If you engage people in hospitality and retail sectors, you should seek legal advice on whether you can reduce Sunday and public holiday rates, following the Fair Work Commission's decision that the reductions in Sunday penalty rates will be phased in over four years.

The first reduction will occur on 1 July 2017, with further decreases in the relevant penalty rates on 1 July each year until 2020.

Reductions to Public Holiday rates will apply in full from 1 July 2017.

How will the reduction in penalty rates be applied?

The reductions for Sunday penalty rates will be phased in over four years.

The transitional arrangements vary depending on the Modern Award, but will generally see a reduction of 5% effective 1 July 2017, with further reductions of 10% in following years.

The phased reductions of Sunday penalty rates for each Modern Award are:

Please click here to view the list.

There are currently no changes to Sunday penalty rates for the Restaurant Award, but the Fair Work Commission is continuing to examine the operation of this award and there may be a reduction in the future.

The reductions to Public Holiday penalty rates will not be phased in and will apply in full from 1 July 2017:

  • For full-time and part-time employees covered by the Hospitality Award, Restaurant Award, Retail Award, Fast Food Award and Pharmacy Award—a reduction from 250% to 225%.
  • For casual employees covered by the Hospitality Award, Retail Award, Fast Food Award and Pharmacy Award—a reduction from 275% to 250% (Restaurant Award rates will not change for casuals as they are already 250%).

The transitional rules for Sunday penalty rates are designed to mitigate hardship that employees may experience with the reduction to their take home pay, by gradually phasing the changes in over a period of time.

The Full Bench found that Public Holiday rate reductions should take effect immediately because they are less likely to adversely affect employees given the timing of public holidays. There are likely to be further changes to penalty rates as the Fair Work Commission continues with its four-yearly review of modern awards. In particular, the Commission is continuing to assess the position with respect to penalty rates for employees working in restaurants and hair and beauty.