Set-Off Clauses Are Not a Free Pass (Woolworths 2025 Case)

Here’s a really interesting case I came across this week that I wanted to share!

So a lot of employers think:

“If I pay a high enough salary, I don’t need to worry about the award.”

But this new Federal Court decision shows why that mindset is risky.

What the Court confirmed:

You can use salary to “set-off” award entitlements but only if it’s done properly:

✅ The salary must cover what’s owed in the same pay period (you can’t average it across months).

✅ The employment contract must clearly say the salary is in satisfaction of award entitlements.

❌ You cannot re-label payments later or pool the money over 6 months and say “it all evens out”.

❌ You still have to keep full overtime/penalty records — set-off clauses do not remove that obligation.

Woolworths argued:

“We overpaid staff overall across 6 months — that covers any award underpayments.”

The Court said no — award entitlements fall due when the pay period ends, not 6 months later.

If you didn’t meet them in that pay period, set-off doesn’t save you.

They also failed the record-keeping test — roster data and clock-in times were not enough.

Why this matters?

If you use set-off clauses in contracts, this case is a reminder:

This is a super important case and one that forces everyone to pause and think on how employers must treat set-off clauses.

Let me know your thoughts!

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