How do I check if my employee has exceeded their outer limits for penalty hours and overtime hours worked?

Tanda helps employers to check if an employee has worked more than their outer limits and calculate how much extra they should be paid.

Andrew Stirling avatar
Written by Andrew Stirling
Updated over a week ago

What are "outer limits"?

Some Modern Awards contain annualised wage clauses. These clauses allow employers to pay annual salaries to their employees, provided they meet certain conditions. One of those conditions is that they top up the employee's salary if they worked more overtime or penalty rate hours in a pay or roster cycle than is accounted for under the annual salary.

This is an example outer limits clause from the Hospitality Industry (General) Award 2020:

(b) The employee must not be required by the employer in any roster cycle to work in excess of:

(i) an average of 18 ordinary hours which would attract a penalty rate under clause 29.2(a) of this award per week, excluding hours worked between 7.00pm to midnight; or
(ii) an average of 12 overtime hours per week in excess of ordinary hours
without being entitled to an amount in excess of the annualised wage in accordance with clause 24.2(c).

(c) If in a roster cycle an employee works any hours in excess of either of the outer limit amounts specified in clause 24.2(b) , such hours will not be covered by the annualised wage and must separately be paid for in accordance with the applicable provisions of this award.

Do I need to set outer limits for my employee?

If you want to comply with an annualised salary clause like this, then you will need to set your employee's outer limits. This setting will be useful if you agreed to pay the employee more if they would have worked penalty rate or overtime under the Award.

The outer limit setting looks at all overtime worked under the Wage Compare profile, not just weekly overtime (e.g. overtime for working more than 38 hours in a week).

Tanda can perform the outer limits calculation for you. For those employers who want to run the outer limits calculation, there is further configuration available on the employee profile when creating the employee's Wage Comparison.

Clicking View outer limits settings brings up some extra fields to configure.

The "outer limits" vary by Modern Award, and some awards let employers set them for each employee. Once you have referred to your relevant Modern Award to determine the outer limits for your employee, enter the limits you wish to test against here.

In terms of Averaging cadence, as with the outer limits, each award may have a different cycle or period that the outer limits must be tested against. For instance - the Hospitality Industry General Award refers to a 'roster cycle'. To account for the ambiguity across awards you may set up the limits to be tested against a pay cycle, overtime averaging period or other.

Selecting pay cycle or overtime averaging period will have Tanda look to the configuration for the employee in question to generate the testing outcome.

Selecting other will offer some more options for when you choose to test against a different cycle perhaps like the 'roster cycle'.

The cycle length is the period of time you are conducting the test over, and the anchor date is where the cycle begins (e.g. the date the roster cycle begins).

Reporting

When the above is configured you can export the outer limits test in spreadsheet format by pressing the Download Compared Costs button when in Wage Comparison reporting.

Within the export Tanda will accumulate the costs you would have to pay - aligned to the applicable award rate specified in the wage comparison set on the employee profile, and only after the employee's configured outer limits are exceeded. In the example below we set the limits for both penalty hours and over time hours at 5. Note that the penalty hour costs only begin accumulating once the 5 hour limit has been reached.

For customers who have configured an employee's wage compare profile to test against Tanda's templated Hospitality Industry or Restaurant Industry Mondern Awards, weekday penalty rate hours will not count towards the outer limit if worked before midnight. This is consistent with the relevant award terms.

The outer limits top up you may be required to make is at the bottom of the Total Outer Limit Penalty Cost and Total Outer Limit Overtime Cost columns for each employee. You can take this number and make an easy top up via the process found below.

FAQs

I want to pay my salaried employee overtime if they work more than 38 hours per week. Should I use the outer limit setting?

You may be better in this case to create a custom overtime rule for the employee, rather than create a Wage Compare profile for the employee. Please contact Tanda support.

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