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Feb 24, 2017

Penalty rate reductions in the Hospitality and Retail Sectors

Contact: Mark Poretti

On 23 February 2017, the Full Bench of the Fair Work Commission handed down a decision reducing some of the penalty rates for Sunday and public holiday work in the hospitality and retail sectors.  The decision is part of the FWC’s four yearly review of modern awards which has already seen changes made to common award provisions such as annual leave and apprentice conditions.

The Full Bench reviewed penalty rates under six awards in the hospitality and retail industries, being sectors characterised by a high proportion of employees working on weekends due to consumer demand for services at those times.

The usual rationale for penalty rates is to provide compensation to employees for working outside what is considered to be normal work hours and to deter employers from scheduling work at that time. The Full Bench determined that deterrence is no longer a consideration in these industries.

Sunday penalty rates will be reduced under the Hospitality, Fast Food, Retail and Pharmacy Awards.  However, there is no change to Saturday penalty rates and the reduced rates are still above Saturday penalty rate levels. The exception is for Level 1 employees under the Fast Food Industry Award where penalty rates will be the same for Saturday and Sunday work.

The Full Bench refused to cut Sunday penalty rates in the restaurant and clubs industries.

The proposed changes will come into effect on 1 July 2017 and transitional measures (which are yet to be determined) will be put in place to minimize the immediate effect on employee take-home pay.

The FWC have published a useful summary of the decision which outlines the changes and the reasons for the reductions.

A brief summary of the penalty rate reductions are set out below:

 

Award Sunday Rates Public Holiday Rates
Full-time and Part-time Casual Full-time and Part-time Casual
Hospitality Industry (General) Award 175% reduced to 150% No change 250% reduced to 225% 275% reduced to 250%
Registered and Licensed Clubs Award No change No change No change No change
Restaurant Industry Award No change No change 250% reduced to 225% No change
Fast Food Industry Award 150% reduced to 125% (Level 1 employees only) 175% to 150%

(Level 1 employees only)

250% reduced to 225% 275% reduced to 250%
General Retail Industry Award 200% reduced to 150% 200% reduced to 175% 250% reduced to 225% 275% reduced to 250%
Pharmacy Industry Award 200% reduced to 150%

(for 7am to 9pm work only)

200% reduced to 175%

(for 7am to 9pm work only)

250% reduced to 225% 275% reduced to 250%

What does this mean for employers?

 Obviously, the economic benefits to employers affected by the penalty rate reductions are welcome, allowing businesses in those sectors to manage their labour resources more efficiently and effectively.

However, if your employees are covered by an Enterprise Agreement, the penalty rates under the Enterprise Agreement will continue to apply while the agreement is in place.  For businesses who provide their employees above award conditions and rates under a written contract of employment, the penalty rate reductions are unlikely to be passed on to employees, at least in the short term.

The Full Bench noted the impact of the reductions will depend on individual business circumstances.  As the changes are not happening immediately, businesses will have time to make decisions concerning the effect of the penalty rate changes on their current employee terms and conditions.

If you have any questions about award penalty rates or employment issues in general, or require any assistance in reviewing your employment documents to assess the effect of the proposed penalty rate reductions, please contact Mark Poretti at Trinity Law on 6163 5050.


The information in this document represents general information, and should not be relied for your specific circumstances. If you require legal advice and assistance on the matters contained or associated in this document you should contact Trinity Law. Subject to the limits of the law, Trinity Law disclaims any liability on persons relying on this document.

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