New overtime penalty rates cause controversy

Overtime text written on blackboard 3D rendering

In 2017 employers welcomed the Fair Work Commission’s (FWC) decision to cut penalty rates for Sunday and public holiday rates in the retail and hospitality industries. But recently, the FWC has made another wave of changes that Senior Employment Relations Adviser of Employsure, Andrew Spiteri, says is “yet another financial burden on industries running on thin margins.”

The various changes apply to the fast food, restaurant, retail, hospitality, hair and beauty, social and community care industries; amongst a total of 11 Modern Awards. The changes took effect from the start of the first full pay period starting on or after 1 January 2018.

Spiteri noted that employers in affected industries voiced their confusion and frustration.

“These industries have been targeted all year with Award changes and are about to see another wave – at the busiest time of the year.”

Broadly, the changes provide part-time employees with greater flexibility of rosters and provide casuals the entitlement to overtime penalty rates – an entitlement not previously given to casual employees.

Under the updated provisions, some casuals are now entitled to overtime penalty rates for work they perform in excess of 38 hours per week or:

  • Fast Food Award – more than 11 hours in one day (175 per cent for the first two overtime hours and 225% for the overtime hours after, and 225 per cent on a Sunday)
  • Retail Award – more than 9 hours in one day (175 per cent for the first three overtime hours and 225 per cent for overtime hours after, 225 per cent on a Sunday, and 275 per cent on a public holiday)
  • Hair and Beauty Award – more than 10.5 hours in any one day (175 per cent for the first three hours and 225 per cent for overtime hours after

In addition, the Hospitality Award, Registered and Licenced Clubs Award, and Restaurant Award now allow casuals the same penalty rate entitlements as part-time employees.

While the changes are expected to be welcomed by thousands of affected employees, small-business employers say they feel the pinch during the peak season and increasing consumer demand for longer operating hours.

With many small businesses airing their frustration on the repeated penalty rate changes, Spiteri said, “We speak to thousands of small-business owners every week who would like to see government stop making frequent changes to overtime penalty rates and get serious about supporting small business.”

For the meantime, Spiteri encouraged employers to prepare for the changes.

“It’s so important to be across these changes and check if the new rates apply to your business. Get the right advice to avoid paying the expensive price of getting it wrong,” Spiteri said.

Australian Retailers Association executive director Russell Zimmerman advised smaller retailers to ensure they were paying employees the correct amount under the award to avoid potential penalties, but also lamented the pressure increasing overtime will have on SMEs.

 “We’re getting to a point whereby if we keep hitting SME retailers we’ll price employment out of proportion,” he said. “Smaller retailers will use a larger pool of employees and all of them will get less hours.”