Offsetting and record keeping for salaried employees

On 5 September 2025, the Federal Court of Australia handed down decisions in Fair Work Ombudsman v Woolworths Group Limited; Fair Work Ombudsman v Coles Supermarkets Australia Pty Ltd; Baker v Woolworths Group Limited; Pabalan v Coles Supermarkets Australia Pty Ltd [2025] FCA 1092.

The information on this page about contractual offsetting and record-keeping reflects these decisions. The Federal Court proceedings for these cases are ongoing.

Contractual offsetting arrangements and annualised wage arrangements

An employer and employee may agree to an annual wage or salary to cover specified minimum entitlements that are payable to the employee under the relevant award or enterprise agreement.

The agreed wage or salary can be:

• agreed to in an employment contract (also known as a contractual offsetting arrangement), or
• made under specific provisions of some awards or enterprise agreements (also known as an annualised wage arrangement).

Contractual offsetting arrangements

An employment contract may contain an agreed salary that’s intended to cover minimum entitlements under:

• an applicable award or enterprise agreement
• the National Minimum Wage (if no award or agreement applies)
• the National Employment Standards.

Some employers may try to rely on an employment contract or a separate agreement to offset above-award or agreement pay rates or salaries against award or agreement entitlements. This is known as a contractual offsetting arrangement.

Employers who use contractual offsetting arrangements still need to pay their employees:

• in full (except for permitted deductions)
• for each pay period as required by their award or enterprise agreement, and
• at least monthly.

If an employer pays their employee more than the minimum amount required by the relevant instrument in one pay period, they can’t generally use this to satisfy a less than minimum amount paid in another pay period.

Employers using contractual offsetting arrangements still have obligations to make and keep certain kinds of records relating to award or agreement entitlements and overtime hours

Annualised wage arrangements

Some awards and enterprise agreements contain specific rules that outline how an employer can pay an employee an annual rate of pay to cover award or enterprise agreement entitlements. An agreement made under these rules is known as an annualised wage arrangement.

An annualised wage arrangement can cover entitlements that the award or enterprise agreement permits it to cover. This may include:

• minimum pay rates
• penalties
• overtime
• allowances
• annual leave loading.

An annualised wage must follow the rules contained in the relevant award or agreement.

Record-keeping

Employers must meet record-keeping and pay slip obligations. This includes employers paying an annual wage or salary to their employees.

Employers have obligations to make and keep records, including records of:

• any loading, penalty rate or allowance payable to an employee, and
• any overtime hours worked where a penalty rate or loading must be paid for those overtime hours.

If an employee is being paid a salary, their pay slips must include the employee’s annual pay rate.