Hospitality Industry

Changes to Annualised Salaries in the Hospitality Industry

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On 7 April 2022 the FWC issued a decision concerning the operation of annualised salaries under the Hospitality Industry (general) Award 2020 and the Restaurant Industry Award 2020. This decision followed their earlier 2018 decision, which identified concerns with the current minimum 25% applied to weekly base rates.

The FWC noted in 2018: “In the case of the Hospitality Award and the Restaurant Award, where a significant amount of ordinary working hours is likely to be performed at unsociable hours which attract evening or weekend penalty rates, it may only take a relatively small number of weekly overtime hours for remuneration payable under the award to exceed the base weekly wage and a 25% increment.”

“In no circumstances should an annualised wage arrangement clause in a modern award permit or facilitate an employee receiving less pay over the course of a year than they would have received had the terms of the modern award been applied in the ordinary way, and it is essential that the clause contain a mechanism or combination of mechanisms to ensure that this does not happen. We consider that there are three types of mechanism which would likely be effective in this respect:

  1. A requirement for a minimum increment above the base rate of pay prescribed in the annualised wages clause itself.
  2. A requirement that the arrangement identify the way the annualised wage is calculated.
  3. A requirement that the employer undertake an annual reconciliation or review exercise.

In respect of the mechanism (A) above, any such provision in an award should be justifiable by reference to reasonable assumptions about the number of hours which are being paid for, and impose outer limits on the number of overtime hours or other penalty-rate hours which are to be taken as paid for by the increment.” 

Following submissions by various employer groups and unions, the FWC issued its 7 April decision. Final determinations about the award variation were issued on 5 May 2022 and are summarised below:

Restaurant Industry Award 2020

Clause 20. – Annualised Wage Arrangements (formerly Annualised Salary Arrangements)

20.1 – Annualised wage instead of award provisions

  1. Annualised wage must be at least 25% more than the weekly minimum wage, multiplied by 52 for the work being performed in satisfaction of any or all of the following provisions:
  1. Clause 18 – Minimum rates
    1. Clause 21.3 – Split shift allowance
    1. Clause 23 – Overtime
    1. Clause 24 – Penalty rates; and
    1. Clause 25.3 – Payment for annual leave (i.e. Leave Loading)
  • The employee must not be required by the employer in any roster cycle to work in excess of:
  1. an average of 18 ordinary hours which would attract a penalty rate under clause 24.2(a) of this award per week, excluding any hours worked from 10.00pm to midnight; or
    1. an average of 12 overtime hours per week in excess of ordinary hours

without being entitled to an amount in excess of the annualised wage in accordance with clause 20.1(c).

  • If in a roster cycle an employee works any hours in excess of either of the outer limit amounts specified in clause 20.1(b), such hours will not be covered by the annualised wage and must separately be paid for in accordance with the applicable provisions of this award.
  • Where a written agreement for an annualised wage arrangement is entered into, the agreement must specify:
  1. the annualised wage that is payable;
    1. which of the provisions of this award will be satisfied by payment of the annualised wage;
    1. the outer limit number of ordinary hours which would attract the payment of a penalty rate under the award and the outer limit number of overtime hours which the employee may be required to work in a roster cycle under clause 20.1(b) without being entitled to an amount in excess of the annualised wage in accordance with clause 20.1(c).
  • The employer must give the employee a copy of the agreement and keep the agreement as a time and wages record.
  • The agreement may be terminated:
  1. by the employer or the employee giving 12 months’ notice of termination, in writing, to the other party and the agreement ceasing to operate at the end of the notice period; or
    1. at any time, by written agreement between the employer and the individual employee.

Similar to current provisions, employers must conduct a reconciliation, each 12 months, of the annualised wage arrangement.

The reconciliation is to calculate what the employee would have earned over the same period, had they been receiving minimum award provisions, with what the employee actually received.

If the employee earned less, then the shortfall must be paid to the employee within 14 days.

Hospitality Industry (general) Award 2020

Clause 24. – Annualised Wage Arrangements (formerly Annualised Salary Arrangements)

24.1 Clause 24 applies to all employees other than those within the Managerial Staff (Hotels) classification level as defined by Schedule A – Classification Structure and Definitions.

24.2 – Annualised wage instead of award provisions

  1. Annualised wage must be at least 25% more than the weekly minimum wage, multiplied by 52 for the work being performed in satisfaction of any or all of the following provisions:
    1. Clause 18 – Minimum rates
    1. Clause 26 – Allowances
    1. Clause 28 – Overtime
    1. Clause 29 – Penalty rates
    1. Clause 30.3 – Payment for annual leave loading; and
    1. Clause 35.3(a) – Additional public holiday arrangements for full-time employees.
  • The employee must not be required by the employer in any roster cycle to work in excess of:
    • an average of 18 ordinary hours which would attract a penalty rate under clause 29.2(a) of this award per week, excluding any hours worked from 7.00pm to midnight; or
    • an average of 12 overtime hours per week in excess of ordinary hours

without being entitled to an amount in excess of the annualised wage in accordance with clause 24.2(c).

  • If in a roster cycle an employee works any hours in excess of either of the outer limit amounts specified in clause 24.2(b), such hours will not be covered by the annualised wage and must separately be paid for in accordance with the applicable provisions of this award.
  • Where a written agreement for an annualised wage arrangement is entered into, the agreement must specify:
  1. the annualised wage that is payable;
    1. which of the provisions of this award will be satisfied by payment of the annualised wage;
    1. the outer limit number of ordinary hours which would attract the payment of a penalty rate under the award and the outer limit number of overtime hours which the employee may be required to work in a roster cycle under clause 24.2(b) without being entitled to an amount in excess of the annualised wage in accordance with clause 24.2(c).
  • The employer must give the employee a copy of the agreement and keep the agreement as a time and wages record.
  • The agreement may be terminated:
  1. by the employer or the employee giving 12 months’ notice of termination, in writing, to the other party and the agreement ceasing to operate at the end of the notice period; or
    1. at any time, by written agreement between the employer and the individual employee.

Similar to current provisions, employers must conduct a reconciliation, each 12 months, of the annualised wage arrangement.

The reconciliation is to calculate what the employee would have earned over the same period, had they been receiving minimum award provisions, with what the employee actually received.

If the employee earned less, then the shortfall must be paid to the employee within 14 days.

The above variations apply to the modern awards effective from 1 September 2022.