Annualised Wage Arrangements: A Cure For Your Businesses’ Payroll Nightmare

Recently, the Fair Work Commission implemented new annualised wage arrangement rules in both the Hospitality Industry (General) Award 2020 (Hospitality Award) and the Restaurant Industry Award 2020 (Restaurant Award). The provisions were implemented on 1 September 2022 and replace the previous annualised salary arrangement provisions. The changes made only apply to full-time employees covered by either the Hospitality Award or the Restaurant Award and do not apply to those employed as managerial staff (hotels) covered by the Hospitality Award.

What does this mean for your business and how should employers ensure they are complying with the annualised wage arrangement obligations?

To put it simply, an annualised wage arrangement enables employers to pay their employees fixed regular amounts every pay period, even when an employees’ hours fluctuate. An annualised wage arrangement allows an employer and an employee to enter into an agreement in writing, for the employee to receive an annual wage, inclusive of entitlements.

If an employee is employed under the Restaurant Award, that employee is entitled to receive an annual wage that is inclusive of:

• minimum award rates;
• split shift allowance;
• overtime;
• penalty rates; and
• annual leave loading.

If an employee is employed under the Hospitality Award, that employee is entitled to receive an annual wage that is inclusive of:

• minimum award rates;
• allowances;
• overtime;
• penalty rates;
• annual leave loading; and
• additional public holiday arrangements.

If an employee works overtime…

The changes also bring about new rules governing the maximum number of hours that an employee is allowed to work in a roster cycle which can be included in their annualised wage arrangement. This is referred to as the ‘outer limits’.

If an employee is governed by the Restaurant Award, they may be entitled to additional payments where they work outside the outer limits. Under the Restaurant Award, the outer limits are:

• 18 penalty rate hours per week, which excludes time worked between 10pm and midnight between Monday and Friday; or
• 12 overtime hours per week.

If an employee is governed by the Hospitality Award, they may be entitled to additional payments where they work outside the outer limits. Under the Hospitality Award, the outer limits are:

• 18 penalty rates hours per week, which excludes time worked between 7pm and midnight between Monday and Friday; or
• 12 overtime hours per week.

So what are employers required to pay their employees?

When implementing an annualised wage arrangement, employers are required to pay employees:

• the regular amount for the pay period as per their annualised wage arrangement;
• any extra amounts necessary at the relevant award rate for any hours worked beyond the outer limits for any overtime or penalty hours worked; and
• any entitlements not covered by the annualised wage arrangement.

Employers needs to ensure the employee’s start and finish times of work are recorded correctly, including unpaid breaks.

An employer should review an annualised salary arrangement:

• every 12 months from the date the arrangement started;
• when the arrangement ends; and
• when the employment ends.

In Summary

• Employer should ensure they are aware of changes to the rates and allowances under the Restaurant Award and the Hospitality Award.
• Employers should ensure they properly document any annual wage arrangements in accordance with the Award requirements.
• Employers must ensure their record keeping is up to date and that their employees’ time and hours are accurately recorded.

This article was prepared with the assistance of Ebony Billett.