Increased Award Flexibility for the Hotel Industry

OWEN WEBB - AHA|SA WORKPLACE RELATIONS MANAGER

The Australian Hotels Association (AHA) has had a significant win for Award flexibility with the introduction of “loaded rate” arrangements into the Hospitality Award.

On 3 September 2021, the Fair Work Commission (FWC) agreed to vary the Hospitality Industry (General) Award 2020 (Award) and include a new schedule which provides employers with an optional simplified pay arrangement in the form of loaded rates (Schedule K).

In this article we examine the details of the new “loaded rate’ arrangements in the Award, how employers can utilise them and what steps need to be taken in order for an employee to be employed under such terms and conditions.

WHAT WAS THE BACKGROUND TO THIS APPLICATION?

On 9 December 2020, the former Attorney-General and Minister for Industrial Relations, the Hon Christian Porter MP wrote to the FWC President, the Hon Justice Iain Ross AO regarding the “extraordinary circumstances” caused by the COVID-19 pandemic.

Specifically, Minister Porter wrote: “it would be in Australia’s economic best interest for the Fair Work Commission to use its powers under section 157(3)(a) of the Fair Work Act 2009 (the Act) to undertake a process to ensure several priority modern awards in sectors hardest hit by the pandemic be amended”.

The hospitality industry was identified as being an industry hardest hit by the COVID-19 pandemic.

Minister Porter outlined two (2) award flexibilities which could be “critically important for providing businesses in the most distressed parts of the economy with the confidence to increase hiring during the recovery”:

a) the introduction of a simplified pay arrangement in the form of loaded rates / exemption rates to reduce businesses’ administrative cost and address concerns regarding risks arising from existing pay rate complexities; and

b) the streamlining of classification structures making them easier and simpler to apply.

On 10 December 2020, President Ross issued a statement, responding to the Ministers Letter, confirming that the FWC would, of its own motion, consider the inclusion of loaded rates into modern awards and whether any changes can be made to simplify the existing classification structures in awards most affected by the COVID-19 pandemic.

WHAT WAS THE BASIS OF THE AHA’S APPLICATION?

The AHA application sought to introduce a range of loaded rates (subject to parameters) to simplify the

administration and understanding of entitlements and payroll for employers and employees, particularly small business employers in the sector.

The AHA proposed a range of loaded rates which provide for a minimum percentage to be applied to the minimum hourly rate which compensates employees for a defined range of hours and entitlements.

• In support of the application the AHA submitted that:

• The variation would not disadvantage employees when compared to the Award;

• A dispute resolution process could be utilised if any employee felt aggrieved by a loaded rate arrangement;

• The application satisfied the modern awards objectives; and

• The variation balanced the Government’s request for sensible workplace flexibility in response to changing economic conditions against the need to maintain appropriate safeguards and ensuring employees are not worse off when compared to award entitlements.

The United Workers Union (UWU) and Australian Council of Trade Unions (ACTU) opposed the application.

On 3 September 2021, the FWC approved the AHA’s application to vary the Award and insert a new Schedule K – Loaded Rate Arrangements. A copy of Schedule K can be accessed by clicking here: http://www.fwc.gov.au/documents/documents/modern_awards/award/ma000009/default.htm.

WHO DOES SCHEDULE K APPLY TO?

Schedule K only applies to full time employees classified as Wage Level 3 or above.

WHAT IS A LOADED RATE PERCENTAGE?

Schedule K provides for the payment of a percentage amount above an employee’s ordinary hourly rate in satisfaction of the requirement to pay:

• split shift allowance (clause 26.14(b)(i) of the Award);

• overtime (clause 28 of the Award), excluding 28.2(d) to (f) of the Award; and

• penalty rates (clause 29 of the Award), except for penalty rates in relation to public holidays.

The percentages are based on a set number of hours (Maximum Weekly Hours) worked over a range of days (Loaded Rate Range of Days):

Loaded Rate Percentage (% of ordinary hourly rate) / Loaded Rate Range of Days / Loaded Rate Maximum Weekly Hours

110.20 / Monday to Friday / 40

120.00 / Monday to Friday / 45

116.95 / Monday to Saturday / 40

123.40 / Monday to Saturday / 45

126.85 / Monday to Sunday / 40

131.05 / Monday to Sunday / 45

The following table outlines the dollar value for Wage Level 3 and up based on the Loaded Rate Percentages:

Loaded Rate Percentages

% / 110.20 / 120 / 116.95 / 123.40 / 126.85 / 131.05

L3 $24.16 / $26.30 / $25.64 / $27.05 / $27.81 / $ 28.73

L4 $25.45 / $27.71 / $27.00 / $28.50 / $29.29 / $30.26

L5 $27.04 / $29.45 / $28.70 / $30.28 / $31.13 / $32.16

L6 $27.77 / $30.24 / $29.47 / $31.10 / $31.97 / $33.02

Separately, these rates will increase on 1 November 2021 in accordance with the Annual Wage Review 2020-21 decision.

HOW DO EMPLOYERS KNOW WHEN TO APPLY THE LOADED RATE PERCENTAGES?

The Loaded Rate Percentages will only apply on the basis the Loaded Rate Parameters are complied with.

Clause K.4 of Schedule K defines the Loaded Rate Parameters. The Loaded Rate Parameters are:

• The roster cycle must operate weekly commencing on a Monday;

• Between Monday to Friday: - Maximum of 11.5 hours (excluding meal breaks) per day;

- Shift rostered between 7:00am and 12:00am (midnight);

• On Saturday: - a maximum of 10 hours (excluding meal breaks);

• On Sunday: - a maximum of 10 hours (excluding meal breaks); and

• If the period between shifts is 3 hours or less, a split shift allowance must be paid.

WHAT HAPPENS IF AN EMPLOYEE IS ROSTERED OUTSIDE OF THE LOADED RATE PARAMETERS?

The employee is entitled to payment of the applicable penalty rate or allowance in accordance with the Award.

For example, an employee will be entitled to overtime in accordance with clause 28 of the Award for work which exceeds the:

• daily and/or shift maximum hours;

• Loaded Rate Range of Days; or

• the Loaded Rate Maximum Weekly Hours each week.

DO THE HOURS WORKED ON PUBLIC HOLIDAY COUNT TOWARDS THE LOADED RATE MAXIMUM WEEKLY HOURS?

Yes. The hours worked on a public holiday are counted for the purposes of an employee’s Loaded Rate Maximum Weekly Hours.

FOR WORK PERFORMED ON A PUBLIC HOLIDAY, DO EMPLOYERS JUST PAY THE LOADED RATE AMOUNT?

No. An employee will be entitled to payment of the relevant penalty rate and the applicable entitlements for working on a public holiday as outlined in the Award.

WHAT DO EMPLOYERS HAVE TO DO IF THEY WANT TO PAY ELIGIBLE EMPLOYEES UNDER SCHEDULE K?

Clause K.7 of Schedule K requires that at least 7 days prior to initiating any of the Schedule K provisions, an employer consult with affected employees. An employee’s agreement is not required for a Loaded Rate Arrangement to come into effect.

Consultation in this regard will require speaking to employees and advising them about the business’ decision to implement a Loaded Rate Arrangement and addressing concerns raised by the employees in a timely manner.

WHAT TYPE OF PAPERWORK DO EMPLOYERS NEED TO COMPLETE?

Employers will need to ensure they have completed the ‘Schedule L – Loaded Rate Arrangement Form’ (Form) at the time of entering into a Loaded Rate Arrangement.

It is important the Form to be completed and kept as it constitutes a time and wage record.

A copy of the Form can be accessed by clicking here: http://www.fwc.gov.au/documents/documents/modern_awards/award/ma000009/default.htm.

WHAT IF THE EMPLOYER DECIDES THEY NO LONGER WANT TO PAY THEIR EMPLOYEE UNDER SCHEDULE K?

Clause K.2.5 of Schedule K outlines a Loaded Rate Arrangement can be terminated:

• at any time by written agreement between the employer and employee; or

• by an employer providing 2 weeks’ written notice to the employee of the employer’s intention to terminate the arrangement. A Loaded Rates Arrangement terminated at the employer’s initiative will cease to have effect at the end of the notice period.

IS SCHEDULE K MANDATORY?

No. Schedule K is optional. An employer can elect if they want to ‘opt in’ to a Loaded Rates Arrangement.

FURTHER INFORMATION

For further information regarding Schedule K, please contact the AHA|SA Workplace Relations Team.