Australia: Reductions in penalty rates results from review of food, pharma and club industry modern awards

Last Updated: 5 March 2017
Article by Rachael Sutton

On 23 February 2017 the Full Bench of the Fair Work Commission announced the reduction of a number of penalties in respect to work on Sundays and/or public holidays in modern awards, effective from 1 July, which will be phased in over at least two annual instalments.

The decision impacts the following modern awards:

  • Fast Food Industry Award 2010 (Fast Food Award)
  • General Retail Industry Award 2010 (Retail Award)
  • Hospitality Industry (General) Award 2010 (Hospitality Award)
  • Pharmacy Industry Award 2010 (Pharmacy Award)
  • Registered and Licensed Clubs Award 2010 (Clubs Award), and
  • Restaurant Industry Award 2010 (Restaurant Award).

Weekend penalty rates

The Full Bench reviewed the Saturday penalty rates in the Fast Food, Hospitality, Restaurant and Retail Awards and was satisfied that the existing Saturday penalty rates achieve the modern awards objective – they provide a fair and relevant minimum safety net. The review of Saturday penalty rates in the Clubs and Pharmacy Awards is to be the subject of further proceedings.

The Full Bench decided that the existing Sunday penalty rates in the Hospitality, Fast Food, Retail and Pharmacy Awards do not achieve the modern awards objective, as they do not provide a fair and relevant minimum safety net.

Except in the Fast Food Award, the Full Bench did not reduce the Sunday penalty rates to the same level as the Saturday penalty rates, noting that for many workers Sunday work has a higher level of disutility than Saturday work, though the extent of the disutility is much less than in times past. The Full Bench also noted that it is implicit in the claims advanced by most of the employer interests that they accepted the proposition that the disutility associated with Sunday work is higher than the disutility associated with Saturday work. If this was not the case then they would have proposed that the penalty rates for Sunday and Saturday work be the same, but they did not.

In relation to the Fast Food Award, for reasons associated with the preferences of the relevant employees and the limited impact of Sunday work upon those employees, the Full Bench decided to reduce the Sunday penalty rate, for level 1 employees from 150 per cent to 125 per cent (for full-time and part-time employees) and from 175 per cent to 150 per cent (for casual employees). The Full Bench did not propose to change the Sunday penalty rate for Level 2 and 3 employees. Level 2 and 3 employees are, generally speaking, regarded as 'career' employees with the major chains whereas casual and part-time crew members (level 1 employees) are usually regarded as 'non-career' employees.

In addition to the changes to Sunday penalty rates the Full Bench decided to vary some of the penalty provisions in relation to early/late night work in the Restaurant and Fast Food Awards.

As to the Pharmacy Award, the Full Bench was not persuaded to make the changes proposed to the loadings for work before 7.00 am and between 9.00 pm and midnight, on weekends and Monday to Friday.

Nor was the Full Bench satisfied that the variations proposed to weekend penalty rates in the Clubs Award and the Restaurant Award were necessary to ensure that these awards achieve the modern awards objective. In short, the employer organisations concerned did not establish a merit case sufficient to warrant the granting of their claims.

Public Holiday penalty rates

The Full Bench also decided to reduce the public holiday penalty rates in the Hospitality and Retail awards (except for the Clubs Award.).

Late night penalties

The Full Bench also decided to vary the late night penalties in the Fast Food Award and the Restaurant Award. At present, both awards provide an additional payment of 15 per cent of the standard hourly rate between midnight and 7.00 am.

They decided to vary the span of hours which attract the 15 per cent loading such that it applies for work performed between midnight and 6.00 am (not 7.00 am).

The Full Bench also decided to vary the Fast Food Award to provide that the 10 per cent evening work loading applies to work between 10.00 pm and midnight (as is currently the case in the Restaurant Award on the basis that it appeared that the existing 9.00 pm threshold for the payment of the evening work loading in the Fast Food Award was simply an error. At the time the modern award was made the Full Bench clearly intended to align the evening penalty rate provisions in the Fast Food and Restaurant Awards, but for whatever reason that intention was incompletely implemented.

When do the changes take effect?

In respect to the late night penalties it is the intention of the Bench that, following a period of consultation, these variations will commence operation on 27 March 2017.

The new reduced public holiday penalties will be effective from 1 July 2017.

The Commission is seeking comment from interested parties about appropriate transitional arrangements, to minimise the immediate impact of the changes to Sunday penalty rates. Once transitional provisions are agreed, the Commission has said it will insert "loaded rates" into these Awards—allowing an employer to pay a higher hourly rate for each hour worked—in lieu of other penalties, loadings and allowances.

The Commission is calling interested parties to make submissions on other changes sought, such as changes to the terminology used in some awards, and the review of other awards (most notably the Hair and Beauty Industry Award 2010).

The full bench said today's changes "provide no warrant for the variation of penalty rates in other modern awards".

Summary of the changes

The proposed changes, subject to further consultation are as follows:

Award Sunday penalty rates Public holiday rates
From 1 July 2017
Late Evening Rates
From 27 March 2017
Hospitality Award
Full-time and part-time employees
Casual employees

175% to 150%
No change

250% to 225%
275% to 250% (No change)
Restaurant Award
Full-time and part-time employees
Casual employees

No change
No change

250% to 225%
250% (No change)

Work between midnight and 6am 15% loading
Work between 10pm and midnight 10% loading (No change)
Fast Food Award
(Level 1 employees only)
Full-time and part-time employees
Casual employees

150% to 125%
175% to 150%

250% to 225%
275% to 350%

Work between midnight and 6am 15% loading
Work between 10pm and midnight 10% loading
Retail Award
Full-time and part-time employees
Casual employees

200% to 150% 200% to 175%

250% to 225%
275% or 250% to 250%
Pharmacy Award
(7 am–9 am only)
Full-time and part-time employees
Casual employees

200% to 150%
200% to 175%

250% to 225%
275% to 250%

For employers operating under these Awards, you can provide any submissions on the draft determinations and changes to the Award proposed by the Commission by 24 March 2017. Please contact us should you require any assistance in this regard.

We will be providing further updates in the future as to any transitional arrangements that may be determined by the Commission in the respect to the implementation of these changes.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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