With a recent change to the Hospitality Industry (General) Award 2020 (Hospitality Award) which came into effect from the first full pay period on or after 3 September 2021, employers in the hospitality industry can now use loaded rates to simplify payment for certain employees. This decision follows on from the Federal Government’s request last year for greater workplace flexibility for industries heavily impacted by the ongoing COVID-19 pandemic, including hospitality.

This change allows employers to roll overtime, penalty rates and split shift penalties (excluding public holiday penalty rates) into a single loaded rate payable for all hours worked. An employee on a loaded rate can work beyond their usual rostered hours, on weekends or late nights and be paid the same rate for all hours, which will promote flexibility and simplify payroll procedures. However, there are conditions that mean this will not be applicable for all employees.

Only full-time employees engaged under the Hospitality Award at Level 3 or above can be remunerated by a loaded rate under this change. Employees on junior or supported wage rates will not be eligible, and neither will employees on certain four-week ADO roster arrangements or those remunerated under the ‘catering in remote locations’ clause of the Hospitality Award.

Additionally, the Hospitality Award specifies different loaded rates to be paid depending on the maximum hours the employee will work in a week, and which days of the week the employee will work.

Background

The application to amend the Hospitality Award to include loaded rates was proposed by the Australian Hotels Association for the purpose of increasing flexibility in the industry, but was opposed by the ACTU and UWU who argued that the Fair Work Commission (FWC) did not have the power to make the variations and that if it was made, it could result in employees being worse off (including greater pressure on employees to work additional hours and reduce work for casual and part-time employees).

However, in its decision the Full Bench of the FWC rejected the argument that it did not have the power to make the variations sought and proceeded to confirm its provisional view that the introduction of loaded rates was appropriate. In considering the modern awards objective, the FWC found that “the asserted negative effects on the workforce participation of some employees is entirely speculative”, promotes workplace flexibility, and does not disadvantage employees because any staff who are paid the loaded rate will be paid the same or more than if they were not paid the loaded rates.

The FWC did, however, make two amendments to its provisional draft, being a consultation requirement and confirmation that the loaded rate arrangement does not satisfy the requirement to pay overtime for work on an employee’s rostered day off.

Implementing Loaded Rates in Your Workplace

To implement a loaded rate under the amended Hospitality Award, an employer covered by that award will need to complete the following steps in respect of adult full-time employees at Level 3 or above only:

  1. Check whether your roster cycles operate weekly, commencing from a Monday. If not, you may have to adjust the cycle in accordance with the Hospitality Award.
  2. Work out the maximum number of hours that the employee is expected to work each week and on which days they will work, to determine the correct loaded rate percentage that needs to be paid and whether any additional payments are likely to be required to be made.
  3. Consult with the employee (and their representative, if any) at least 7 days before implementing the loaded rate.
  4. Complete the Loaded Rate Arrangement form in Schedule L of the Hospitality Award and provide the employee with a copy. The arrangement will commence from the first full pay period after that form is provided to the employee.
  5. Monitor the employee’s hours of work and ensure they are appropriately remunerated for any work which is not capable of being covered by the loaded rate arrangement. The loaded pay rate does not cover hours beyond the maximum hours in the arrangement, work on a rostered day off, public holiday penalty rates, or allowances.

Once the agreement is in place, it can be varied by giving the employee two weeks’ written notice and with the provision of a new Loaded Rate Arrangement form, if the correct consultation procedure about changing hours is followed. The loaded rate arrangement can be terminated immediately by agreement between the employer and the employee, or by the employer giving two weeks’ written notice.

Implications for employers

Although the loaded rate method will simplify the administration and payment of wages, there is still an obligation to keep various employee records in accordance with legislative provisions. Additionally, employer must record all hours worked by these employees, including their actual start and finish times, to ensure that if they work outside of the loaded rate arrangement, they are appropriately compensated by the remaining terms of the Hospitality Award.

Some employers may welcome this additional flexibility, but it may not suit every business. We recommend that hospitality operators consider their individual circumstances before deciding whether to rely on these new provisions.

If you are looking to implement loaded rates for your employees, contact the team at HR Assured.

Clients of HR Assured can contact the 24/7 Telephone Advisory Service any time.

If your business is not an HR Assured client, we’d like to offer you a no-obligation, complimentary 30-minute consultation call. Employers can speak to our friendly workplace relations consultants and seek advice about this new legislation or an existing workplace issue. You can arrange your complimentary consultation here.