Changes to annualised wage arrangements under the Hospitality Industry (General) Award 2020 and the Restaurant Industry Award 2020

As of 1 September 2022, the annualised wage arrangement provisions under the Restaurant Award 2020 (Restaurant Award) and the Hospitality Industry (General) Award 2020 (Hospitality Award) (collectively, the Awards) have been tightened, imposing greater obligations on employers.

The changes come after the Fair Work Ombudsman (FWO) announced it would focus on wage compliance over the course of 2022-23 in a bid to curb wage theft across several industries. FWO Sandra Parker stated there are “high levels of non-compliance” across the hospitality and restaurant sectors, with vulnerable workers being particularly at risk of exploitation.

What is an annualised wage arrangement?

The term ‘annualised wage arrangement’ differs from that of an ‘annual salary’ paid under a contract of employment. An annualised wage arrangement is derived from specific provisions under certain modern awards, whereby an employee and employee can enter into an agreement for the employee to receive an annual wage that, is inclusive of multiple entitlements, and is more than the minimum award rate.

When paying an annualised wage, additional obligations are imposed on an employer to conduct annual reconciliations on annualised wages to check for any shortfalls.

Who can be on an annualised wage arrangement?

Only full-time employees, by way of a written agreement, can be paid an annualised wage under the Hospitality Award and Restaurant Award.

What has changed?

1. What can be included in an annualised wage arrangement

The revised provisions have imposed new restrictions on what entitlements may be included in an annualised wage.

Under both Awards, an annualised wage arrangement may include minimum award rates, overtime rates, penalty rates (such as early morning, evening, late night, weekend, and public holidays), and annual leave loading.

In the Restaurant Award, annualised wages may also include a split shift allowance and under the Hospitality Award, an annualised wage may also include additional public holiday arrangements and allowances listed in clause 26.

However, other entitlements that are not mentioned above can no longer be included in an annualised wage and will need to be paid separately.

2. Restrictions on the number of hours that can attract overtime or penalty rates

There are now limitations on the maximum number of hours that can attract overtime, or penalty rates, that an employee can be subject to work in a roster cycle and be included in their annualised wage, without being entitled to additional payment (Outer Limits).

Under both Awards, an annualised wage can only cover up to the following number of hours:

• an average of 18 ordinary hours per week that attract a penalty rate (except for evening work); and
• an average of 12 overtime hours per week.

Any hours worked in a roster cycle beyond the Outer Limits cannot be covered by the annualised wage and must be paid separately to the employee, at the relevant award rate for the period the hours were performed.

3. What must be included in the agreement

The agreement used to enter into an annualised wage arrangement, at a minimum, must now include:

• the annualised wage amount;
• which award entitlements have been incorporated into the annualised wage; and
• the Outer Limits of the annualised wage.

4. Extra record-keeping obligations

In addition to the record-keeping requirements provided by the Fair Work Regulations 2009 (Cth), employers will now be required to keep accurate records of the employee’s start and finish times each day and any unpaid meal breaks that were taken. Further, the employee will be required to sign and acknowledge these records as being correct, in writing, every pay period/roster cycle.

5. Requirements for ending an annualised wage arrangement

In accordance with the new provisions in both Awards, an annualised wage arrangement can be terminated by either party by providing 12 months’ notice of the termination in writing. The agreement will cease to operate at the end of the notice period. However, the agreement can be terminated earlier if there is a mutual agreement in writing between the employer and the employee.

You can review our factsheet on the changes to annualised wage provisions on our Member Portal.

If you are considering placing your employee on an annualised wage arrangement and require assistance navigating the changes, please contact NRA Legal on 1800 916 523.