The Full Bench of Australia's Fair Work Commission has handed down its decision on weekend and public holiday penalty rates in the Hospitality and Retail industries. This is a significant change for employers in only these two industries.

Traditionally penalty rates have had a dual function; they deter employers from rostering work outside of 'normal' hours and compensate employees who were rostered to work outside of 'normal hours'. The intention to compensate employees for the disturbance to their social and family life was particularly relevant to the Retail and Hospitality industries when they operated in a very different manner to the way they function now

The evolution of these industries, including the advent of extended trade over 7 days a week, has removed the need for a deterrent. The Full Bench accepted that whilst the imposition of a penalty rate may have the effect of deterring employees from scheduling work at specific times that it was not the intended objective of penalty rates. The focus for penalty rates has moved to compensate employees for any adverse impact or hardship suffered as a consequence of their working on weekends or public holidays.

A range of factors was considered by the Full Bench in reaching its decision including:

1. the impact on employees of working on weekends and public holidays

2. the terms of the relevant modern award and whether it already compensated employees for working on weekends and public holidays

3. the extent to which working on weekends and public holidays is a feature of the relevant industry.

Saturday Rates

Ultimately the Full Bench was satisfied that existing Saturday penalty rates in the Fast Food, Hospitality, Restaurant and Retail Awards achieve the modern award objective, that is, they provide a fair and relevant minimum safety net. Saturday penalty rates in the Clubs and Pharmacy awards are subject to further proceedings.

Sunday Rates

The Full Bench reached a different conclusion in respect of Sunday rates. The Full Bench reduced Sunday penalty rates, but not to the same level as Saturday rates. In doing so, the Full Bench acknowledged there was inconvenience or an adverse impact on workers associated with Sunday work, that was greater than working on a Saturday, but not as high as it had been in the past for Sunday work. This was generally accepted by employers in the relevant industries.

The FWCFB has decided to make the following reductions to penalty rates:

As you can see from the above table, no change has been proposed by the Full Bench to Level 2 and 3 employees in the Fast Food Award. This is because Level 2 and 3 employees are generally considered 'career' employees.

In addition, the Full Bench has also made the following changes to the penalty provisions for early and late night work in the Restaurant and Fast Food Awards:

• vary the span of hours in the Restaurant Award to provide for an additional payment of 15% for work performed between midnight and 6am (previously 7am); and 

• vary the late night hours in the Fast Food Award to provide for a 10% loading for hours worked between 10pm and midnight (previously 9pm).

Public Holiday Rates

Public Holiday rates were also reduced as follows:

When will the new rates apply?

The changes to public holiday rates will take effect from 1 July 2017 and the variation of the early and late night work loadings in the Restaurant and Fast Food Awards will take effect in late March 2017.

The implementation of these new weekend rates is likely to have an impact across the industries on employers and employees alike. The Full Bench has proposed that the reductions in Sunday penalty rates should take place in a series of annual adjustments on 1 July each year, commencing 1 July 2017 to coincide with any increases in modern award minimum wages. The number of annual adjustments has not been determined, and the Full Bench has asked for submissions from interested parties in respect of the proposal. Submissions are due by 4pm Friday 24 March 2017.

The Fair Work Commission's summary of the decision can be found here.