Penalty Rates Retained in Retail, Hospitality and Food Industries


Penalty Rates Retained in Retail, Hospitality and Food Industries

The door remains open for some change

As part of the transitional review of all modern awards, the Full Bench of the Fair Work Commission (‘FWC’) has rejected 20 applications to vary penalty rates in the General Retail Industry Award 2010 (‘GRI Award’), Fast Food Industry Award 2010 (‘FFI Award’), Food Beverage and Tobacco Manufacturing Award 2010, Hair and Beauty Industry Award 2010 and the Hospitality Industry (General) Award 2010.

Weekend penalty rates

Employer groups sought to reduce the Sunday penalty rates contained in the GRI Award from 100% to 50%. The primary employer claims in relation to the FFI Award focused on the reduction of percentage loadings (e.g. replacing weekend penalty rates with weekday evening penalty rates only) and time spans to which the higher loadings apply (e.g. 10% loading commencing at 10pm, rather than 9pm).

Employer groups contended that the reduction of Sunday penalty rates would increase the willingness of employers to offer more hours of work on Sundays, increasing the mix of employees engaged on Sundays and promoting more efficient and productive business performance.

The substantive applications from employer groups to reduce Sunday penalty rates were considered to be lacking a reliable evidentiary basis, with employer groups failing to demonstrate the impact current Sunday penalty rates have on employment patterns, business performance and operational decisions made. Although the FWC recognised that aspects of the application were not without merit, they found there was little probative evidence provided to support a variation of the Sunday penalty rates in the awards.

The FWC also rejected variations sought by the Shop, Distributive and Allied Employee’s Association to provide for the operation of double time penalty rates after two, instead of three hours and to provide for overtime payments for casuals working in excess of 38 hours.


Although the FWC was not persuaded to introduce annualised salaries into the relevant awards, it did acknowledge that the existing penalty rate regime in those awards is complex and poses particular challenges for small business. In order to address this issue it is prepared to discuss the concept of incorporating loaded rates within the GRI Award and FFI Award in the future. To explore this concept further, the FWC will facilitate conciliation discussions between the parties on this topic.

The FWC commented that the four-yearly review of the modern awards, due to commence in 2014, will allow for issues raised in the transitional review to be considered again, but this time in light of the full implementation of transitional provisions. The FWC recognised that it would be more appropriate to make broader changes to modern awards after the transition to modern awards has ended, instead of during the transitional phase.

Lessons for employers

If employers wish to persuade the FWC that penalty rates in these awards are having an adverse effect, the decisions of businesses to employ staff then need to provide clear evidence of this impact. This evidence can be submitted in the four-yearly review of modern awards, commencing in 2014.

Evidence about the complexity of incorporating penalty rates into the remuneration process will also assist in persuading the FWC, in its ongoing conciliation discussions, to consider adopting loaded rates in order to simplify these issues for small business.

The evidence should be provided to relevant industry employer associations.

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