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Changes to Penalty Rates: What You Need to Know

When a journalist last year asked Bill Shorten whether he would accept the decision of the Fair Work Commission if it found in favour of reducing penalty rates, he incredulously retorted: "What if alien life makes contact with earth?"

Well, this week, not only did NASA find a solar system with planets they say could support life, but the Fair Work Commission also handed down its decision to cut penalty rates.

After almost two years of considering the evidence from more than 140 witnesses and 6000 written submissions, the Fair Work Commission yesterday handed down its (551 page long) decision on the penalty rates case as part of the 4 yearly review of Modern Awards. The FWC has decided that Sunday and public holiday penalty rates will be reduced for employees in specific industries. Saturday penalty rates will be unaffected.

The penalty rate changes will apply to employees covered by the following six Modern Awards:

  • ● Fast Food Industry Award 2010; 
  • ● General Retail Industry Award 2010; 
  • ● Hospitality Industry (General) Award 2010; 
  • ● Pharmacy Industry Award 2010;
  • ● Registered and Licensed Clubs Award 2010; and
  • ● Restaurant Industry Award 2010

We have summarised the changes for you in the table below:

Changes to Penalty Rates - Table

It is important to note that changes to the Fast Food Industry Award only apply to Level 1 employees. Employers unsure of whether their employees are covered by the Restaurant Industry Award or the Fast Food Industry Award may wish to check coverage with us, as well as the classifications applicable to your employees to ensure any penalty rate changes are compliant.

Importantly, don't reduce penalty rates or budget for new staff members just yet.

Changes to public holiday penalty rates will take effect from 1 July 2017, but we don't yet know when the new Sunday penalty rates will apply. We expect these will be 'phased-in' over a number of years. We'll keep you updated with any further announcements made by the FWC on this matter.

The reality remains that there is widespread non-compliance with Modern Awards in the hospitality and retail sectors. This was noted by the FWC in their decision. Specifically, we understand that many employers pay 'above-Award' wages at all times without regard to penalty rates at all, mistakenly believing that these higher rates will 'offset' penalty rate obligations. Accordingly, we recommend that you contact Workforce Guardian for specialist advice on applicable wage rates, penalty rates and for all your other employment law queries.

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