Posted on 22nd September 2017 by Christabelle Harris

There has been a bit of controversy surrounding the Fair Work Commission’s (FWC) decision to reduce penalty rates with their decision coming down on the 23rd February this year.  The changes take effect from the first full pay period from 1 July 2017.

The penalty rates proceedings commenced in early 2015 and considered over 450 submissions and statements. The proceedings were part of the 4-yearly review of the Modern Awards as required by the Fair Work Act 2009 to determine if the awards are meeting their objectives.

The decision affects the following Modern Awards ONLY:

  • General Retail Industry Award 2010 [MA000004]
  • Fast Food Industry Award 2010 [MA000003]
  • Restaurant Industry Award 2010 [MA000119]
  • Pharmacy Industry Award 2010 [MA000012]
  • Hospitality Industry (General) Award 2010 [MA000009]

The Commission reviewed penalty rates applying to weekends, public holidays, and shiftwork. The Penalty Rates decision determined the existing Sunday penalty rates did not achieve the Modern Awards objective as they do not provide a fair and relevant minimum safety net of terms and conditions.  “Fairness” was considered in the context of employees and employers, and “relevant” in conveying suitability to current circumstances.

There were a number of arguments put forward concerned that the decision didn’t appropriately consider the impact the penalty rate cuts would have on employees’ living standards. The Commission has implemented transitional arrangements to mitigate the hardship. The Sunday penalty rates will be dropping by 25% or 50% depending on the specific rates in the updated Modern Awards with the changes phased in over 3 or 4 years.

For example the Sunday penalty rate for the full time and part time employees covered by the Hospitality Award will transition from 175% (rate at 30 June 2017) down to 150% from 1 July 2019 as follows:

  • 1 July 2017                175% →170%
  • 1 July 2018                170% →160%
  • 1 July 2019                160% →150%

The Commission found the reduction in Sunday penalty rates are likely to have positive effects, such as longer trading hours and increased services available to customers.

The Full Bench in the Penalty Rates decision also decided to reduce the public holiday rates by 25%, however there will be no transition and the rates dropped immediately from 1 July 2017.

Many employee and industry groups were hoping employees would be able to apply for a Take-Home Pay Order, that is, employees were able to make submissions to the FWC after the introduction of Modern Awards to preserve their current pay entitlements where the Modern Awards would make leave them worse off.  However the FWC has decided not to allow Take Home Pay Orders for the penalty rate cuts as this would negate the intention of the penalty rate cuts.

If you would like more information on how the penalty rate changes may affect you, please refer to the materials and pay and conditions tools available on or contact the Fair Work Ombudsman on 13 13 94.

Enter your details here to subscribe to our newsletter:

sign up