#IRDisrupted: Simplicity = reduced complexity+ higher compliance for hospitality?

Loaded up rates are coming to a bar near you....

The Hospitality industry has done it tough in #COVIDTimes. After all the disruption and pivoting caused by lockdowns, post-outbreak crowd hesitancy and ever-changing restrictions, this sector has shown incredibly resiilience. But it's always operated close to the margins. The people who make our meals, pour our drinks and serve us work damn hard and aren't making squillions.

Hospitality has also been a focus of the Fair Work Ombudsman (FWO). Once again this sector features as an official compliance priority for 2020 -2021. Its workforce is proportionality more casual, younger and more vulnerable than most others.[1]

Hospitality has also has demonstrated persistently higher workplace relations non-compliance?– taking the title for number one sector of non-compliance, with three times as much non-compliance as the second highest industry, retail[2]. Wow.

But could it be possible to both address non-compliance and bring about more flexibility and simplicity by changing the rules of the system, while still ensuring employees are not financially worse off? Well, that was the ask of former Industrial Relations Minister, Christian Porter. And the Fair Work Commission (the Commission) has provisionally agreed making a move to include loaded rates in the Hospitality Industry General Award 2020.

‘Simplified pay arrangements in the form of ‘loaded rates’ and/or ‘exemption rates’ designed to reduce … the complexities and complexity risks that may lead to…mistakenly underpaying employees.’

Former Minister for Industrial Relations, Christian Porter, December 2020

The Hospitality Award may be changing… What’s the story?

You’ll recall from my article a fortnight ago about the Restaurant Industry Award trial changes, that the Minister prompted the Commission to investigate potential changes to four awards in ‘distressed’ industries: restaurants, clubs, retail and hospitality.

Each of these awards has benefited from a range of short-term COVID-inspired flexibilities, but the Commission’s award flexibility process is targeted at longer-term changes that could help the Australian economy recover through giving employers to ‘increase hiring during the recovery’.[3]

With this in mind, the Commission has issued its provisional view that the Australian Hotels’ Association’s application to include loaded rates into the Hospitality Award ‘had merit’.

What are loaded rates and how might they work in the Hospitality Award?

The proposition (made by the Australian Hotels’ Association) is to pay employees a percentage above the employee’s award hourly rate to absorb the need to pay overtime, penalty rates (except public holiday penalty rates) and the split shift allowance.

The loaded rate would only apply to full time employees at least Level 3 and above.

Without going too far into detail, you won’t be surprised to hear that designing loaded rates is complex. The Commission applied a BOOT to a number of different, commonly applied rosters.

So the various proposed loaded rates (Schedule K) vary depending on a number of factors. Things like, the day of the week being worked (weekday versus Saturday versus Sunday), the maximum weekly hours being worked (between 40 and 45) and the type of work being performed (with one set of rates for regular employees, one for casino employees). The loadings vary from just over 110% of the award hourly rate to just over 131%.

And of course, the loaded rate must result in each employee being paid at least the same as their award equivalent.

Will this help non-compliance in hospitality?

The short answer is….maybe, if implemented as intended.

We can see (including through Enforceable Undertakings made with the FWO in this sector) that many hospitality businesses try to simplify their payroll by using loaded rates, but underestimate the loading they need to pay because they haven’t properly factored in an employees’ days, hours and times of work.

This informal approach to creating flat or loaded rates is a key factor leading to underpayments. So the Commission setting out defined rates may help compliance because the work has been done for businesses.

Businesses could cut through the complexity of working out how much of an above-award "buffer" they need to pay to be compliant and benefit from more streamlined payroll.

What’s it all mean? We should know by 31 August.

My crystal ball’s been doing okay: this is another flavour of industrial relations flexibility coming out of the Commission. It's a trend. The Commission is rising to the Minister's challenge.

It’s clear the pandemic (and the former Minister’s request) has laid the ground for a constructive, open-minded approach to improving in our industrial relations system. The changes currently centre around industries that have been hardest hit by the pandemic. It would be great to see this approach extending to other industries seeking greater flexibility.

The decision about the Hospitality Award is due to be finalised on 31 August, after the United Workers Union has had their opportunity to submit their response and AHA, a reply. So as they say in the business, please come again then…

[1] Deloitte Access Economics, 2021

[2] Fair Work Ombudsman and Registered Organisations Commission Entity?Annual Report?2019-2020

[3] Minister Christian Porter’s letter to the FWC