On July 27th 2021, the Fair Work Commission decided that the Australian Hotels Association’s application to insert loaded rates into the Hospitality Award had merit. It is likely that in August or September, employers that are covered by the Hospitality Award will have a new way to simplify the administrative process of paying staff correctly.

The intent of the AHA’s proposed changes is to insert loaded rates of pay into the Hospitality Industry (General) Award. Payroll administration is costly and stressful for many small and independent businesses, due to the often criticised complexity of modern awards and crackdown on non-compliant businesses.

A loaded rate is a higher rate of pay that is intended to incorporate, in part or in whole, penalty rates and other monetary benefits that would normally be paid under a modern award. This concept will be familiar to many businesses, who have paid higher base rates of pays under contract or individual flexible arrangements with elevated flat rates as a means of reducing pay complexity.

Under the AHA’s proposal, employers will be allowed to pay loaded rates to some employees. The loaded rate must be a minimum percentage of the employee’s ordinary hourly rate (between 110% and 131.05%, depending on the days worked).

It is important to note that the AHA’s proposal has limitations that it is important for employers to consider:

  • the proposes loaded rates can be paid only to full-time employees;
  • the loaded rates cannot be paid to part-time or casual employees;
  • the loaded rates cannot be paid to employees classified at the introductory level, Level 1 or Level 2, employees paid as juniors, or employees engaged or rostered under clause 15.3 (catering in remote locations) or 15.1(b)(vii) (160 hour four week roster with an ADO);
  • the loaded rates can be paid in satisfaction of only some (not all) payments under the award. For example, the loaded rates cannot be paid in satisfaction of any allowances or public holiday penalty rates; and
  • very strict rostering arrangements apply to payments of the loaded rates. Overtime and penalty rates will still be payable for work outside those rostering arrangements. 

The proposed changes come in the context of the impact of COVID-19, travel restrictions and region-wide lockdowns as major contributors to financial stress and hardship for those in the Australian hospitality industry.

The changes have been suggested and supported by the AHA, who initially engaged Fair Work in regard to payroll complexity and loaded rates in January of 2021. The AHA supports the idea on the grounds that the proposed variation will provide greater certainty for employees in relation to weekly take-home pay, as well as protect the needs of the low paid by ensuring employees are not worse off, and promote more flexible work practices.

Fair Work has since stated in their July 27 release that its “provisional view” is “that the application has merit”.

The full statement from Fair Work can be read here

More to come, this article will be updated when new information is released.