Australia: The penalty rate review by the Fair Work Commission: A contentious decision briefly explained

Last Updated: 3 July 2017
Article by Ruth Collins

On 23 February 2017 the Full Bench of the Fair Work Commission (FWC) handed down a significant decision following a review of weekend and public holiday penalty rates across the following six 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)
  • Restaurant Industry Award 2010 (Restaurant Award)


The key changes to penalty rates can be summarised as follows:

Sunday Penalty Rates
Award Full-Time and Part-Time Casual
Hospitality Award 175% reduced to 150%. No change.
Fast Food Award
(Level 1 employees only)
150% reduced to 125%. 175% reduced to 150%.
Retail Award 200% reduced to 150%. 200% reduced to 175%.
Pharmacy Award 200% reduced to 150%. 200% reduced to 175%.
Restaurant Award No change. No change.
Clubs Award No change. No change.
Public Holiday Penalty Rates
Award Full-Time and Part-Time Casual
Hospitality Award 250% reduced to 225%. 275% reduced to 250%.
Restaurant Award 250% reduced to 225%. No change.
Clubs Award No change. No change.
Retail Award 250% reduced to 225%. 275/250% reduced to 250%.
Fast Food Award
(Level 1 employees only)
250% reduced to 225%. 275% reduced to 250%.
Pharmacy Award 250% reduced to 225%. 275% reduced to 250%.


The FWC considered whether each modern award was achieving its objective. Specifically, the need to provide additional remuneration for employees working in particular circumstances, including "employees working weekends or public holidays".

The FWC stated that an assessment of the need to provide additional remuneration to specific employees requires consideration of a range of matters, including1:

  1. i) the impact of working such times or on such days on the employees concerned;
  2. ii) the terms of the relevant modern award and whether it already compensates employees for working at such times or on such days; and
  3. iii) the extent to which working at such times or on such days is a feature of the industry regulated by the modern award.

These factors were considered against the evidence submitted by both the union and employer representatives. The FWC distinguished the hospitality and retail industries from other industries, identifying these industries as ones where "consumer expectations of access to services has expanded over time"2 and that they were "important courses of entry level jobs for, among others, relatively unskilled casual employees and young people (particularly students) needing flexible working arrangements".3

Following detailed consideration of the separate evidence presented in relation to each of the 6 modern awards, the FWC implemented varied reductions in Sunday and public holiday penalty rates across each award, as outlined in the tables above.

An example of the FWC's reasoning behind the different implementation of reductions across each award can be seen in its reasoning to vary Sunday penalty rates in the Fast Food Award. Here, the FWC undertook consideration of the nature of the fast food industry and its employees to conclude that:

  1. a) the standard hours of operation in the fast food industry "include Saturdays and Sundays, reflecting customer demand for the purchase and consumption of fast food"; 4and
  2. b) the "typical"' fast food industry employee is likely to be: a student; aged between 14 and 24 years; employed on a part-time basis; and working between 1 and 24 hours a week.5

On this basis, the FWC reduced the Sunday penalty rates of Level 1 employees under the Fast Food Award to the same level as Saturday penalty rates. Notably, the penalty rates of Level 2 and 3 employees under the same award were left untouched, as these employees were considered "career employees".

By way of an alternate example, the FWC did not grant any of the proposed variations to penalty rates put forward for the Clubs Award or the Sunday penalty rate reductions for the Restaurant Award, identifying that there was a lack of merit in the cases put forward by the relevant employer groups to justify the reductions sought.6 However, contentiously, the FWC allowed the relevant employer associations to make further submissions related to these awards, to be heard at a future date.


On 5 June 2017, FWC handed down a subsequent decision that addressed the transitional arrangements for the implementation of the changes to penalty rates.

A number of parties (including the Labor Party) argued that the original decision should be "set aside" or "not implemented" based on the effect it would have on employees. The FWC rejected this proposition and concluded that while the changes would adversely impact employees that matter had already been considered and balanced.

In deciding the appropriate transitional arrangements, the FWC differentiated between public holiday penalty rates and Sunday penalty rates

Changes to public holiday penalty rates will be implemented on 1 July 2017 without any transitional arrangements.

Changes to Sunday penalty rates will be implemented through phased reductions which will occur on 1 July each year. The number of instalments and percentage of the reduction is different for each Award and varies between 3 and 4 years of annual adjustments.


It is apparent that penalty rates will continue to remain a contentious political issue. The Labor Party was quick to criticise the decision, and introduced a Private Member's Bill in the House of Representatives seeking to halt the penalty rate reductions by amending the Fair Work Act to prevent variations to a modern award in a way that could reduce the take-home pay of any employee covered by an award. The Bill was quickly defeated by the Coalition.

However, shortly following, a similar Bill was introduced in the Senate, jointly sponsored by Labor, the Greens and Tasmanian Senator Jacqui Lambie, which was passed, receiving support from the Nick Xenophon Team, Pauline Hanson's One Nation and Derryn Hinch's Justice Party. The Bill was introduced in the House of Representatives however it has not progressed because of the Coalition Government's majority.

Prime Minister Turnball has indicated the Government's support for the phased implementation of the planned cuts over a period of years.


Consumers and employers alike optimistically wait to see what changes a reduction in penalty rates will bring. Only time will tell whether the changes will have the desired effect of an increase in opening hours, services, and employment. However, in the meantime the question of what effect this will have on some of the most poorly paid workers in Australia has seen intense political focus and uncertainty in relation to the utility of the changes.


1 4 yearly review of modern awards – Penalty Rates [2017] FWCFB at [190]
2 4 yearly review of modern awards – Penalty Rates [2017] FWCFB at [77]
3 4 yearly review of modern awards – Penalty Rates [2017] FWCFB at [77]
4 4 yearly review of modern awards – Penalty Rates [2017] FWCFB at [1266] – [1267]
54 yearly review of modern awards – Penalty Rates [2017] FWCFB at [1275]
6 4 yearly review of modern awards – Penalty Rates [2017] FWCFB 1001 at [2044]–[2050].

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Ruth Collins
Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions