An employee receives a generous annual salary. Their contract says the salary is intended to cover overtime, penalty rates, allowances and other entitlements.
So, is the employer automatically compliant?
Not necessarily.
In Australia, paying an employee a salary above their award rate does not automatically mean the employer has satisfied every minimum employment entitlement.
With minimum award wages increasing by 4.75% from 1 July 2026, employers using “all-in” or salary offset arrangements should review their contracts, payroll systems and actual hours worked to make sure employees are not falling below their minimum legal entitlements.
What Is an “All-In” Salary?
An “all-in” salary generally means an employee receives a fixed annual salary intended to compensate them for multiple entitlements that might otherwise be payable separately.
Depending on the applicable award or agreement, these may include:
- Minimum rates
- Overtime
- Penalty rates
- Allowances
- Annual leave loading
However, there is an important distinction between an annualised wage arrangement under an award and a contractual salary that seeks to offset award entitlements. They are not the same thing and can have different legal requirements.
A Higher Salary Does Not Automatically Cancel the Award
One of the biggest misconceptions is that an employee who earns more than the award rate is automatically “better off.”
An employment contract cannot simply remove minimum entitlements under an applicable award or the National Employment Standards.
The real question is whether the employee’s total remuneration actually covers the minimum entitlements they would have received under the relevant industrial instrument for the work they performed.
For example, an employee might receive a $90,000 annual salary but regularly work evenings, weekends and overtime. If the applicable award would have required additional penalty rates and overtime payments that exceed the salary paid, there could be a shortfall.
2026 Award Increases Make This Particularly Important
From 1 July 2026, minimum award wages increased by 4.75%. The National Minimum Wage also increased to $26.44 per hour or $1,004.90 per week for eligible employees not covered by an award or registered agreement.
This means a salary arrangement that previously provided sufficient coverage may need to be reassessed.
Employers should not assume that because an employee’s salary remained unchanged, the arrangement remains compliant.
What If the Salary Is Intended to Cover Overtime?
This is where employers need to be particularly careful.
A salary may be structured to compensate an employee for certain award entitlements, but employers need to understand exactly which entitlements are being offset and whether the arrangement is legally effective.
For some awards, annualised wage arrangements have specific requirements, including written agreements, limits on overtime and penalty-rate hours, record-keeping and regular reconciliation.
If the employee’s award entitlements for the relevant period exceed the annualised salary, the employer may need to pay the difference.
You Still Need Accurate Records
An “all-in” salary does not mean an employer can stop recording working hours.
Employers using salary or contractual offsetting arrangements still have record-keeping obligations. These can include records relating to overtime, penalty rates, allowances and other award entitlements.
Keeping accurate timesheets can also help employers determine whether the salary remains sufficient when compared with the employee’s actual hours and working patterns.
What About an Employee Who Agrees to the Arrangement?
An employee signing a contract does not necessarily make an otherwise non-compliant arrangement lawful.
Employees cannot contract out of their minimum workplace entitlements.
The fact that an employee agreed to an annual salary or signed a clause stating that the salary includes overtime does not, by itself, guarantee that the employer has met its obligations.
Warning Signs Employers Should Look For
Your salary arrangement may need review if:
- Employees regularly work significant overtime.
- Employees regularly work weekends or public holidays.
- Employees receive allowances under an award.
- Employees’ duties or classifications have changed.
- The applicable award has recently changed.
- The contract simply states “salary inclusive of all entitlements” without identifying what is covered.
- Working hours are not being recorded.
- Salaries have not been reviewed following the 2026 award increase.
What Should Employers Do in 2026?
Employers using all-in salaries should consider conducting a salary-to-award reconciliation.
This means comparing what the employee was actually paid against what they would have received under the applicable award for the hours and work performed.
Employers should also:
- Confirm the correct award and classification.
- Review employment contracts.
- Identify which entitlements the salary is intended to cover.
- Check overtime, penalty rates and allowances.
- Review arrangements following the 1 July 2026 wage increase.
- Maintain appropriate payroll and time records.
- Correct any identified shortfalls promptly.
A regular review can help identify problems before they become significant underpayment claims.
Is Your “All-In” Salary Really Compliant?
A salary may look generous on paper but still leave an employer exposed if it does not properly account for the employee’s minimum award entitlements.
If your business uses annual salaries or “all-in” remuneration packages, talk to NB Employment Law about reviewing your arrangements and reducing the risk of costly wage underpayment claims.