Posted: 16 Aug. 2021

Fair Work disrupted

COVID-19 has heightened unpredictability for many industries, hospitality being one of the most hard hit. Lockdowns, density limitations, extra policing, and mask rules have all had an affect on individuals, businesses and ultimately, our economy. So much so that former Industrial Relations Minister Christian Porter urged the Fair Work Commission (FWC) late last year to grant "increased flexibility" to four Modern Awards, three of which apply to hospitality. And because of this, the Commission began reviewing whether loaded rates and exemption rates might be included in the four awards to “support Australia’s economic recovery”. 

The first of these decisions was made on 14 July, with a Full Bench approving three changes to the Restaurant Industry Award which will go live on 11 August for a 12 month trial. This experimental and constructive approach taken by the FWC even has Justice Ian Ross, President of the FWC calling the changes "somewhat novel".

So, what are these three ‘novel’ changes?

  1. Exemption rates
    Employers can agree to pay Level 5 and 6 chefs the equivalent of 170% of their award weekly rate to absorb several other entitlements (this is known as an ‘exemption rate’). The exemption rate simplifies how these employees are paid by removing the administration of individually paying penalties, overtime, allowances, and meal breaks. Any employee who agrees (in writing) to the exemption rate can only work up to 57 hours per week. After 57 hours, regular overtime rules apply.

    The changes eliminate the guesswork that is often involved in loaded hourly rates and are a clear nod to Porter's request for "administrative simplicity...in annualised salary arrangement(s).

  2. Simplifying classifications
    There will be a new, simpler classification structure that employers can choose to apply. Instead of 12 classifications, there will be six, across two streams: restaurant/café workers and chefs. The former generally covers front of house, cleaning, and some short orders. The latter covers chefs with an appropriate apprenticeship, or equivalent training. Unlike the other changes, using this classification structure doesn’t rely on the employees and employers agreeing.

  3. Substitute allowance
    Employers can replace six individual allowances with an approximate $1 increase, or slightly more for lower classifications. To do so, employers must obtain either written agreement from an individual employee or agreement from 75% of employees for a whole workplace.

    These temporary changes will be reviewed around May 2022. It's as if the FWC is conducting a 'pilot,' which it will evaluate after observing it in action. This is a common policymaking approach, but novel for a Tribunal and it’s encouraging to see the Commission adopting this formula: testing, gathering data, and refining its approach.

Did it take a global pandemic to inspire real workplace relations system simplification?

After the failure of centrally convened talks in 2020 and the Commonwealth's abandonment of reforms in the Omnibus Bill, it is positive to see the FWC driving evidence-led, carefully considered change.

The United Workers Union (UWU) has tentatively agreed but flagged with the Commission to be "cautious”. Their key objections were the ‘multi-skilling’ requirements of the classification simplification, and potential lack of mobility between some new classifications. The Commission echoed that, ‘a cautious approach is warranted’. The UWU will also form a monitoring committee with the Restaurant and Catering Industrial Association to track the changes.

What do these changes mean?

If there was ever a time to consider employee flexibility in our industrial relation system, it is now. The changes to the Restaurant Award, as well as the changes to the Retail Award that took effect in June part-time flexibility may herald further changes.

Some see the exemption rate clauses as going 'back to the future.' Exemption rates were common in pre-reform awards, but now rare (only six of 121 awards currently have them).

The obvious candidates for the next change are other hospitality awards in Porter’s request (Hospitality Industry General Award 2020, and Registered and Licensed Clubs Award 2010). Interestingly, the Australian Hotels Association has already applied to include a simplified loaded rate in the Clubs Award.

It remains to be seen if this approach will be adopted in other sectors where workers currently work under very flexible conditions, particularly work-from-home/hybrid arrangements: consider banking and finance, as well as clerical workers.

It appears we are now receiving what the system has been requesting for some time: (micro)reform to enable businesses and their employees to make arrangements that suit them while maintaining compliance.

Although anticipating the changing demands on the hospitality sector will continue to be a challenge for the industry and its employees, the industry may now be able to respond more readily as a result of the trial changes to the Award.

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Natalie James

Natalie James

Partner, Risk Advisory

Natalie James is a Partner in Deloitte’s Regulatory and Risk Insights practice. She leads Deloitte’s Workplace Integrity Team working with businesses to enhance their workplace integrity and ensure compliance with work laws. She brings deep expertise and insight to helping companies identify and resolve compliance risks, reduce complexity and build fit for purpose, compliant and sustainable workplace practices. Natalie was the Fair Work Ombudsman, leading Australia’s national workplace relations regulator, from July 2013 to July 2018. Prior to that she led the development of work laws as Chief Counsel for the Commonwealth Government. Natalie has a Bachelor of Arts Law and a Masters in Law (Commercial – Labour Law).