12 SEPTEMBER 2025

On 5 September 2025, Justice Perram of the Federal Court handed down a long-awaited decision in FWO v Woolworths Group & Ors[1]. This is a long and very complicated decision that deals with a couple of big employment issues. While it is likely that this decision will be appealed, and it may eventually end up in the High Court, it is currently the law of the land.

Issue 1 – Annual Salaries or all up rates

The key take away from this decision is that where an employer is using an annual salary (or an all-up rate), they must do a reconciliation for each pay period against the relevant award. If, in that pay period, the salary does not meet the minimum entitlements under the award, the employer must pay the difference.

It is not possible to ‘set off’ an overpayment in one pay period against an underpayment in another pay period. Each and every pay period must meet the minimum remuneration under the award.

Some award obligations don’t become due in a single pay period. For example, under the Pastoral Award, the maximum ordinary hours of work are an average of 38 hours per week, over a 4-week period[2]. Overtime is not payable until the employee has exceeded those 152 hours in any consecutive 4-week period.

If the employer is operating a fortnightly pay cycle, then it is unlikely that the employee will work more than 152 hours in the first fortnight, so no overtime is payable. The obligation is to pay the hours that the employee has worked, in that fortnight, plus any relevant allowance. However, it is more likely that they will work overtime in the second fortnight. In that second fortnight the employee is entitled to ordinary hours for the remaining 152 hours in the 4 weeks, and then overtime at the relevant rate for the remaining hours worked.

What is not possible, is to average the payment across these 2 fortnights, unless the payment in the second fortnight is enough to meet the costs of the overtime in that second fortnight. Below is an example of how this may work:

Janine is FLH 5. She is entitled to a minimum payment of $26.30 per hour, for the first 152 hours worked in a 4-week cycle. She is paid fortnightly. She works 6 days a week and each day has 10 hours of work. She doesn’t work on a Sunday. Her employer has her on an annual salary of $100,000 per annum, paid in fortnightly instalments of $3846.15.

Week 1 – 60 hours of work

Week 2 – 60 hours of work

Pay for fortnight 1 is a minimum of 120 x $26.30 = $3156.00. This is all ordinary time, as she hasn’t worked in excess of 152 hours. Her fortnightly salary is more than what she is entitled to, no problem.

Week 3 – 60 hours of work

Week 4 – 60 hours of work

Pay for fortnight 2 is different.

There are 32 hours of ordinary time left. This means she is entitled to 32 x $26.30 = $841.60 for those hours.

The remaining 88 hours are overtime and as there is no Sunday work, she is entitled to all of these hours at 150% the ordinary rate[3]. 88 x 1.5 x $26.30 = $3471.60.

Because she has worked more than 1.5 hours after completing her ordinary time, she is also entitled to the overtime meal allowance in clause 18.3(d)(i) of $17.19. This is only payable once.

Her total entitlement in fortnight 2 is therefore $4330.39. This is more than her fortnightly salary of $3846.15, and we have a problem.

What can be done

1. Review and amend the contracts of employment so that overtime is calculated on a weekly/fortnightly basis (whatever your pay period is) instead of over the 4 weeks that the award provides for.
2. Ensure that the contract is clear as to how many hours per pay period the salary covers.
3. Ensure that any hours worked in excess of the agreed weekly/fortnightly hours contained in the contract are paid for at the appropriate rate.
4. Consider making an enterprise agreement with your employees which may expressly provide for an annual salary arrangement to be made.

Issue 2 – Requirement for time records

The second big issue in this decision is the importance of making and keeping proper time records. One of the issues decided was ‘are the record keeping obligations satisfied when the employer has kept a record of the rostered and worked hours of an employee?[4]’ The answer was no.

The obligation is to keep not just a record of the hours worked, but when those hours were worked (start and finish times) and to keep a record of any identifiable allowance or penalty that may be payable because of the hours worked. Overtime is one example, but so too are payments for relevant allowances.

The Pastoral Award at clause 18.3(d) has an overtime meal allowance that is payable in two different circumstances. Employer’s must keep a record of when that entitlement arises and obviously make the relevant payment.

DA will be reviewing its template employment contract to assist members with meeting this requirement.

Daniel Houlihan

First IR Law Pty Ltd.

[1] 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

[2] Clause 34.1 and 34.2 of the Pastoral Award 2020

[3] Clause 35.2 of the Pastoral Award

[4] Issue 38 paragraph 91 of the decision