Australia: The Fair Work Commission decision to phase in changes to penalty rates – Key dates

Last Updated: 13 June 2017
Article by Mike Baldwin

In February 2017 the Fair Work Commission (FWC) made a decision to reduce existing penalty rates in the Hospitality, Retail, Fast Food and Pharmacy Awards, as the existing rates did not achieve the modern award objective of providing a fair and relevant minimum safety net.

In this decision the FWC has determined to phase in the reductions to Sunday penalty rates over four years.

The first reduction will occur on 1 July 2017, with further decreases in the relevant penalty rates on 1 July each year until 2020.

Reductions to Public Holiday rates will apply in full from 1 July 2017.

Penalty rate cuts to be phased in

The transitional arrangements vary depending on the Modern Award, but will generally see a reduction of 5% effective 1 July 2017, with further reductions of 10% in following years.

The phased reductions of Sunday penalty rates for each Modern Award are:

Fast Food Award 2010
Full-time and part-time employees – Level 1 only
1 July 2019 160 per cent -> 150 per cent
1 July 2017 150 per cent -> 145 per cent
1 July 2018 145 per cent -> 135 per cent
1 July 2019 135 per cent -> 125 per cent
Casual employees (inclusive of casual loading) – Level 1 only
1 July 2017 175 per cent -> 170 per cent
1 July 2018 170 per cent -> 160 per cent
Hospitality Award 2010
Full-time and part-time employees
1 July 2017 175 per cent -> 170 per cent
1 July 2018 170 per cent -> 160 per cent
1 July 2019 160 per cent -> 150 per cent
Retail Award 2010
Full-time and part-time employees
1 July 2017 200 per cent -> 195 per cent
1 July 2018 195 per cent -> 180 per cent
1 July 2019 180 per cent -> 165 per cent
1 July 2020 165 per cent -> 150 per cent
Casual employees (inclusive of casual loading)
1 July 2017 200 per cent -> 195 per cent
1 July 2018 195 per cent -> 185 per cent
1 July 2019 185 per cent -> 175 per cent
Pharmacy Award 2010
Full-time and part-time employees
1 July 2017 200 per cent -> 195 per cent
1 July 2018 195 per cent -> 180 per cent
1 July 2019 180 per cent -> 165 per cent
1 July 2020 165 per cent -> 150 per cent
Casual employees (inclusive of casual loading)
1 July 2017 225 per cent -> 220 per cent
1 July 2018 220 per cent -> 205 per cent
1 July 2019 205 per cent -> 190 per cent
1 July 2020 190 per cent -> 175 per cent

Interestingly, the Restaurant Award has remained untouched. However, the FWC commenced a watching brief and it would surprise, if changes to pay rates were not introduced in the next 18 months to two years.

Public Holidays

The reductions to Public Holiday penalty rates will not be phased in, but rather will apply in full from 1 July 2017:

  • For full-time and part-time employees covered by the Hospitality Award, Restaurant Award, Retail Award, Fast Food Award and Pharmacy Award—a reduction from 250% to 225%.
  • For casual employees covered by the Hospitality Award, Retail Award, Fast Food Award and Pharmacy Award—a reduction from 275% to 250% (Restaurant Award rates will not change for casuals as they are already 250%).

The rationale

Clearly the current political debate raging around the fairness or otherwise of the original decision to reduce Sunday penalty rates has had an impact on the FWC. The notion that these changes will harshly impact on affected employees has resulted in the reductions being phased in over a longer period. The transitional rules for Sunday penalty rates are designed to mitigate hardship that employees may experience with the reduction to their take home pay, by gradually phasing in the changes.

In contrast, the Full Bench found that Public Holiday rate reductions should take effect immediately, because they are less likely to adversely affect employees given the timing of public holidays.

Finally, there are likely to be further changes to penalty rates as the Fair Work Commission continues with its four-yearly review of modern awards. In particular, the Commission is continuing to assess the position with respect to penalty rates for employees working in the restaurant, hair and beauty industries.

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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