Fair Work Commission Puts Exemption Rates Back on the Menu

What has happened?

Today, the Fair Work Commission issued a provisional view that it will insert an exemption rate into the Restaurant Industry Award for an initial period of 12 months.

If the clause is inserted into the Award, it will mean an employer can agree to pay an employee an hourly rate of pay that is 170% of the award rate of pay and the employee will be exempt from overtime, penalty rates and allowances.

Why is this significant?

Award compliance has proven to be very difficult in recent years. Exemption rates were common prior to award modernisation but were largely phased out in that process. They make complying with awards much simpler.

Exemption rates generally do not attract the onerous time keeping obligations that come with annualised salary provisions. Whether this will be achieved in the clause being proposed in the Restaurant Award is not clear.

One hopes the Commission acts on its provisional view and inserts exemption rates into the Restaurant Award as well as other industry awards. If it does, it will be a big step in improving award compliance.

Why has the Commission made this decision?

The change has been triggered by the unique set of circumstances pertaining to the COVID-19 pandemic. There can be no doubt that the circumstances warrant improved flexibility and less regulatory burden in the restaurant industry, which has been particularly hard hit.

In our view, the benefits associated with exemption rates would be well placed in other industries. We think this helps to solve a problem that existed prior to COVID-19, which was the excessive regulatory burden associated with award compliance.

Tell me the detail

For those of you that appreciate the detail, you can read the Commission’s statement here. The clause being proposed is as follows:

R.3 Exemption Rate

R.3.1 An employer and a full time employee (paid at the Level 5 or Level 6 rate of pay) may enter into an agreement to pay the employee no less than 170% of their relevant Level rate of pay each week as set out in clause 18 Minimum Rates of this award (the Exemption Rate).

R.3.2 Where an agreement to pay the Exemption Rate has been made, the following clauses of this award shall not apply:

    1. clauses 16.5 and 16.6 (meal break);
    2. clause 21 (allowances);
    3. clause 23 (overtime rates) but not clause 23.2; and
    4. clause 24 (penalty rates).

R.3.3 Where an agreement has been made to pay an employee the Exemption Rate the employee must be paid the Exemption Rate for each hour worked up to and including 57 hours in a week and for hours worked in excess of 57 in a week the employee must be paid:

    1. 150% of the Exemption Rate for the first two hours in excess of 57 in the week; and then
    2. 200% of the Exemption Rate thereafter in the week.

R.3.4 The Exemption Rate shall be the rate for the purposes of calculating:

    1. personal leave; and
    2. annual leave.

R.3.5 Clause R3 does not apply to employees classified under the administrative and general stream (Schedule A.4).


Steven Amendola
+61 3 9958 9606
[email protected]
Peter Willink
+61 2 9169 8413
[email protected]