The Fair Work Commission (FWC) has determined that penalty rates in a number of retail and hospitality awards are here to stay. While employers submitted to the FWC that penalty rates limit the number and variety of employees they can employ and diminish attempts to respond to increasing demands for services over extended hours, the FWC said there was insufficient evidence to substantiate these arguments.

Outline

As part of the two-year transitional review of modern awards, the FWC heard arguments from employers seeking to reduce weekend and evening penalty rates applicable under a number of awards in the retail and hospitality industries. While submissions were made with respect to the General Retail Industry Award, the Fast Food Industry Award, the Hospitality Industry (General) Award, the Food, Beverage and Tobacco Manufacturing Award and the Hair and Beauty Industry Award, the main focus was on:

  • reducing Sunday penalty rates from 100% to 50% and removing evening penalties of 25% under the General Retail Industry Award; and
  • removing weekend penalty rates and limiting the span of hours in which evening penalty rates applied under the Fast Food Industry Award.

Employers argued that reducing penalty rates would enable employers to employ a greater number and variety of employees and respond to increasing demand for 24/7 services. However, while the FWC acknowledged there may be some merit to these arguments, it determined the employers had provided insufficient evidence in support of them and that penalty rates are necessary to compensate employees for working unsociable hours.

The FWC did recognise that in the future a loaded rate of pay in the retail and fast food awards may be appropriate. The FWC said the four-yearly review of modern awards in 2014 provides employers with a further opportunity to discuss and consider the issue of penalty rates.

What does this mean for you?

For employers in the retail and hospitality industries, this decision confirms the continued operation of penalty rates. However, if a loaded pay rate is introduced in the future, this would hopefully simplify the application of penalty rates under some awards, particularly for small businesses.

More broadly however, the decision brings into focus employer obligations to comply with wage, allowance and penalty rate provisions in modern awards, which can often be extensive and somewhat confusing to navigate.

Employers should therefore take the time to audit their compliance with award obligations and seek advice if they are concerned about issues of non-compliance.