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New annualised salary arrangements in more Awards

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Special Edition E-Update

The Fair Work Commission has continued its review of annualised wage arrangements in modern awards.

The Fair Work Commission (the Commission) has continued its review of annualised wage arrangements in modern awards.

You can find our previous updates on important annualised salary decisions here: Annualised Salary Arrangements and Annualised Salary Arrangements – One Year On.  

On 7 April 2022 the Full Bench of the Commission issued draft determinations to vary to the Health Professionals and Support Services Award 2020 (Health Professionals Award), the Hospitality Industry (General) Award 2020 (Hospitality Award) and the Restaurant Industry Award 2020 (Restaurant Award) to introduce or amend annualised wage arrangement clauses.

As part of this decision, the Full Bench addressed the following outstanding matters:

  • What should be the “outer limit” numbers of penalty rate hours and overtime hours prescribed in the Hospitality Award, Restaurant Award and the Marine Towage Award 2020 (Marine Towage Award).
  • Whether annualised wage arrangements under the Health Professionals Award should be available in respect to employees classified as Health Professionals Level 1,Level 2 and Level 3.

The operative dates of the draft determinations of the above matters vary and are summarised below. Any interested parties have an opportunity to make submissions as to the terms of the draft determinations by 21 April 2022.

“Outer limit” of penalty rate hours and overtime hours in the Hospitality Award, the Restaurant Award and the Marine Towage Award

In the Full Bench’s initial decision on 20 February 2018 (February 2018 Decision), it identified that the Hospitality Award, Restaurant Award and Marine Towage Award contained an annualised wage arrangement provision which required the annualised salary to be a minimum percentage above the relevant base award weekly wage.

At that time, the Full Bench concluded that in respect of these provisions there needed to be reasonable assumptions made about the number of hours, and to set outer limits on the number of overtime hours or penalty-rate hours which are taken to be compensated by the minimum percentage increment.

In its decision of 23 December 2019 (December 2019 Decision), the Full Bench proposed provisional views as to the number of hours for those outer limits and sought submissions from interested parties.

The FWC has now dealt with these outstanding matters in its decision - 4 yearly review of modern awards – Annualised Wage Arrangements [2022] FWCFB 51 (April 2022 Decision).

In relation to the Hospitality Award and the Restaurant Award, the Full Bench adjusted its preliminary view and determined that where there is a pay uplift of 25%, the outer limits should be as follows:

  • An average of 18 hours over the pay period/roster for penalty rate hours; and
  • An average of 12 hours over the pay period/roster for overtime hours.

Practically, in the case of penalty rate hours, this means that across a four-week cycle an employee will be able to be rostered for eight ordinary hours on each Saturday and Sunday and also for one public holiday. In the case of overtime hours, the new outer limit will ensure that peak periods are accommodated.

The Full Bench stated that its adjustment of the outer limits should not be understood as an endorsement of the proposition that the pay uplift of 25% will be sufficient in properly compensating employees who work at or near the outer limits over the course of a year.

The Full Bench warned that in any event, the operation of the reconciliation mechanism will require the employer to make significant payment adjustments to the employee to cover the shortfall unless the payment uplift is already higher than 25%.

In the draft determinations, the Full Bench has proposed a commencement date of 1 September 2022 for the variation in order to give employers and employees a reasonable opportunity to adjust any existing annualised salary arrangement.

In relation to the Marine Towage Award, the Full Bench proposed not to depart from its view expressed in its December 2019 Decision. Therefore, it remains that where the required pay uplift is 40%, the outer limits should be as follows:

  • An average of 20 hours over the pay period/roster for penalty rate hours; and
  • An average of 15 hours over the pay period/roster for overtime hours.

The Marine Towage Award will be varied accordingly effective 9 May 2022.

Annualised wage arrangements under the Health Professionals Award

In the Full Bench’s initial February 2018 Decision, it considered draft determinations to vary the Health Professionals Award to insert an annualised salary provision. At this time, the Full Bench expressed the provisional view that it was not satisfied that this variation should be made as the employees covered by the award work complex rosters where shift loadings and penalty rate payments constitute a significant element of their overall salary.

In the July 2019 Decision, after considering the submissions in response to its provisional view, the Commission concluded that a model clause should be inserted into the Health Professionals Award, applying only to managerial and supervisory employees within the classifications of Support Services Employee Level 8 and 9 and Health Professional Level 4.

In the December 2019 Decision, the Full Bench also called for submissions as to whether annualised wage arrangements should be included to apply to managerial and supervisory employees under the classifications of Health Professional Level 1, Level 2 and Level 3.

The Full Bench dealt with these matters in the recent April 2022 Decision.

It determined that annualised wage arrangements should not apply to the Health Professional Level 1 classification as it is an entry level classification and the relevant employees may not have sufficient experience or exposure to give informed consent to an annualised wage arrangement.

In contrast, it determined that annualised wage arrangements should be made available to Health Professional Level 2 and 3 classifications given that the relevant employees have a sufficient level of experience to assess whether a proposed annualised salary arrangement would be appropriate having regard to the pattern of working hours over the long term.

The Full Bench therefore proposed to vary the Health Professional Award to include an annualised wage arrangements clause which will only apply to employees in the classifications of Support Services Employee Level 8 and Level 9 and Health Professional Level 2, Level 3 and Level 4.

The Full Bench issued draft determinations with the variation, proposing the operative date of 9 May 2022.

What do these changes mean for employers?

Employers should review whether any of its employees are covered by the Hospitality Award, Restaurant Award, Marine Towage Award and Health Professional Award and ensure that its annualised salary provisions are consistent with the draft determinations prior to the operative dates.

Employers should take particular note of the draft determinations concerning the Hospitality Award, the Restaurant Award and the Marine Towage Award to ensure that where there is an annualised salary arrangement that rostering arrangements comply with the new outer limits.

Information provided in this update is not legal advice and should not be relied upon as such. Workplace Law does not accept liability for any loss or damage arising from reliance on the content of this update, or from links on this website to any external website. Where applicable, liability is limited by a scheme approved under Professional Standards Legislation.

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