In case you missed it, a Fair Work Commission full bench handed down a landmark decision last month, as part of the 4-yearly review of modern awards, to reduce penalty rates and public holiday rates across a number of awards. In recent years, the issue of penalty rates has become a highly-contested area, as Australia has evolved into a ‘24/7’ service economy, where some argue the existing system of penalties no longer reflects the reality of working arrangements in many industries. In reaching its decision, the FWC observed that penalty rates traditionally served a compensatory and deterrence purpose for working outside the ‘normal’ hours of 9-5pm Monday—Friday. However, it said that the extent of disutility for working weekends and public holidays is now much less than in times past. Does it affect my business? This decision has a direct effect on employers and employees who are covered by the following Awards:
• Hospitality Industry (General) Award 2010
• Registered and Licensed Clubs Award 2010
• Restaurant Industry Award 2010
• Fast Food Industry Award 2010
• General Retail Industry Award 2010
• Pharmacy Industry Award 2010
If your business is not covered by any of these Awards, you should still be aware of the changes made as they may have a flow on effect to other Awards in the future.
What changes have been made?
In summary, the following changes will be made to the affected Awards listed above:
• No changes will be made to Saturday penalty rates.
• Sunday and public holidays rates will be reduced across most affected Awards but remain higher than Saturday penalty rates.
• There will be minor changes to late night and early morning penalties for those covered by the Restaurant Award and the Fast Food Award.
These changes are yet to be finalised. The FWC decided that there was insufficient evidence to support a change to Sunday or public holiday penalty rates for the Clubs Award, or Sunday penalty rates for the Restaurant Award. Interested parties have been given another chance to provide evidence to the contrary.
When will these changes come into effect? Given that the FWC have not finalised changes to the affected Awards, it is unclear when the proposed changes will come into effect and what transitional arrangements will apply. At this stage, the FWC is in the process of reviewing submissions on the phasing in of penalty rates across the affected Awards. This will most likely result in a substantial delay to applying the changes and any transitional arrangement.
The only thing known for certain is that changes to public holiday penalty rates will take effect from 1 July 2017. What implications does this decision have for employers? For those employers who are covered by these Awards but have an enterprise agreement (EA) in place, this decision will have no immediate impact as they must continue to comply with their pay obligations under their EA. When negotiating a new EA, you must keep in mind that the reduced penalty rates, once operational, will be used as the basis of comparison with the applicable award for the purposes of the Better Off Overall Test.
Employers who pay in accordance with any of these Awards must keep a close eye on the dates that these changes come into effect and any other changes the FWC makes as a result of further proceedings. In particular, you should review employment contracts before implementing any penalty rate reductions in accordance with this decision, as they may prohibit any unilateral variation of existing conditions. If you are unsure how these changes affect your current or future employees, or how to implement them in your workplace, please give First IR a call on (02) 9231 2088.
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