Penalty Rates Decision – A Significant and Historical Departure
The Fair Work Commission has announced reductions in Sunday and public holiday penalty rates in the retail, fast food and hospitality industries, meaning that many thousands of Australian businesses in these industry sectors will be able to potentially reduce their labour costs at crucial times of trading. The FWC decided not to reduce penalties for ordinary work performed on Saturday.
Justice Iain Ross said the FWC decided to cut Sunday and public holiday rates because they were not a “fair and relevant” safety net and agreed with employers that reducing rates might increase employment. Justice Ross said evidence from business owners demonstrated that the present level of Sunday rates had led them to restrict trading hours, reduce staff levels and restrict the services provided. This was consistent with the Productivity Commissions findings from 12 months ago. The FWC chose to cut Sunday rates but not as low as Saturday levels because “Sunday work has a higher level of disutility” for employees. Not unexpectedly Labour and the Unions have protested the decision suggesting that nearly half a million people, would lose up to $6,000 a year.
However, for business this is a decision that goes far beyond just the retail and hospitality industries. It does represent a significant shift and a willingness by the Fair Work Commission to surrender many of the bastions and historical norms of our industrial relations system that have been in place for decades and centuries, that in terms of a modern Australian business and a more modern Australian society may no longer be relevant.
In its decision, the FWC said the “existing Sunday penalty rates in the Hospitality, Fast Food, Retail and Pharmacy Award do not achieve the modern awards objective, as they do not provide a fair and relevant minimum safety net.” Whilst these words may seem benign, in the context of the past, these are significant words. Key elements of the decision include:
- Retail Industry – reduction in Sunday penalty rates from 200% to 150% (for permanent staff) and 175% (for casuals)
- Hospitality Industry - reduction in Sunday penalty rates from 175% to 150% (for permanent staff only);
- Fast Food Industry - reduction Sunday penalty rates from 150% to 125% (for permanent staff) and 175% to 150% (for casual staff); and
- Hospitality, Retail, Fast Food and Pharmacy industries - public holiday penalty rates reduced from 250% to 225% across all of these industries.
It should be noted that large parts of the variations sought in the Restaurant Award, and all of the claims sought in the Club industry were rejected by the Fair Work Commission.
The reductions take effect from July, however these are subject to possible transitional arrangements, and clients will be informed of the operative date and any transitional arrangements that will be in place. We suspect that those details will be finalised in April or May.