Penalty rate reductions: what you need to know

In a long awaited and much publicised decision issued last week, the Fair Work Commission reduced Sunday and Public Holiday penalty rates by between 25% and 50% in a number of modern awards in the retail and hospitality sectors.

A brief overview of these reductions is described below.

The reduction to Sunday penalty rates will be phased in by annual instalments, with the Commission to hear submissions on transitional arrangements over the coming months. The first transitional reduction in Sunday penalty rates is likely to occur from 1 July 2017.

The Full Bench did not reduce the Sunday penalty rates in the Restaurant Industry Award 2010 or the Registered and Licensed Clubs Award 2010, finding that a sufficient merits based case had not been established. However, the Full Bench has invited interested parties to provide further submissions.

There will be no phasing in of public holiday penalty rates, with the new rates to take full effect from 1 July 2017.

Variation to the early/late night loadings will take effect in late March 2017.

Employers who pay in accordance with the modern awards should consider how these changes may impact their operations and update their payroll systems accordingly.

Employers who employ staff under rates of pay governed by contracts, enterprise agreements or transitional instruments should obtain advice about the implications of these penalty rate reductions on arrangements with staff.

The decision has been met with significant opposition from the union movement and Labor and may be the subject of challenge in future.

Gadens’ Employment Advisory Team can assist employers with more detailed advice about the impact of these reductions on their business and staff.