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Aug 24, 2022
Following a decision made by the Fair Work Commission, from 1 September 2022, there are new annualised wage arrangement rules in the Hospitality Award and the Restaurant Award. These replace the previous annualised salary arrangement provisions in these awards.
Key changes include:
Annualised wage arrangements — overview
Annualised wage arrangements enable employers to pay their employees fixed regular amounts every pay period by agreement, even when their employees’ hours and days of work vary.
There are rules around how to set and formalise an annualised wage for employees to benefit from an annualised wage arrangement, including the minimum amount employers have to pay.
Minimum annual wage — what can be included
Under the Restaurant and Hospitality Awards, an annualised wage arrangement can include payment for:
When an annualised wage arrangement includes payment for these entitlements, there is generally no need to calculate and pay for those entitlements in each individual pay period.
In any roster cycle, an annual wage can only cover an employee working up to a weekly average of:
These are called the ‘outer limits’. Sometimes an employee will work more than these hours over a roster cycle. The annual wage does not cover these extra hours. Instead, an employer needs to pay these extra hours at the employee’s minimum hourly rate, plus any penalty or overtime rate on top of their regular wage for that pay period.
All other entitlements not covered by the annual wage must also be paid separately.
Calculating the annual wage
Under the annual wage arrangement provisions in the Restaurant Award and the Hospitality Award, an employer must pay their employee at least 25% more than the employee’s weekly minimum award rate, multiplied by 52.
What needs to be included in a written agreement for an annualised wage arrangement
An annualised wage arrangement must be agreed to in writing by an employee and employer. At a minimum, employers need to:
The annualised wage arrangement needs to include:
Extra record-keeping rules
Employers need to record the employees:
At the end of the pay period or roster cycle, the employee needs to:
Employers need to review and reconcile annualised wage arrangements:
This is to ensure their employees get at least the minimum amounts they’d otherwise be entitled to for their work over the year.
An annualised wage arrangement may result in an employee getting paid less than they would usually be entitled to for their work under the award. If an employer finds that they haven’t paid their employee enough over the year, they must pay the employee the shortfall within 14 days of completing the reconciliation.
Employers also need to pay their employees in each pay period:
Ending an annualised wage arrangement.
Under the new rules, employees and employers can end an annualised wage arrangement:
Why annualised salary?
So why would you have an annualised salary in place? The benefit is that for you and the employee, there is a regular rate of pay – it does not vary from week to week. This allows you and the employee to plan. In a tight market for quality employees, annualised salaries can be a great way to attract and retain employees.
Please let us know if you need assistance reviewing and updating your employment contracts.
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