracts of employment. It is generally accepted that clerical employees are commonly remunerated by way of annualised salaries whether the relevant award expressly provides for such arrangements or not. It is also generally accepted that if the salary is expressly paid in compensation of all award entitlements and the amount paid exceeds the amount due under the award then the arrangement is not inconsistent with the award. The intention of the ASU in making its application is that the only arrangements which can legally be entered into are those expressly provided for in the award”……Clerks – Private Sector Award 2010 (AM2009/185) Fair Work Australia  FWAFB 969.
Additionally, some modern awards even expressly adopt the practice. For example The Wine Industry Award 2010 provides that
“2.2 The monetary obligations imposed on employers by this award may be absorbed into overaward payments. Nothing in this award requires an employer to maintain or increase any overaward payment.”
What however are the technical requirements for a set off to be lawful and effective? I will deal with this issue in the next several days.