In brief
Welcome to the inaugural edition of 'Banking on People' - a quarterly update on the employment law, workplace and regulatory developments shaping financial institutions and their people: your most valuable asset, and your highest-risk area.
In this edition:
- Changes to the Banking, Finance and Insurance Award 2020
- Whether annualised salary arrangements remain a viable option in light of the Federal Court's decision in Coles and Woolworths
- Recent Westpac and NAB underpayment cases, and the Fair Work Ombudsman's approach to award breaches by financial institutions
- What Chandler v Westpac Banking Corporation means for flexible work requests
- The impending non-compete ban and its unexpected reach
- The transition of BEAR to FAR and what you should be doing to comply
In more detail
The last few years have been a rollercoaster for employment lawyers and HR professionals, with extensive reforms to Australian workplace law, elevating employment-related risk to a key consideration for boards and compliance committees. For this reason, it is vital that professionals working in this area stay up to date with these changes and understand how they impact their business.
Updates to the Banking, Finance and Insurance Award 2020
On 1 July 2026, the Banking, Finance and Insurance Award 2020 ("BFI Award") was updated to reflect the Fair Work Commission's (FWC) 2026 Annual Wage Review. This resulted in minimum rates increasing by 4.75%. In addition, allowances, such as meal allowances and motor vehicle allowances, have also increased.
Whilst many banks and financial institutions traditionally rely on annualised salary arrangements (more on that below) rather than paying employees award rates, it is important that employers' pay arrangements are reviewed to ensure that employees' salaries adequately compensate them, having regard to the 1 July increases.
Are annualised salaries still an option?
Following the decision in FWO v Woolworths and Coles [2025] FCA 1092 last year, there has been significant panic about whether annualised salaries are still a viable way to pay employees when the Federal Court found that contractual set-off arrangements can only apply within a pay period. That is, an employee's above-award salary in one pay period cannot be used to satisfy entitlements earned in another pay period.
Whilst many employers have started to look at their practices more closely, the short answer is that annualised salaries remain a lawful and practical way to remunerate employees, provided they are structured and administered correctly. The key is a well-drafted set-off (or annualised salary) clause, coupled with a salary that is sufficient, in each pay period, to cover all of the award entitlements that fall due in that same period (including overtime, penalty rates, loadings and allowances).
In practical terms, employers relying on annualised salaries for employees covered by the BFI Award should:
- Review their set-off clauses to confirm they clearly identify the award entitlements the salary is intended to absorb
- Undertake regular reconciliations comparing the salary paid in each pay period against what the employee would have been entitled to under the BFI Award for that same period
- Keep accurate records of hours worked (particularly for employees who regularly work significant additional hours), so that any shortfall can be identified and rectified promptly
- Avoid assuming that a generous annual salary will be enough. A high salary will not cure a shortfall in a pay period in which award-based entitlements spike because of long working hours.
In short, annualised salaries are not dead, but Woolworths and Coles is a timely reminder that they require active management rather than a "set and forget" approach.
It is also worthwhile keeping in mind that the BFI Award actually provides for annualised wage arrangements at clause 17. Whilst such arrangements are not often used by employers, and are not always implemented well, given the complexity of compliance and ongoing monitoring, they are an option for employers. The process outlined in the Award that must be followed is not dissimilar to the steps required of employers that pay an annualised salary to employees in a post Woolworths and Coles world.
Something to keep on the radar is a proposal currently before the FWC to vary the BFI Award so that employees can voluntarily agree to a higher salary at least 55% above the award rate that absorbs (or "buys out") penalty rates and overtime. The Full Bench of the FWC is due to consider the matter in December 2026.
Recent underpayment cases and the FWO's approach to financial institutions that underpay staff
Underpayments continue to dominate the headlines, and the banking and finance sector has not been immune. In November 2025, Westpac back-paid more than AUD 50 million (plus almost AUD 9 million in interest and superannuation contributions) to nearly 47,000 current and former employees, and entered into an enforceable undertaking with the Fair Work Ombudsman (FWO) that included an AUD 800,000 contrition payment. The underpayments spanned an 11-year period and were largely caused by failures in Westpac's systems, governance processes and compliance oversight, inadequate record-keeping, and a reliance on systems requiring manual adjustment.
Westpac is not alone. In August 2025, NAB flagged an additional AUD 130 million impact on its FY25 operating expenses arising from ongoing payroll remediation, on top of some AUD 250 million incurred following an earlier review that commenced in 2019.
Payroll compliance has been a live issue for other major banks in recent years, underscoring that even the most sophisticated employers are exposed where award interpretation is complex and payroll systems are inadequate for Australia's award system.
The stakes are now higher. Since 1 January 2025, intentionally underpaying employees is a criminal offence under the Fair Work Act 2009 (Cth), carrying with it significant penalties. Whilst most employers in the financial services and banking sector are not "intentionally" underpaying staff, regulators are unlikely to have much tolerance for large employers that have the resources but fail to adopt a culture of compliance.
The FWO has confirmed that "large corporates" remain one of its enforcement priorities. Whilst it has not directly called out banks and financial institutions, as some of the largest employers in the country, no bank or financial institution can safely assume it will be immune from the gaze of the FWO.
Flexible work requests – the lessons from Chandler v Westpac
A recent case, Chandler v Westpac Banking Corporation [2025] FWC 3115, gained significant media attention because it highlighted the need for employers to engage in a robust consultation process when they receive a request for flexible work arrangements.
The FWC ordered Westpac to grant a long-serving employee's request to work remotely on a permanent basis to manage her caring responsibilities. The FWC found that Westpac had not genuinely engaged with the employee's specific circumstances. It had also failed to properly consult. Westpac's reliance on a company-wide policy mandating office attendance, without evidence that the employee's particular role could not be performed as requested, did not amount to reasonable business grounds that were required to reject the request.
The decision is a timely reminder for financial institutions operating hybrid or return-to-office models. Process and evidence matter: a template rejection letter citing "collaboration" or "consistency" is unlikely to suffice, nor is a policy mandating employees to be in the office. Employers should genuinely consider each request on its individual merits, engage in (and document) genuine consultation, and be able to point to specific, evidence-based operational reasons if they intend to refuse a flexible work request.
The impending non-compete ban and its unexpected reach
After first flagging its intention to ban non-competes in 2023, the Federal Government has released draft legislation to implement the ban and is seeking feedback by 2 October 2026.
What is important to note is that the draft legislation is more far-reaching than we originally expected. It will:
- Ban non-compete clauses that restrain an employee from working for a competitor for employees who earn below the high-income threshold (currently AUD 190,100 but increasing annually)
- Extend to arrangements that require an employee to repay bonuses, or prevent them from receiving a severance package, if they commence employment with a competing business
- Ban non-solicitation terms which prohibit employees from soliciting former co-workers altogether, irrespective of income
- Make cascading clauses unlawful. Employers use these clauses to assist with enforceability, for example, by stating that the term of the restraint is for twelve months, nine months, six months or three months, giving courts an option to "read down" and enforce a shorter period if the longer periods were unreasonable and therefore unenforceable. Where a term is drafted in a cascading manner, the entire term will have no effect and be unenforceable
- Mean that post-employment restraint of trade terms for all employees will be regulated by the Fair Work Act 2009 (Cth) and not by the common law or the NSW Restraint of Trade Act 1976 (NSW).
The significance of these changes cannot be overstated if they are subsequently passed by Parliament. They go far beyond the Government's original plan to ban non-competes for those under the high-income threshold and will effectively change the entire law on non-competes and restraints of trade in Australia.
Banks and financial institutions should be acting now to review their employment contracts and confidentiality terms, considering longer notice periods and using garden leave arrangements to protect their businesses in light of these changes, which are due to come into effect sometime in 2027, depending on when the Bill receives Royal Assent.
From BEAR to FAR – completing the transition
The transition from the Banking Executive Accountability Regime (BEAR) to the Financial Accountability Regime (FAR) is now complete. The FAR commenced for authorised deposit-taking institutions (ADIs) and their non-operating holding companies on 15 March 2024, and extended to insurers and superannuation trustees on 15 March 2025. Jointly administered by APRA and ASIC, the FAR imposes a strengthened responsibility and accountability framework on accountable entities and their directors and most senior executives.
From an employment perspective, accountable entities should ensure that accountability statements and accountability maps remain accurate and up to date, and that employment contracts and remuneration arrangements for accountable persons properly reflect deferred remuneration obligations. They should also ensure onboarding, performance management and consequence-management processes support (and evidence) compliance with accountable person obligations. With the transition now behind them, the focus should shift from implementation to embedding and demonstrating ongoing compliance.
Look out for our next update, due before the end of 2026, where we will bring you further updates about the matters that will impact your people.