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Many business owners in Adelaide and across South Australia pay their employees well above the minimum award rates — and understandably assume that covers everything. 

After all, if you're generous with wages, why worry about the fine print of the award or enterprise agreement?

The reality is more nuanced. While paying above the award can protect you in many cases, it doesn't automatically discharge every obligation under the Fair Work Act 2009 (Cth) or the relevant modern award/enterprise agreement. 

Get the wording wrong in your employment contracts, and you could face back-pay claims, penalties, or even civil contraventions — even if your employees are paid generously overall.

The Full Federal Court made this clear in the 2023 decision of Wardman v Macquarie Bank Limited [2023] FCAFC 13. 

The key takeaway: whether over-award payments “set off” specific award entitlements depends on the objective intention of the contract — what a reasonable person would understand the payment to cover — not just the labels used.

Two Main Approaches That Work

Courts have recognised two broad ways to structure over-award pay so it discharges award obligations:

Detailed Set-Off Clause (The Careful, Specific Option)

Spell it out clearly in the employment contract. A strong clause should:

• Identify the relevant modern award or enterprise agreement covering the employee
• List the specific entitlements it intends to cover (e.g., overtime rates, weekend penalty rates, public holiday rates, allowances, shift penalties)
• State that the employee’s base rate (or total remuneration) is higher than the award minimums and is intended to fully satisfy those obligations
• The more precisely the clause matches the nature of the award entitlements, the more likely a court will find the payment discharges them. This approach gives the clearest protection — but it requires careful drafting specific to the employee’s award and role.

Broad, High-Rate Clause (The Simpler, Generous Option)

Pay a significantly higher flat rate without referencing specific award entitlements or the award itself. Courts have accepted that a substantially above-award salary, without tying it to particular obligations, can set off the full range of monetary entitlements — ordinary time, overtime, penalties, allowances — because the payment is so generous that it covers everything.

This works best when the rate is clearly well above the award minimums and there’s no contrary indication in the contract. It’s simpler to draft but relies on the pay being high enough that a reasonable person would see it as covering all entitlements.

What Can Go Wrong?

Poorly drafted clauses create risk. If the contract is ambiguous or doesn’t clearly show intent to cover specific entitlements, courts may find the over-award pay only offsets ordinary time — leaving overtime, penalties, or allowances unpaid. 

That can trigger:

• Back-pay claims (plus interest)
• Civil penalties under the Fair Work Act (up to $18,780 per contravention for individuals; $93,900 for companies as of 2026)
• Fair Work Ombudsman investigations or court orders

Recent cases show this is a live issue — especially with casuals, shift workers, or roles with variable hours.

Practical Tips for South Australian Employers

• Review your employment contracts now — especially if you pay above award but haven’t used a clear set-off clause.
• Choose the approach that fits your business: detailed clauses for precision; broad high-rate clauses for simplicity (if the pay is genuinely generous).
• Ensure the contract reflects the reality of the role — labels like “casual” or “contractor” don’t override the substance (High Court in Jamsek and Personnel Contracting 2022).
• Keep good records of pay, hours, and award coverage — it helps defend against claims.
• If unsure, get advice before problems arise — fixing wording later is far easier than defending a back-pay claim.

At Visual Legal, we help Adelaide and South Australian businesses draft clear, compliant employment contracts — including set-off clauses that match your pay structure and award obligations. 

We can review your existing arrangements and make sure you’re protected.

Book a free consultation — we’ll meet in our central Adelaide office or via secure teleconference, review your setup, explain the risks and protections in plain terms, and help you get it right. No pressure, just practical support.

Paying above award but worried about compliance? Let’s talk — get in touch today.