Salary does not cancel overtime — annualised pay, set-offs and the NES
A fixed salary is a payment method, not an opt-out from award overtime or the NES 38-hour standard. How annualised salaries and set-off clauses work, when they fail, and how salaried workers recover underpayments.
A salary does not cancel overtime
"You're on a salary: no overtime" is one of the most common: and most often wrong: lines in Australian workplaces. An annual salary is a payment method. It does not remove award coverage, NES maximum hours, or the duty to pay for hours worked.
Deep dive: do salaried employees get overtime?.
Annualised salaries and set-off clauses
Some awards allow annualised salary arrangements with conditions (often reconciliation and records). Contracts may include a set-off saying the salary satisfies award overtime. Either mechanism only works to the extent the salary genuinely covers what the award requires for the hours actually worked. If overtime exceeds what the salary absorbs, the shortfall is recoverable.
Worked comparison
Annual salary equivalent to $70,000 ÷ 52 ≈ $1,346 a week. If the award would pay 45 hours including overtime loadings of about $1,520 for a typical week, a flat salary that never reconciles leaves roughly $174 short that week. Over 40 such weeks that is about $6,960: before interest or penalties.
The NES 38-hour standard still applies
Whatever you earn, Fair Work Act s. 62 still limits full-time hours to 38 plus reasonable additional hours. A high salary is only one factor in whether extra hours are reasonable (s. 62(3)(d)); it does not license unlimited unpaid work or displace the NES (s. 61).
38-hour week under the NES · right to refuse unreasonable additional hours
Casuals, TOIL and on-call
Related structures that often get confused with “exemptions”:
- Casual employees and overtime: casual loading is separate from overtime rates in award tables
- Time off in lieu vs overtime pay
- On-call and standby pay
If your salary is not covering the hours
- Identify your modern award and classification.
- Log hours and compare to payslips and the salary “package” wording.
- Write to the employer, then use the underpayment recovery path (FWO / small claims). Six-year limit applies.
Frequently asked questions
Is there an Australian “manager overtime exemption” like in some US states?
Do not import foreign exemption myths. Australian entitlements turn on the Fair Work Act, your award or agreement, and whether any annualised/set-off arrangement actually covers the hours. Job title alone is not a statutory opt-out from award overtime.
What if I signed “overtime included”?
A clause cannot undercut the NES or leave you worse than the award. If the maths does not stack up, you can still claim the difference.
Where is the broader overtime framework?
Unpaid overtime in Australia: complete guide and how overtime pay works under awards.
Related articles
- On-Call and Standby: Are You Being Paid Correctly?Whether standby time counts as work (and what an on-call allowance is worth) is set by your modern award or enterprise agreement, not by a general Australian law. But every hour you actually work when called out is payable, and the maximum-weekly-hours standard frames how much on-call your employer can reasonably demand.
- Overtime for Casual Employees in Australia: What You're OwedCasual loading is not overtime, and confusing the two costs casual workers money. Here is what casuals are owed for extra hours, and why the multiplier depends on your award.
- Do Salaried Employees Get Overtime in Australia?A fixed annual salary does not automatically cancel your overtime. An annualised salary or set-off clause only works if it leaves you better off, and the NES 38-hour standard applies whatever you earn. Here is what a salaried worker is really owed.
- The 38-Hour Week: Maximum Weekly Hours Under the NESThe 38-hour week is the backbone of Australian working-time law, but it is a duration standard, not a pay rule. Here is what article 62 of the Fair Work Act says, and why it decides when an hour becomes overtime.
- Reasonable Additional Hours: Your Right to Refuse OvertimeYou can be asked to work beyond 38 hours only if the extra hours are reasonable, and you may refuse them if they are not. Here are the ten factors the Fair Work Act uses to decide, and what 'reasonable' really governs.
- Time Off in Lieu vs Overtime Pay: Know Your RightsTaking time off instead of overtime pay ('TOIL') is an award or agreement arrangement, not a statutory right. Here is how it must work, and why unpaid, un-taken overtime still leaves you a certain claim.
Start a free audit
Check in 3 minutes how much your employer may actually owe you.
Start the audit