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Published: 23 February 2017
Author: Ryan Carlisle Thomas

Penalty rates decision sets an alarming precedent

Today the Full Bench of the Fair Work Commission delivered its much awaited decision about penalty rates in the hospitality and retail sector. Sadly the Commissions decided to reduce Sunday penalty rates for workers covered by the following awards:

  • Hospitality Award Industry (General) Award 2010;
  • Fast Food Industry Award 2010;
  • General Retail Industry Award 2010;
  • Pharmacy Industry Award 2010.

These awards provide the minimum safety net entitlements for some of Australia’s lowest paid workers. The Commission acknowledged that many of these employees “earn just enough to cover weekly expenses” and are people who are likely to be dependent on earnings from these industries as their principal or only source of income.

As a result of the decision, workers covered by the awards will earn between 25% and 50% less on a Sunday. Low paid employees (level 1) covered by the Fast Food industry will be paid no more on a Sunday than on a Saturday. 

The Full Bench also decided to reduce the public holiday penalty rates in the Hospitality and Retail Awards by 25%. 

Sunday penalty rate reduction

The Commission acknowledged that weekend and public holiday penalty rates are intended to compensate employees for working outside normal hours. However the Commission found that the "disutility" of working Sundays, as compared with Saturdays, was "much less than in times past". The Commission accepted that some difference between working Saturday and Sunday still remained.

The decision will no doubt be heralded as a victory by employers and employer interests groups. The Commission accepted the highly contested finding of the Productivity Commission that a reduction of penalty rates would have positive effects on business and increase employment. The decision is not welcomed by the Unions who represent that effected workers and the Union movement more generally.

“No case for common penalty rates across all industries”

The Commission was at pains to point out that the decision had no consequences on Sunday penalty rates in other industries and that it was based on characteristics specific to the retail and hospitality sectors. These characteristics include consumer expectation of access to services, and the need for flexible working arrangements. 

Alarming precedent

The decision sets a concerning precedent for the erosion of the minimum safety net for workers and especially those who are required to work unsociable hours. This includes workers who provide essential services.

The Commission’s attempt to confine its decision to the retail and hospitality sectors is likely to be challenged by employers. New applications will be made to extend the erosion of pay to other areas.

Despite the acknowledged adverse impact on low paid workers' living such that phasing in is required, the Commission nonetheless accepted that consumer expectations, the need for "flexibility" and highly controversial claims for increased employment outweighed the needs of employees. We can expect the same arguments to be advanced in other industries on the basis on such voodoo economics and references to "community expectations" that exclude the expectations of the workers concerned.

A Summary of the Commission's decision on penalty rates is available here.

The changes to public holiday rates will take effect from 1 July 2017. Changes to Sunday penalties are likely to be phased in over a period of at least two years commencing on 1 July of each year. This "transitional provisions" are intended to give retail and hospitality workers notice of the changes and mitigate hardship.

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