An annualised wage looks like a clean way to pay a salaried chef or restaurant manager — one fixed number, no penalty rate calculations, no Saturday loading maths. Under clause 20 of the Restaurant Industry Award MA000119, that simplicity comes with strict guardrails: a minimum 25% loading, hard outer limits of 18 ordinary penalty hours and 12 overtime hours per week, signed weekly time records, and a 12-month reconciliation with shortfalls payable within 14 days. Get any one of those wrong and the “simple” salary becomes a multi-year underpayment claim.
Under clause 20.1 of MA000119, an annualised wage is a written agreement between an employer and a full-time employee only (no casuals, no part-timers) for an annual salary of at least 25% above the minimum weekly rate (clause 18) × 52. The wage can absorb obligations under clauses 18, 21.3, 23, 24, and 25.3. Outer limits cap the “included” hours: an average of 18 ordinary penalty hours/week (excluding 10pm–midnight) and an average of 12 overtime hours/week. Hours beyond either limit must be paid separately. Reconciliation is required every 12 months with any shortfall paid within 14 days, and the employer must keep signed weekly time records.
In Simple TermsAn annualised wage under the Restaurant Award (also called an annualised salary) is a fixed yearly figure that must be at least 25% above the Award minimum and can only cover up to 18 penalty hours and 12 overtime hours per week on average — anything beyond that must be paid separately at Award rates.
Clause 20 of the Restaurant Industry Award MA000119 was substantially rewritten in 2022 (PR740708, ppc 1 September 2022). The old version — titled “Annualised salary arrangements” — let an employer roll an annual salary into the Award and rely on a year-end better-off comparison. The current version — “Annualised wage arrangements” (still commonly called annualised salary arrangements in practice) — keeps the salary structure but adds outer limits on the hours covered, mandatory weekly time-record signing, and a precise list of which Award provisions the wage can absorb.
If you’re unsure whether your venue is covered by MA000119 in the first place, see the Hospitality Award vs Restaurant Award comparison guide — cafes, restaurants, and bistros are usually MA000119, while pubs, hotels, and licensed venues are generally MA000009.
Under clause 20.1(a), an employer and a full-time employee may enter a written agreement to pay the employee an annualised wage of at least 25% above the minimum weekly wage in clause 18, multiplied by 52, in satisfaction of any or all of:
Anything outside that list — the meal allowance under clause 21.2, the tool allowance under clause 21.4, the 17.5% leave loading under clause 25.5, public holiday substitution under clause 24.4, breakages reimbursements, superannuation under clause 22 — is not absorbed by the annualised wage and must still be paid in addition.
Clause 20.1(a) explicitly says “an employer and a full-time employee.” Casuals and part-timers cannot be placed on an annualised wage under MA000119. A casual gets the 25% loading under clause 11.1; a part-timer gets minimum rates plus applicable penalties for hours within their guaranteed hours under clause 10.
The annualised wage must be at least 25% above the minimum weekly rate prescribed in clause 18 for the employee’s classification, multiplied by 52. The 25% is a floor, not a target — an employer can pay more, but cannot pay less under clause 20.
Worked example using rates from the Annual Wage Review 2024-25 determination (PR786658, effective from the first full pay period on or after 1 July 2025):
| Classification | Min Weekly Rate (Clause 18) | × 52 | + 25% Loading = Annual Min |
|---|---|---|---|
| Level 3 (Cook grade 2) | $1,014.70 | $52,764.40 | $65,955.50 |
| Level 4 (Cook grade 3 — standard) | $1,068.40 | $55,556.80 | $69,446.00 |
| Level 5 (Cook grade 4 / supervisor) | $1,135.50 | $59,046.00 | $73,807.50 |
| Level 6 (Cook grade 5) | $1,165.70 | $60,616.40 | $75,770.50 |
If the Award rates change at the next Annual Wage Review (typically effective from the first full pay period on or after 1 July each year), the 25% minimum recalculates against the new figures. The annualised wage must continue to satisfy the 25% floor for every pay period covered. See the full 2026 Restaurant Award rates guide.
This is the provision that catches venues out. Under clause 20.1(b), an employee on an annualised wage cannot be required to work more than:
| Outer Limit | Maximum Hours Covered by the Annualised Wage |
|---|---|
| Penalty hours (Clause 20.1(b)(i)) | An average of 18 ordinary hours per week that would attract a penalty rate under clause 24.2(a) — excluding any hours worked from 10pm to midnight |
| Overtime hours (Clause 20.1(b)(ii)) | An average of 12 overtime hours per week in excess of ordinary hours |
If the employee works any hours in excess of either outer limit in a roster cycle, those excess hours are not covered by the annualised wage and must be paid separately at the applicable Award rate (clause 20.1(c)).
The 10pm–midnight exclusion in limit (i) is significant. Late-evening hours during a Monday-to-Friday dinner service do not count toward the 18-hour penalty cap — but the late evening loading under clause 24.3 (a flat dollar amount per hour, updated annually by the Fair Work Commission) still applies separately if the employee is not on an annualised wage, and is absorbed by the annualised wage if they are.
Worked example: A Level 4 head chef on an annualised wage of $72,000 (above the $69,446 minimum) is rostered for a 4-week cycle with 80 ordinary hours that attract Saturday or Sunday penalty rates and 60 overtime hours.
Under clause 20.1(d), a written annualised wage agreement must specify:
Under clause 20.1(e), the employer must give the employee a copy of the agreement and keep the agreement as a time and wages record under regulation 3.34 of the Fair Work Regulations 2009. A verbal agreement, an email reference, or a clause hidden in an offer letter without the three required specifications above will not satisfy clause 20.
Under clause 20.2(a), the annualised wage must be no less than the amount the employee would have received under the Award for the work performed over the year. This is the “no disadvantage” test — identical to what existed under the old clause — but the current clause requires it to be tested annually, not just at termination.
Under clause 20.2(b), the employer must, every 12 months from the commencement of the arrangement (or earlier if the employment ends or the agreement terminates):
The reconciliation cannot be satisfied by a high-level estimate or a payroll system’s assumed averages. It requires the actual hours worked during the period, mapped against the Award provisions absorbed by the wage, and a real arithmetic comparison. This is why clause 20.2(c) requires signed time records.
Clause 20.2(c) is the provision most often overlooked, and the easiest to fail an audit on. The employer must keep a record for each employee on an annualised wage of:
The record must be signed by the employee, or acknowledged as correct in writing (including by electronic means), each pay period or roster cycle. A monthly retrospective sign-off does not satisfy clause 20.2(c) — the requirement is per pay period or roster cycle.
This requirement exists because the 12-month reconciliation under clause 20.2(b) cannot be performed without contemporaneous, employee-verified time records. It also creates audit transparency — the Fair Work Ombudsman can inspect these records at any time under section 712 of the Fair Work Act 2009 (Cth), and failing to keep them is a separate civil contravention under section 535 and regulation 3.42 of the Fair Work Regulations 2009.
Contemporaneous time records are the basis of every defence to an underpayment claim and every clean reconciliation. Without them, the employer cannot prove which Award provisions were satisfied by the wage in any given week.
Under clause 20.3, for the purposes of the National Employment Standards (NES), the base rate of pay of an employee on an annualised wage is the portion of the wage equivalent to the relevant minimum rate of pay in clause 18 for their classification. The base rate excludes any incentive-based payments, bonuses, loadings, monetary allowances, overtime, and penalties built into the annualised wage.
This matters for:
An employer who calculates termination pay or redundancy on the full annualised wage figure (including the absorbed penalties and overtime) will overpay; one who calculates leave loading or other entitlements on only the minimum rate when the absorbed obligations also apply will underpay. Clause 20.3 requires careful payroll configuration.
Under clause 20.1, an annualised wage arrangement may be terminated by either party giving written notice to the other — the notice period required is 12 months. The arrangement ceases to operate at the end of that 12-month notice period. It can also end earlier by mutual written agreement at any time.
Important distinction: the 12-month period applies to terminating the annualised wage arrangement itself — not to terminating the employment. Notice of termination of employment is governed by the National Employment Standards (section 117 of the Fair Work Act 2009 (Cth)) and clause 35 of MA000119, which generally require between 1 and 5 weeks’ notice depending on the employee’s length of service and age. The two notice periods operate independently.
The 12-month termination notice for the wage arrangement is one of the highest in any modern award and is itself a reason many venues prefer a standard hourly arrangement with separate penalties — the flexibility to revert is constrained.
If the employment itself ends during the operation of an annualised wage arrangement, clause 20.2(b) requires the employer to perform a final reconciliation immediately and pay any shortfall within 14 days — not waiting for the next 12-month anniversary.
Three different arrangements often get conflated. They are not interchangeable:
| Arrangement | Authority | Key Constraint |
|---|---|---|
| Annualised wage (Clause 20) | MA000119 Clause 20 | Full-time only, 25% loading minimum, outer limits 18/12 hrs, 12-month reconciliation, signed weekly time records, 12 months termination notice |
| Common-law set-off clause | Employment contract (not the Award) | Contractual provision that high salary “sets off” Award entitlements. Effectiveness depends on careful drafting and is more legally exposed than clause 20. Period-by-period reconciliation may still be required at law |
| Individual Flexibility Arrangement (IFA — Clause 7) | MA000119 Clause 7 + s144 Fair Work Act | Bespoke variation of specified Award terms. Must leave the employee “better off overall.” Either party can terminate with 13 weeks’ written notice (or 4 weeks if entered into before 4 December 2013) |
If a written arrangement does not satisfy clause 20 (for example, no signed weekly time records, or the wage is below the 25% loading), it does not become a clause 20 arrangement just because the parties called it one. It either fails entirely (Award entitlements payable in full, with the salary credited toward them under common-law set-off principles) or is treated as a contract-based set-off — with the underpayment risk that goes with it.
Annualised wage arrangements work well for:
They tend to fail in:
For many cafes and small restaurants, the simpler path is paying minimum rates plus the actual applicable penalties under clauses 18, 23, and 24, rather than absorbing those obligations into a salary that requires ongoing administration.
Annualised wage compliance moved from administrative housekeeping to material exposure on 1 January 2025, when the Closing Loopholes No. 2 reforms made intentional underpayment a federal criminal offence under section 327A of the Fair Work Act 2009 (Cth). The Fair Work Ombudsman remains the primary civil enforcement body, with new referral powers to the Commonwealth Director of Public Prosecutions for criminal wage theft cases.
An annualised wage arrangement that fails the clause 20 requirements — no signed weekly time records, no 12-month reconciliation, outer limits ignored — is a structurally defective arrangement that can produce systematic underpayments across years of employment. With civil penalties up to $495,000 per contravention (or 3x the underpayment, whichever is greater) for non-small business employers and criminal exposure now on the table, the cost of getting clause 20 wrong has changed materially. See the full breakdown in underpayment penalties for restaurants.
The full Restaurant Award guide — penalty rates, classifications, and compliance.
Adult, casual, junior, and apprentice rates by classification level under MA000119.
Split shift allowance and the rules around minimum engagement and spread of hours.
Civil penalties, criminal wage theft, and back-pay obligations for Award non-compliance.
You don’t need a payroll consultant on retainer to get clause 20 right — you need to know whether your current annualised wage agreement, your weekly time records, and your last reconciliation actually satisfy the Award. That check takes a few questions.
Fitz HR knows MA000119 clause 20 inside out. Check your annualised wage agreements, run reconciliations, and confirm outer-limit compliance in seconds.
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