Don’t Get Caught Out – Getting it Right With Salary Arrangements

OWEN WEBB - AHA|SA WORKPLACE RELATIONS MANAGER

There are many benefits associated with an employee and employer entering into a salary arrangement, however it is important to ensure that employees enter into the correct salary arrangement and that they are classified and remunerated appropriately.

In this article we examine the salary arrangements under the Hospitality Industry (General) Award 2020 (‘HIGA’), including how to calculate the appropriate salary level and how to determine which positions fall under which arrangement to avoid any potential backpay or underpayment claim.

ANNUALISED SALARY ARRANGEMENTS (CLAUSE 24)

Coverage

The HIGA contains annualised salary provisions under Clause 24. Clause 24 applies to all employees other than casual employees and employees within the Managerial Staff (Hotels) classification level.

An individual employee and their employer may agree on the payment of an annualised salary pursuant to Clause 24, however such an arrangement needs to be mutually agreed between the employer and the employee, it cannot be forced upon the employee.

Annualised salary arrangements are suitable for any positions that fall within the classification levels 1 to 6 in Schedule A – Classification Structure and Definitions of the HIGA. For example, the annualised salary arrangement would be suitable for a Food and Beverage Attendant Grade 3 (wage level 3) position.

Salary

When determining the appropriate salary to pay an employee under an annualised salary arrangement, the first consideration for the employer is to ensure that the employee is paid at least 125% of the minimum weekly rate that would otherwise be applicable under Table 3-Minimum rates in the HIGA over the year. For example, the minimum weekly rate for a full-time employee at the level 3 Food and Beverage Attendant classification (as at 1 June 2021) is $832.80. If we add an additional 25%, the minimum salary that would be payable for the level 3 classification would be $54,132 gross per annum ($832.80 x 52 weeks + 25%).

The annualised salary satisfies the requirements of the HIGA under clause 28-Overtime and Clause 29-Penalty rates. However, the second consideration for the employer is to ensure that the annualised salary does not result in an employee being paid less over a year (or, if the employee’s employment is terminated before a year is completed, over the period of that employment) than would have been the case if an annualised salary had not been agreed and the employee had instead been paid their weekly rate and any other amounts satisfied by the annualised salary.

So for an employer it is one thing to pay 125% of the minimum weekly rate, but that does not mean the employer can simply roster the employee for as many hours as they like, because the employer still has to ensure that the employee is no worse off under their salary arrangement than what they would otherwise be as a full-time or part-time employee under an hourly rate and in receipt of all award entitlements such as overtime and penalty rates.

One of the most effective means of ensuring that the annualised salary paid to the employee is sufficient, is to cost out an indicative roster for a week to determine what the employee would be entitled to under an hourly rate with all of the applicable award entitlements such as penalty rates and overtime applied.

If the costing out process results in the employee needing to be paid more than 125% of the minimum weekly rate then the annualised salary will need to be adjusted accordingly.

Days off and Public Holidays

Under the annualised salary arrangement under Clause 24, the employee is entitled to 8 days off per 4-week period.

If the employee under an annualised salary works on a public holiday, they are entitled to paid time off that is of equal length to the time worked on the public holiday or the equal length of time added to their annual leave entitlement.

Where an employee under an annualised salary arrangement has a day off that coincides with a public holiday, they are entitled to one of the following under clause 35.3 of the HIGA:

• An extra day’s pay; or

• An alternative day off within 28 days; or

• An additional day’s annual leave.

Annual Leave Loading

Employees employed in accordance with the Annualised Salary provisions under Clause 24 are entitled to leave loading of 17.5% which applies for any leave taken and on any unused leave paid out on termination.

Salary Increases

It is important for employer’s to remember that if they are paying an employee exactly 125% of the minimum weekly rate, then the salary will need to be adjusted each year in line with any applicable wage increase handed down by the Fair Work Commission (‘FWC’) in the annual wage review.

MANAGERIAL SALARY ARRANGEMENT

Coverage

The HIGA also contains a Managerial staff (Hotels) classification under Schedule A.2.9. The managerial classification only applies to employees who perform work in one of the following establishments:

“… Hotels, resorts, casinos, taverns, wine saloons, wine and spirit merchants retailing to the general public and other retail licensed establishments in or in connection with accommodation, with the selling of drinks, preparing and serving food and drinks, cleaning and attending to the premises and all other associated services”

It is important to remember that not all employees can enter into a salaried arrangement under the Managerial classification. An employee under the managerial provisions pursuant to Schedule A.2.9 means a manager who:

• Under the direction of senior management is required to manage and co-ordinate the activities of a relevant area or areas of the hotel; and

• Directs staff to ensure they carry out their duties in the relevant area or areas of the hotel; and

• Implements policies, procedures and operating systems for the hotel, and

• Has completed an appropriate level of training in business management or has relevant industry experience, including in supervising employees in one or more areas of a hotel.

An example of a position that would fall within the classification of the Managerial provisions would include the Head Chef or a Duty Manager.

Salary

For the Managerial salary provisions the base salary is listed under Clause 18.2 of the HIGA, which is currently $49,883 gross per annum (as at 1 June 2021). However, that is a base salary and therefore on top of that the employer would be required to pay any penalties for work performed on weekends or after 7pm and also for any overtime after 38 hours.

As an alternative option the employer can pay a salary in accordance with clause 25 of the HIGA – Salaries absorption (Managerial Staff (Hotels)). That requires the employer to pay a salary of 125% of the minimum annual salary in clause 18.2 and that salary is (as at 1 June 2021) $62,345 gross per annum. The payment of that salary or above relieves the employer from their obligations with respect to a number of clauses of the HIGA including:

Clause 15 – Ordinary hours of work and rostering arrangements

Clause 16 – BreaksClause 26 – AllowancesClause 28 – OvertimeClause 29 – Penalty ratesClause 30.3 – Payment for annual leave loading

Clause 35.3 - Additional entitlement for full-timers where their RDO coincides with a public holiday.

Clause 37 – Deductions for provision of employee accommodation and meals

Days off and Public Holidays

Under the Managerial salary absorption provisions, the employee must have at least 8 days off in a 4 week period, so they could for example work a 7 day week and have more days off in a later week of that 4 week period.

If the managerial salary absorption provision employee works on a public holiday they are entitled to paid time off equivalent to the time worked on the public holiday.

In terms of where an RDO coincides with a Public holiday, under the managerial salary absorption provisions the employee is not entitled to any benefits.

Annual Leave Loading

Employees employed in accordance with the Managerial Salary Absorption provisions under Clause 25 are not entitled to be paid annual leave loading.

Salary Increases

As the managerial salary absorption amount is aligned to any award increases, if the FWC increases the award wages then the salary absorption minimum will go up in line with the increase.

AWARD FREE EMPLOYEES

Schedule D.2.9 specifically excludes certain positions from the HIGA. This includes an employee who is employed to undertake the duties of senior management or is responsible for a significant area of the operations of one or more hotels.

Indicative positions include:

• Financial Controller,

• Human Resources Manager

• Venue Manager

• General/Hotel Manager

• Executive Assistant Manager

• Regional Manager

For these particular positions they are award free and therefore the minimum standards under the National Employment Standards apply to their position, however their salary is negotiated according to market rates.

CONTRACTS OF EMPLOYMENT – SALARY ARRANGEMENTS

With written contracts of employment whilst they are not a legal requirement under the Fair Work Act or the Award or the Fair Work regulations, we strongly recommend that all employees before they start their first shift, have a signed contract of employment in place.

Template contracts of employment for the salaried arrangements referred to in this article are available for Members in the Members only portal of the AHA|SA website under the Workplace Relations tab.

RECORD KEEPING OF HOURS WORKED – SALARY ARRANGEMENTS

It is a requirement under Section 535(1) of the Fair Work Act 2009 (Cth) that an employer maintains appropriate time and wage records for all employees for a period of at least 7 years.

Despite the fact that salaried employees are on a fixed wage each week, it’s still very important that appropriate records are maintained in relation to their hours of work, including when they started and finished for the day and any breaks they had during their shift.

Having appropriate time and wage records is critical in ensuring the employer has an appropriate defence as to the hours the employee worked, should the employee ever decide to take action against the employer for an underpayment of wages claim or claim that they didn’t have appropriate breaks.

MEMBER ENQUIRIES

AHA|SA Members that have any enquiries in relation to salaries and in particular the salary arrangements under the HIGA should contact the AHA|SA workplace relations team.