Are you one of the thousands of Australians who receive penalty rates? Do you rely on public holiday and Sunday rates to get by?


This February saw the Fair Work Commission (FWC) hand down a massive decision to reduce penalty rates for certain industry awards. And for many, this decision means that financial losses will soon be a reality.


Let’s get the facts

Under the FWC’s changes, a number of penalty rates will be cut. These cuts will apply to retail, hospitality and pharmaceutical industries.

For full-time retail workers, Sunday rates will change from double-time, down to time-and-a-half.  For casual retail workers, Sunday rates of double-time will be reduced to time-and-three-quarters.

For both full-time and part-time workers in hospitality, Sunday pay rates will decrease from time-and-three-quarters to time-and-a-half. Public holiday rates will decrease from double-time-and-a-half to time-and-a-quarter.

Interestingly, pharmacy workers will also see a reduction in their pay packet. Some Sunday rates will reduce from double-time to time-and-a-half. For casuals, Sunday rates will change from double-time to time-and-three-quarters.


What does it all mean?

Let’s put things in perspective.

Suppose you are a casual hospitality worker on the new minimum rate of $18.29 per hour. An 8 hour Sunday shift would see you earn $292.64. With the new cuts in place, the same shift would earn about $219.48. That’s a difference of $73.16 – a reduction of almost 15%.

Let’s look at the issue from a nation-wide perspective. The Australian Council of Trade Unions claimed that almost half a million people will be out of pocket by up to $6,000 a year.

It’s worth noting that this will impact some of Australia’s lowest paid workers. The average Australian worker earns a little over of $1530 per week. By contrast, the average worker in accommodation and food services earns $524 a week.

MP Brendan O’Connor took to Triple J’s Hack program to put this into context. This is occurring during a time of a “75 year high in… national inequality,” he said.


Why is this happening?

It’s surprising to see this decision come from an independent umpire. So, what lead the FWC to make the cuts? Well, amongst many other factors, the FWC concluded that Australian social values no longer justify such rates.

In their own words, FWC stated “for many workers, Sunday work has a higher level of disutility than Saturday work, though the extent of the disutility is much less than in times past.”

Put simply, the FWC found that the social inconvenience of working on a Sunday is no longer drastically different to working on a Saturday.


Does the FWC have a point?

Many would agree with the FWC here, and it’s largely due to the movement away from religious values. Whilst Australians still view Sunday as a day to relax and spend time with family, it is not completely different to the perception of Saturday.

It’s fair to suggest that someone who works on Saturday should have similar financial compensation to a Sunday worker. This is especially valid if the Saturday shift requires the same skill, and is equally as demanding. Equal work, equal pay, right?


Could this be a good idea?

“Balancing out” pay rates is a plausible idea. After all, there are many Australians who would love to see Saturday’s pay-packet be closer to a Sunday’s return. However, the changes will not distribute the Sunday penalty rate throughout the weekend. Nor will it incorporate penalty rates into a daily rate. Rather, the change is a mere cut in employee benefits.


How will employees react?

Overall, the cut will strip employees of a privilege which they were once granted. This certainly sends the message of being “undervalued”.

This is certainly a cause for concern. As we all know, employees are most productive when they feel valued and secure in their job.

In fact, Seek investigated what drives job satisfaction. Guess what took out the number one spot? Feeling appreciated at work. The study also revealed that a lack of appreciation scores 2nd place in reasons why employees quit (second only to bad management).

With the current housing crisis, it’s clear that these workers are facing tough times.


Could the pay reductions help small businesses?

In short, yes. Supporters argue that the penalty rate cut will empower small businesses. Indeed, Sunday & public holiday trading will be much more affordable. As a result, “Mum and Dad” businesses can consider opening their stores more often—and for longer. This is great news for anyone looking to compete with larger businesses.

The penalty rate cut will also “level the playing field” in another way. Did you know that large enterprises can avoid paying penalty rates? How can they dodge this obligation? Well, large enterprises have the power to make enterprise agreements. These agreements are then negotiated by the SDA.

From here, the potential agreement is subjected to a Better Off Overall Test (BOOT). If the SDA finds that employees are better off under the agreement, then the business is not required to pay penalty rates.

This process has received a lot of scepticism. In fact, there are claims that up to 40% of supermarket workers are “worse off” under such agreements. What’s more, enterprise agreements have been estimated to save a particular supermarket giant $700 million per annum.

In stating this, the crux of the issue becomes painstakingly obvious. It’s clear that huge enterprises are being granted massive privileges. This is putting small business’ opportunities in jeopardy.

So, instead of taking hard-earned cash away from some of Australia’s most disadvantaged, perhaps we could “level the playing field” by limiting the privileges given to dominating enterprises.


Can we expect more employment opportunities?

One of the main arguments in favour of the penalty rate cut is that it has the potential to create jobs. In March of 2017, Australia’s unemployment rate was 5.9%. At its worst, the rate of unemployment exceeded 13% in regional areas.  With these figures in mind, it’s easy to see why job creation is important.

So, could a reduction in penalty rates relieve Australia’s unemployment figures?

The answer to this question lies in the hands of the business owners. However, there has been speculation that businesses will pocket the savings, rather than employ more staff. After all, many businesses do not need to hire more staff, as they’ve been able to trade with their current number of employees. So, the reduction in penalty rates may not drastically impact employment figures.

Disappointingly, the Fair Work Commission hearing saw employers admit that it was “unlikely that they would put on more staff”.


What can we conclude?

The penalty rate cut is a complex issue.

The possible benefits include support for small businesses and potential employment opportunities. However, in order to achieve these possibilities, the change will take away from some of the lowest paid workers.

While this cut will negatively impact the disadvantaged, large-scale enterprises will still be able to earn millions in profit due to bargaining agreements. While this stands true, small businesses will always be at a disadvantage.

So, while the penalty rate cut does address some important issues, it also fuels many others.

Perhaps it is time to look at an overhaul refresh of the system? What are your thoughts?

About the Author:

Jacqueline is a talented content writer. Mesmerized by the power of words, Jacqui's passionate about sharing our team's greater knowledge so as to help individuals all over the world with their HR challenges.
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