As of 1 September 2022 there have been changes to how employers can annualise wages under the Restaurant Industry Award 2020 (Restaurant Award) and the Hospitality Industry (General) Award 2020 (Hospitality Award).
Employers within these industries should also be mindful of new rates and allowances which come into effect from the first full pay period on or after 1 October 2022.
Changes to Annualised Wage Provisions
These changes apply to full-time employees who are paid under an award-based annualised wage or salary arrangement.
They do not apply to:
- part-time or casual employees;
- staff classified as “managerial staff (hotels)” under the Hospitality Award;
- employees covered by enterprise agreements;
- award-free employees; or
- employees whose contract specifies they are paid an all-in salary which compensates them for specified award-based entitlements.
An annualised wage arrangement can now incorporate the following rates and allowances:
Restaurant Award Hospitality Award
- the employee’s minimum award rate;
- split shift allowance;
- overtime;
- penalty rates; and
- annual leave loading.
Hospitality Award
- the employee’s minimum award rate;
- allowances;
- overtime;
- penalty rates;
- annual leave loading; and
- additional payments for rostered days off which fall on a public holiday.
Plus
- For each roster cycle, an annual wage can only cover hours which would otherwise attract penalty rates or overtime rates up to the “outer limits”. Any additional hours which attract penalty rates or overtime rates must be paid in addition to the annual wage.
- The “outer limits” are:
- an average of 18 ordinary hours per week which would attract a penalty rate (excluding time worked between 7:00 pm and midnight, Monday to Friday under the Hospitality Award and time worked between 10:00 pm and midnight, Monday to Friday under the Restaurant Award); and
- an average of 12 overtime hours per week.
- Additional record keeping requirements have been introduced. In addition to the existing record-keeping obligations under the Fair Work Act 2009 (Cth), employers must:
- agree an annualised salary arrangement in writing, keep a copy, and provide a copy to the employee;
- state the annual wage amount, which award entitlements are included, and the specific “outer limits” in the written arrangement;
- record the start, finish, and unpaid break times for each employee; and
- the employee must confirm the record is correct by way of signature or digital acknowledgement at the end of each roster period.
- Annualised wage arrangements can be ended by mutual agreement in writing or by one party giving the other party 12 months’ written notice.
- As previously, for employees covered by the Hospitality Award and the Restaurant Award, employers need to pay at least 125% of their minimum award rate under an annualised arrangement. The annualised salary must be reconciled against the minimum Award entitlements on an annual basis, when the arrangement ends, or when the employment ends. Any shortfall between the Award amount and the annualised arrangement amount must be paid to the employee within 14 days.
Employers who pay full-time staff under a Hospitality Award or Restaurant Award annualisation arrangement should be aware of the above changes. The Fair Work Ombudsman has indicated it is particularly focused on ensuring compliance within the restaurant and café industry in 2022 – 2023 given reports of widespread non-compliance within this sector.
Annualised salary arrangements are also permitted in other industries, but the requirements for a valid arrangement vary from award to award. In some cases, arrangements can also be made outside the award-based structure. However, careful attention is required to ensure the arrangement is valid and will not result in inadvertent underpayments or liability for non-compliance with minimum employment conditions.
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