A guarantee of annual earnings is a written undertaking by an employer to pay an employer more than the high income threshold for 12 months or more.
Under s47(2) of the Fair Work Act a modern award does not apply to an employee when the employee is a high income employee ($153,600 from July 1, 2020), where there is a guarantee of annual earnings. Section 330 of the Act refers to a guarantee of annual earnings and an annual rate of guarantee.
An undertaking given by an employer to an employee is a guarantee of annual earnings if:
- the employee is covered by a modern award
- the undertaking is in writing to pay the amount of earnings during a period of 12 months or more
- the employee agrees to accept the undertaking, and agrees with the amount of the earnings
- the undertaking is given within 14 days after commencing employment, or a day on which the employer and employee agree to vary the terms and conditions of employment, and
- an enterprise agreement does not apply to the employee’s employment at the start of the period.
Section 328(2) of the Fair Work Act requires an employer to ensure that for the period of employment prior to a termination, an employee is paid earnings at the guarantee annual earnings rate.