Here’s what you do need to do when an employee has a salary reduction.
What is a salary reduction?
Generally speaking, super salaries for CSS, PSS and PSSap (FCS) members cannot decrease. If your employee has a salary reduction, the salary maintenance rules will apply.
The definitions of ‘salary reduction’ are:
A salary reduction happens any time the salary (including recognised allowances) on a person’s birthday is lower than the highest salary (including recognised allowances) they received in the previous year.
PSS and PSSap (FCS)
A salary reduction happens any time there is a reduction in the sum of hourly base salary plus recognised allowances.
Salary indexation and AWOTE
When an employee has had a salary reduction, the salary they were receiving immediately before the reduction will be indexed each year at the salary review. This indexed salary is called a maintained salary.
Maintained salaries are increased in line with average weekly ordinary time earnings (AWOTE). AWOTE is published by the Australian Bureau of Statistics, and reflects the average weekly ordinary time earnings for Australian adults in full-time employment.
The AWOTE we use to work out maintained salaries is updated twice per year in February and August. Before February 2013 AWOTE was updated quarterly in February, May, August and November.
Calculating maintained salaries for PSSap and PSS (not receiving a PIP)
For all PSSap members, and for PSS members who are not receiving a PIP, the formula is:
(pre reduction salary X (AWOTE at review/AWOTE at reduction)) + pre reduction allowances
- Pre-reduction salary is the sum of the base salary and any higher duties allowances that were included in the super salary on the day immediately before the reduction;
- AWOTE at review is the last published AWOTE prior to the date of the current review;
- AWOTE at reduction is the last published AWOTE before the reduction happened; and
- Pre-reduction allowances are the total amount of allowances (apart from higher duties allowance) that were included in your employee’s super salary immediately before the reduction.
This means the base salary and any higher duties allowance included in your employee’s super salary immediately before the reduction will be increased in line with AWOTE, but other allowances they were receiving will not.
Calculating maintained salaries for CSS and PSS (receiving a PIP)
For all CSS members, and for those PSS members receiving a PIP, the formula is:
(pre reduction salary + pre reduction allowances) X (AWOTE at Review/AWOTE at Reduction)
This means any allowances that were included in your employee’s salary immediately before the salary reduction will be increased in line with AWOTE along with their salary and higher duties allowance.
Salary reductions prior to 1 July 2003
Before 1 July 2003, salaries were updated using the current equivalent salary method. This meant that salaries were updated with the current rates of payment that your employee was receiving immediately before the salary reduction.
If you are calculating maintained salaries for reductions that happened before 1 July 2003, your employee’s current equivalent salary as at 30 June 2003 will be increased in line with AWOTE. The AWOTE calculator will automatically take this into account if you select ‘yes’ to the question ‘was the salary reduction prior to 1 July 2003?’
Multiple salary reductions
Employees may have had more than one salary reduction since their last birthday, or have a further salary reduction while already on a maintained salary. If this is the case, you should calculate a maintained salary for each reduction to compare with the base salary and recognised allowances that your employee is receiving at the time of the salary review. The highest of these will become their super salary for the next year.
The AWOTE Calculator
We provide employers with an AWOTE calculator to help calculate maintained salaries. The calculator is updated with the latest AWOTE twice per year, and is available on our website. To avoid the risk of reporting incorrect salaries, we strongly recommend that you download the calculator each time you need to perform a salary review.
You should never use an AWOTE calculator that has passed the “next expected release date” indicated at the top of the calculator. If you use a calculator past this date it will not take into account the latest AWOTE rate and may give an incorrect result.
You can find instructions on how to use the calculator in the AWOTE calculator quick guide.
Stopping salary maintenance
You should continue salary maintenance at each salary review until your employee’s base salary and recognised allowances is either equal to or higher than the maintained salary on the review date.
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