The Fair Work Commission yesterday handed down its long awaited decision to reduce the penalty rates for Sunday and public holiday work payable under a number of awards. These include the Hospitality Industry (General) Award 2010 (Hospitality Award), the General Retail Industry Award 2010 (Retail Award) and the Fast Food Industry Award 2010 (Fast Food Award).

The Commission found that the penalty rates payable under the Hospitality, Retail and Fast Food Awards did not provide a fair and relevant minimum safety net and, as such, the rates should be reduced.

We outline the proposed changes to Sunday and public holiday penalty rates in the tables below.

Sunday penalty rates
Award Full time and part time employees Casual employees
Sunday penalty rates Existing Rate (%) New Rate (%) Existing Rate (%) New Rate (%)
Sunday penalty ratesHospitality Award 175 150 175 No change
Sunday penalty ratesRetail Award 200 150 200 175
Sunday penalty ratesFast Food Award (Level 1 employees only) 150 125 175 150
Public holiday penalty rates
Award Full time and part time employees Casual employees
Public holiday penalty rates Existing Rate (%) New Rate (%) Existing Rate (%) New Rate (%)
Public holiday penalty ratesHospitality Award 250 225 275 250
Public holiday penalty ratesRetail Award 250 225 275/250 250
Public holiday penalty ratesFast Food Award (All levels) 250 225 275 250

Next steps

While the changes to the public holiday penalty rates will take effect as of 1 July 2017, the Commission is yet to decide when, and on what basis, the changes to the Sunday penalty rates will occur.

In its decision, the Commission has disagreed with the Productivity Commission's views that a 12 month grandfathering arrangement should apply to the reduction in Sunday penalty rates. Rather, the Commission's provisional views are that the reductions will be introduced by progressive annual adjustments effective on the first day of July in each year (likely to commence on 1 July 2017). This will coincide with any increases to minimum wages arising from the Annual Wage Review decisions. The Commission has foreshadowed that the adjustments will take at least two instalments, but less than five, to complete the transition. The Commission will take further submissions on this matter before making its final decision. Dentons will provide further information as the Commission finalises the transitional arrangements.

The decision of the Commission is a great win for employers in the retail and hospitality industries. However, employers should be aware that the Commission’s decision will not impact the penalty rates payable under enterprise agreements made with employees. Employers who are currently bargaining for an enterprise agreement should consider the impact of the Commission's decision on that bargaining, including the assessment of what proposals will pass the 'better off overall' test.