Fair Work Commission – Penalty Rates Decision


  • four-yearly review of employment law modern awards has been conducted by the Full Bench of the Fair Work Commission
  • Fair Work Commission received over 5,900 submissions, and heard from 143 lay and expert witnesses over 39 days of hearing throughout 2015 and 2016
  • purpose of the review was to ensure that the modern awards continue to achieve their objective to provide ‘a fair and relevant minimum safety net’ and, of course, remain consistent with relevant workplace laws

Rationale for Penalty Rates

With respect to penalty rates:

  • the original rationale for penalty rates was to compensate employees for working outside ‘normal hours’ and to deter employers from scheduling work outside these hours
  • however, this rationale has shifted in more modern times and the Fair Work Commission has concluded that deterrence is no longer an objective of the modern awards in relation to weekend and holiday penalty rates
  • this means the primary objective of the modern awards is now compensation of employees
  • the hospitality and retail sectors made applications to vary (and ultimately reduce) the penalty rate provisions in relation to weekend and public holiday rates
  • employers have been pushing for these changes, with many asserting that they have had to reduce labour costs on Sundays and public holidays by restricting trading hours and limiting staff levels, leading to restrictions on the type and range of services provided

Affected Awards

The employment law decision of the Fair Work Commission relates only to businesses under the following 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)

Weekend Rates

In respect of the weekend rates aspect of the Fair Work Commission decision:

  • they reviewed Saturday rates for the Fast Food, Hospitality, Restaurant, and Retail Awards and were satisfied that the rates achieved the modern award’s objective and did provide a fair and minimum safety net
  • the Clubs and Pharmacy Awards are subject to further consideration in this regard
  • in relation to Sunday rates, the Fair Work Commission decided that the Fast Food, Hospitality, Retail and Pharmacy Awards did not provide a fair and relevant minimum safety net consistent with workplace law
  • except for the Fast Food Award, Sunday rates for these awards were not simply reduced to Saturday rates
  • it was recognised that there remains a higher level of disutility in working Sundays rather than Saturdays, although the extent of that disutility is much less than in times past and hence some reduction is warranted
  • for the Fast Food Award, Sunday rates were levelled with Saturday rates for casual, part-time and full-time employees but career employees went unscathed
  • the Fair Work Commission has expressed a provisional view that the reductions should take place with a series of annual adjustments on 1 July each year (starting 1 July 2017) in conjunction with any increases to modern award minimum wages from Annual Wage Review decisions
  • casual employees can rest at ease knowing that their applicable rates will (currently) remain an extra 25% over other employees

Early/Late Loading rates

In respect of the early/late loading rates aspect of the Fair Work Commission decision:

  • some provisions concerning early morning/late night work were changed in the Restaurant and Fast Food Awards, winding back the clock from 7am to 6am as most cafes open at that time in capital cities
  • work performed between midnight and 6am will attract a 15% additional payment
  • these employment law changes will be in effect as of late March 2017
  • the Fair Work Commission was not persuaded to make changes proposed to Pharmacy AwardClubs Award and Restaurant Award loadings

Public Holiday Rates

In respect of the public holiday rates aspect of the Fair Work Commission decision:

  • public holiday rates were also cut for the Hospitality and Retail Awards, although the Fair Work Commission debunked the two-tier approach proposed by hospitality employers, referring to the views expressed in the Modern Awards Review 2012 – Public Holidays decision that the number and standardisation of public holidays across Australia is primarily an issue for the Commonwealth, State and Territory legislatures
  • the rationale for public holiday rate reductions is that it is believed they will translate to increased employment and have positive effects on business
  • these employment law changes will take place on 1 July 2017

Tips for Employers

We recommend employers:

  • review the employment law changes to penalty rates on Sundays and public holidays applicable to the relevant award
  • be mindful of the various dates from which the employment law changes come into effect
  • review the employment contracts for employees to ascertain whether any clauses impact on the employer’s ability to vary the wages of an employee
  • review current rates of pay to make sure there is compliance with award provisions generally
  • notify employees of impending employment adjustments that may be made to their pay (taking into account any employment contract restrictions)
  • modify pro-forma employment contracts to be used for future new employees as needed to cater for the award changes

More Information

Please call the leading employment lawyers in Parramatta, the Matthews Folbigg Workplace Solutions team on 9635-7966 to speak with one of our employment lawyers.