2022 Annual Wage Arrangement for Hospitality Workers

The following awards' annualised wage arrangements in Australia are changing from 1 September 2022:

• Hospitality Award 
• Restaurant Award 

These terms are perhaps more well known as annualised wages. For additional details, continue reading.

What Are the Changes? 

Following a ruling by the Fair Work Commission, there are new annualised wage arrangement regulations in the Hospitality and Restaurant Award as of 1 September 2022. The clauses in these awards replace the terms of the prior annualised pay arrangement provisions.

Key modifications include:

• Limitations on which award entitlements are included in an annualised wage arrangement
• A new set of regulations known as the "outer limits" govern how many hours an employee may work in a roster cycle without incurring overtime or penalty rates.
• What information is included in a written contract for an annualised salary arrangement
• Supplementary requirements for record-keeping
• New guidelines for terminating annualised salary agreements.

These modifications:

• Only applicable to full-time employees covered by the Hospitality award or the Restaurant award.
• Under the Hospitality Award, those who work as managerial staff (hotels) are exempted from these restrictions.

If you are exempt from these changes, check the general information on Annualised pay.

Overview of Annualised Wage Arrangements

Even though the employees' hours vary, annualised wage arrangements allow employers to pay their employees fixed, recurring monthly amounts as specified. This system differs from employment contracts that require companies to pay employees a yearly wage.

For employees to get the benefits of an annualised wage arrangement, there are regulations governing how to determine and formalise it, including the minimum rate employers must provide. 

By reading further down in this article, find out more about how to create and manage annualised compensation arrangements under the Restaurant Award or Hospitality Award.

What Can Be Included in the Restaurant Award's Minimum Annualised Wage?

An annualised wage agreement may include the following payments under the Restaurant Award:

• Annually loaded leaves
• Split shift compensation
• Overtime
• Minimum award rates based on the employee's categorisation level
• Split shift compensation

There is no need to calculate and pay for these benefits for each pay period when an annualised wage agreement includes payment for any of these benefits.

Additional compensation

An annual wage, in any roster cycle, can only cover an employee working on an average of (weekly): 

• 18 hours at a penalty rate (excluding time worked between 10:00 pm and midnight, Monday to Friday)
• 12 hours of overtime.

These are referred to as the 'outside limits.' A worker may occasionally put in more time than these hours throughout a roster cycle. 

The yearly salary does not cover these additional hours. Instead, an employer must compensate the employee for these extra hours at their minimum hourly rate, plus any overtime or penalty rates. 

Other benefits that are not included in the yearly pay must also be paid separately.

What Can Be Included in the Hospitality Award's Minimum Annualised Wage

According to the Hospitality Award, an annualised wage agreement may cover the following payments:

• Minimum award rates based on the employee's categorisation level
• Penalty rates 
• Allowances 
• Overtime 
• Annual leave 
• Clause 35.3: extra public holiday arrangements

Calculating and paying for these benefits for each pay period is unnecessary when an annualised wage agreement includes payment for any of these benefits.

Additional compensation

An annual wage, in any roster cycle, can only cover an employee working on an average of (weekly): 

• 18 hours at a penalty rate (excluding time worked between 10:00 pm and midnight, Monday to Friday)
• 12 hours of overtime.

These are referred to as the 'outside limits.' Over the course of a roster cycle, a worker may occasionally put in more time than these hours. 

The yearly salary does not cover these additional hours. Instead, an employer must compensate the employee for these extra hours at their minimum hourly rate, plus any overtime or penalty rates. 

Other benefits that are not included in the yearly pay must also be paid separately.

This means that employers must pay their employees during each pay period:

• Regular annualised salary amount during the pay period.
• Any additional payments at the appropriate award rate for any hours worked above the "outside limits" for penalty or overtime hours.
• Any entitlements that the annualised wage arrangement does not cover.

Best tip: 

Employers should determine an annualised salary that will cover what their employees are entitled to be paid under their award. This should be over the annual course and by considering their employees' work patterns and other factors. 

Creating the Contract and Record-Keeping Guidelines

More stringent record-keeping standards are now part of the Restaurant Award and the Hospitality Award. Employers who pay their employees an annualised wage must abide by these new regulations.

Under the Fair Work Act, employers must adhere to additional record-keeping and pay slip requirements.

Putting everything together:

An annualised salary agreement requires the employee and the employer to sign it in writing. Employers must, at the very least, need to:

• Jot down the agreement in writing as a time and payment record.
• Provide a copy of the annualised salary agreement to their employees.

The annualised pay arrangement must contain the following:

• The annual salary amount
• Which awards are considered in the annual salary
• The maximum number of overtime and penalty rate hours an employee may be compelled to perform within a roster cycle without being eligible for further compensation (referred to as the "outer limits").

During the roster period

Employers are required to document the employees':

• Employee's start and end times of work 
• Unpaid breaks
• Roster period verification 

At the end of a roster cycle or pay period, the employee must:

• Verify the record's accuracy
• Digitally sign the form as acknowledgement.

Reviews and Reconciliation of Annualised Wage Arrangements

Employers must evaluate and reconcile annualised wage arrangements:

• At least once every 12 months from the start of the agreement
• Once the agreement expires
• When a job is terminated

This is done to ensure that employees receive at least the minimum payment to which they are entitled to the year's worth of labour.

An annualised pay arrangement may sometimes result in an employee being paid less than what they are entitled to for their job under the award. If an employer hasn't paid an employee over the year, they should pay the shortfall within 14 days of finishing the reconciliation. 

Helpful tip: 

Employers should examine their records often throughout the year. This will help in:

• Avoiding underpayments and errors
• When it's time for the yearly assessment and reconciliation of the annualised wage arrangements, forecast and prepare for any possible gaps.

Terminating the Agreement

Employees and employers can discontinue an annualised wage agreement under the new rules:

• By indicating in writing that the agreement is ending at any moment
• Giving the other party 12 months' written notice that the deal is ending.

How RosterElf Can Help 

Employees with annualised compensation agreements can submit timesheets using RosterElf  to track their working hours, including unpaid breaks. RosterElf preserves a permanent digital record of the hours worked after this data has been collected. RosterElf may also remind employees to turn in timesheets, ensuring that you never go without an audit record.

RosterElf provides a number of features to help you control and manage how many hours your employees work and when. Fair Work advises taking into account your employee's work schedules when calculating annualised wage rates; this can be done with ease using RosterElf's rostering platform.

Staff set the times and days they can work, and RosterElf does the rest. Our software then automatically suggests available employees fill shifts. 

To get a clearer view of how our app works, enjoy 15-day access to our tool for free.