A Full Bench of the Fair Work Commission has today ruled in favour of reducing Sunday and public holiday penalty rates in the retail sector. This long-awaited decision will be welcomed by employers in the retail industry after a tough start to 2017, although the proposed changes to Sunday rates are to be phased in over a number of years, with the exact timing yet to be finally determined.

Sunday penalty rates for full-time and part-time employees under the General Retail Industry Award 2010 will reduce from 200% to 150%. Sunday penalty rates for casual employees under the Award will reduce from 200% to 175%, which appears to be inclusive of the casual loading.

Public holiday rates for full-time and part-time employees under the Award will reduce from 250% to 225%, whilst casuals will continue to receive a penalty rate of 250%.

The Commission noted that the relevant issue in arriving at its decision was whether or not the penalty rates in the Award achieved the modern award objectives. The Commission held that, in relation to the Award, the Sunday and public holiday penalty rates did not provide a fair and relevant minimum safety net.

It noted that the impact of Sunday work on affected employees in the retail sector was much less than in times past, although still greater than for Saturday work.

The Commission also reviewed the Saturday penalty rates under the Award, however it was satisfied that they achieve the Award's objective and did not amend them.

The Commission noted that the high Sunday and public holiday penalty rates had led many business owners and operators to restrict their hours of operation and services provided on Sundays and public holidays. In the Commission's view, the reduction in penalty rates is likely to result in a number of benefits to both employees and employers, including increased trading hours.

In light of the fact that the decision is likely to create financial hardship for a number of employees, particularly those who work on Sundays, the Commission concluded that appropriate transitional arrangements will be necessary to mitigate this hardship. It has not reached a final view on what these arrangements will be and will seek submissions from interested parties.

However, the Commission has indicated that the transition to the new Sunday penalty rates will be achieved by a series of annual adjustments, commencing on 1 July 2017, over a period of at least two years (but less than five). In this way, the transition will likely occur at the same time as the minimum wage increase is passed on.

The changes to the public holiday penalty rates will take effect from 1 July 2017.

Daniel Proietto, Partner and Head of Lander & Rogers' Retail & Supply Chain sector team, said, "Today's decision will provide some welcome relief to retailers after what has been a challenging start to 2017. The catch is that there is unlikely to be an immediate dramatic change due to the reduction in Sunday penalty rates being transitioned in over a number of years, commencing in July 2017.

"Large retailers with existing enterprise agreements should review their current arrangements as today's decision will affect their industrial relations strategy, particularly in light of the Fair Work Commission's recent approach to approving these agreements".

In addition to the retail sector, the Commission also ruled in favour of reducing penalty rates in other areas including the hospitality, fast food, and pharmacy sectors.