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Penalty shootout: Fair Work Commission decides to change penalty rates

Yesterday the Fair Work Commission handed down a decision to reduce Sunday, public holiday and late night/early morning penalty rates in various modern awards. Some of these changes will be effective from late March this year.

The decision was made as part of the Commission’s compulsory 4 yearly review of modern awards. The review is intended to ensure that modern awards continue to meet the ‘modern awards objective’: to provide a fair and relevant minimum safety net of employment terms and conditions (section 134 of the Fair Work Act 2009). 

The Full Bench considered the historical purpose of penalty rates, being to compensate employees for working outside ‘normal hours’ and to deter employers from scheduling work outside ‘normal hours’.  It found that while compensating employees for working outside normal hours was relevant in today’s world, deterring employers from rostering staff during those hours (and therefore operating) was no longer a relevant consideration.

When analysing the penalty rates in each relevant award, the Commission considered the impact of working on the days and at the times that the penalty rates applied, the current entitlements provided in the award to compensate for working at such times, and the extent to which working at such times was a feature in the relevant industry.  It also took into consideration the penalty rates in awards applying to similar industries.

The early/late night work loadings in the Restaurant and Fast Food Awards will be amended from late March 2017 to simplify the operation of those provisions, with a minimum impact on employees overall. 

Sunday penalty rates will be reduced from 1 July 2017 in the Hospitality Award, Fast Food Award, Retail Award, and Pharmacy Award. The Commission concluded that whilst working on the weekend in these industries can still be a burden, there was less difference now between working on a Saturday and working on a Sunday than there had been in the past.

Public holiday rates will be reduced from 1 July 2017 in the Hospitality Award, Restaurant Award, Clubs Award, Retail Award, Fast Food Award, and the Pharmacy Award. The Commission concluded that working on a public holiday is still less socially convenient for employees than working on a weekend, but this burden is now reduced by an employee’s statutory right to reasonably refuse work on public holidays. In addition, the Commission took into account that working on a public holiday is more common in the hospitality and retail sectors, and that reducing penalty rates may increase employment on those days.

The Commission was not convinced that it was necessary to change Sunday penalty rates in the Clubs Award and the Restaurant Award, or loading rates in the Pharmacy Award. 

The Sunday rate changes will be phased in over time as part of a future decision after the Commission takes further submissions.  

If your business is covered by one of the modern awards affected by this decision it will be important to ensure that when they come into effect, your current workplace agreements are up to date and you engage in open communication with your employees who may be affected by this change. Please contact the Workplace Relations, Employment and Safety team if you require any assistance in relation to these matters.

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