Penalty rate cuts for hospitality and retail sectors – transitional arrangements commence on 1 July

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:

Fast Food 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

Hospitality 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

Retail 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  >  85 per cent

1 July 2019            185 per cent  >  175 per cent

Pharmacy 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
 

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.