Phasing in the changes to penalty rates

The Full Bench of the Fair Work Commission has released its decision on the transitional arrangements that are to apply to the phasing in of the new penalty rates arising from its decision on 23 February 2017.

Affected employers will recall that in that February decision, the Full Bench determined to impose the following changes to penalty rates in 4 specific awards:

SUNDAY PENALTY RATES

The reduction in Sunday penalty rates was summarised as follows:

Hospitality Industry (General) Award 2010

Full-time and part-time employees – reduction from 175% to 150%

Casual employees – no change

Fast Food Industry Award 2010 (changes only apply to Level 1 employees)

Full-time and part-time employees – reduction from 150% to 125%

Casual employees – reduction from 175% to 150%

General Retail Industry Award 2010

Full-time and part-time employees – reduction from 200% to 150%

Casual employees – reduction from 200% to 175%

Pharmacy Industry Award 2010 (for hours worked 7.00am to 9.00pm only)

Full-time and part-time employees – reduction from 200% to 150%

Casual employees – reduction from 200% to 175%

PUBLIC HOLIDAY PENALTY RATES

The Full Bench also ordered reductions in public holiday penalty rates in 5 awards, summarised as follows:

Hospitality Industry (General) Award 2010

Full-time and part-time employees -reduction from 250% to 225%

Casual employees – reduction from 275% to 250%

Fast Food Industry Award 2010

Full-time and part-time employees – reduction from 250% to 225%

Casual employees – reduction from 275% to 250%

General Retail Industry Award 2010

Full-time and part-time employees – reduction from 250% to 225%

Casual employees – reduction from 275% to 250%

Pharmacy Industry Award 2010

Full-time and part-time employees – reduction from 250% to 225%

Casual employees – reduction from 275% to 250%

Restaurant Industry Award 2010

Full-time and part-time employees – reduction from 250% to 225%

Casual employees – no change

IMPLEMENTATION OF THE PENALTY RATES

Public Holidays

The changes to the public holiday penalty rates in the cited awards will take full and immediate effect from 1 July 2017. 

The Full Bench determined to implement the changes immediately and in full (as opposed to imposing transitional arrangements) on the following basis:

“We have had regard to the submissions made in respect of this issue and to the considerations identified in Chapter 4. Further, we also note that:

• the number and timing of State and Territory declared public holiday vary depending on the particular State or Territory; most public holidays occur in the first 6 months of the year;
• the impact of the reductions in public holiday penalty rates will, in aggregate, be less than the reduction in Sunday penalty rates.

In all the circumstances we are of the view that the reductions in public holiday penalty rates should take effect on 1 July 2017, without any transitional arrangements. It is necessary to vary the Fast Food, Hospitality, Restaurant, Retail and Pharmacy Awards in the manner proposed to ensure that those awards achieve the modern awards objective.”

To be clear, this means that the changes to the public holiday penalty rates will apply (in full) from 1 July 2017.

Sunday Penalty Rates

For these rates, the transitional arrangements provide for a staggered decrease in the applicable Sunday penalty rates, with each reduction occurring on 1 July, for the next three years.

The impact of these transitional provisions is best demonstrated by the tables published by the Full Bench in the decision:

Hospitality Industry (General) Award 2010

Full-time and part-time employees

1 July 2017          175 per cent ˃ 170 per cent

1 July 2018          170 per cent ˃ 160 per cent

1 July 2019           160 per cent ˃ 150 per cent

Fast Food Industry Award 2010

Full-time and part-time employees – Level 1 only

1 July 2017          150 per cent ˃ 145 per cent

1 July 2018          145 per cent ˃ 135 per cent

1 July 2019           135 per cent ˃ 125 per cent

Casual employees (inclusive of casual loading) – Level 1 only

1 July 2017          175 per cent ˃ 170 per cent

1 July 2018          170 per cent ˃ 160 per cent

1 July 2019           160 per cent ˃ 150 per cent

General Retail Industry Award 2010

Full-time and part-time employees

1 July 2017          200 per cent ˃ 195 per cent

1 July 2018          195 per cent ˃ 180 per cent

1 July 2019           180 per cent ˃ 165 per cent

1 July 2020          165 per cent > 150 per cent

Casual employees (inclusive of casual loading)

1 July 2017          200 per cent ˃ 195 per cent

1 July 2018          195 per cent ˃ 185 per cent

1 July 2019           185 per cent ˃ 175 per cent

Pharmacy Industry Award 2010

Full-time and part-time employees

1 July 2017          200 per cent ˃ 195 per cent

1 July 2018          195 per cent ˃ 180 per cent

1 July 2019           180 per cent ˃ 165 per cent

1 July 2020          165 per cent > 150 per cent

Casual employees (inclusive of casual loading)

1 July 2017          225 per cent ˃ 220 per cent

1 July 2018          220 per cent ˃ 205 per cent

1 July 2019          205 per cent ˃ 190 per cent

1 July 2020         190 per cent > 175 per cent

Other changes – Fast Food Industry Award 2010 and Restaurant Industry Award 2010

For employers covered by the Fast Food Industry Award 2010, the Full Bench determined to change the application of the evening work shift loading from applying between 9.00pm and midnight Monday to Friday to between 10.00pm and midnight.

The Full Bench also determined to change the application of the late night shift loading in the Restaurant Industry Award 2010 from applying between midnight and 7.00am Monday to Friday, to midnight to 6.00am Monday to Friday.  The Full Bench also indicated that they would align the Fast Food Industry Award 2010 with the Restaurant Industry Award 2010 in this respect.

These additional changes are to come into effect from 1 July 2017.

Lessons for Employers

Employers in affected industries need to immediately note these implementation dates and ensure that they are prepared for the changes that will take effect from 1 July 2017.  Employer’s will also have to be wary of further transition on 1 July of 2018, 2019 and 2020.

Employer’s may be considering maintaining their current arrangements with their employees with respect to Sunday penalty rates and public holiday penalty rates.  Where the current arrangements are such that they exceed the minimum terms and conditions prescribed by the relevant award, then these ‘above award’ arrangements can be maintained.  Employers should at all times ensure that they are paying no less than the minimum terms and conditions prescribed by their relevant award.

Some Employer’s may also choose to maintain current arrangements for current employees, but adopt the new reduced penalty rate arrangements for new employees who are employed after 1 July 2017.  Again, this is an approach that can be implemented, although due consideration should be given to the potential for disharmony or conflict between employees through this approach.

Aitken Legal stands ready to advise on all aspects of the implementation of the new penalty rates, and transitional arrangements in relation to same.

Reminder:  Pending National Minimum Wage Increase

The Full Bench of the Fair Work Commission has determined that from 1 July 2017, the National Minimum Wage will increase by 3.3%, and that the same increase will be applied to the minimum rates in each Modern Award.

The effect of the increase will mean that the National Minimum Wage will increase by $22.20 per week, from the current $672.70 ($17.70 per hour) to $694.90 per week ($18.29 per hour).