Penalty rates pay cut for 700,000 workers

Penalty rates pay cut for 700,000 workers


Corporations and their conservative allies in politics have been attacking the concept of the working week for over 30 years. It’s been a centrepiece of their trickle down economic theory that asks us to believe that if we take money from workers and give it to corporations somehow we will all benefit.

One quarter of Australia’s workforce works on the weekend. They give up time with family and friends and miss out on special occasions with their loved ones. Penalty rates compensate people for working these unsociable hours when the rest of us are enjoying time off work. For many working people, the penalty rates they are paid are the difference between making ends meet and financial ruin. They should be protected. The penalty rates they earn allow these workers just to survive.

Our work rules were supposed to prevent pay cuts for Australian workers, but, if some employers have the option of cutting penalty rates from 1 July, the rules are clearly broken.

The decision

In late 2016 a group of 11 large employer associations, including the Australian Hotels Association, Clubs Australia, Australian Business, Restaurant and Catering Industry Australia, the Australian Industry Group, the Australian Retailers Association, and the Pharmacy Guild of Australia, argued that weekend and public holiday penalty rates in awards should be cut. They were supported by a range of conservative politicians.

On 23 February, 2017, the FWC, applying the rules relating to award reviews, accepted much of what the employers had said and made the decision to cut penalty rates across four industry awards:

  • Hospitality Industry (general)
  • Fast Food
  • Pharmacy
  • General Retail

The decision cut Sunday and public holiday penalty rates for workers on these awards by between 25 per cent and 50 per cent.

The public holiday penalty rate cuts take full immediate effect from the first public holiday after 1 July, 2017, and cuts to Sunday rates will be phased in over three to four years, depending on the award, locking in cuts year after year.

Importantly, employers can continue to pay current penalty rates – they are not required to apply penalty rates cuts.

Who is affected?

700,000 workers across the retail, pharmacy, hospitality and fast food sectors - who don’t have an EBA in place - can have their take home pay reduced if their employers decide to cut their penalty rates.

At the same time, workers with an EBA are losing their safety net. Employers are already queuing up to cut penalty rates for workers once EBAs expire.

The penalty rates decision could spread to other industries – like healthcare, the energy sector, construction – any industry where people work on weekends. In fact, some employers are already arguing for reduced penalty rates in their industries.

How much do workers stand to lose?

Some of Australia’s lowest paid workers are affected by the penalty rates decision.

They could lose up to $77 a week just from the cuts to Sunday penalty rates, and each worker could lose another $40 to $60 for every public holiday. That’s a big hit to already tight household budgets.

Research from the McKell Institute shows the impact of these cuts on our communities will be massive:

  • Workers in regional Australia stand to lose up to $667 million dollars in wages every year, money they will no longer spend in local shops and businesses. Even worse, 43 per cent of the money cut from workers’ wages will go straight to corporate headquarters in the big cities or overseas.
  • Workers in urban areas will lose even more - $760 million dollars in wages every year after the penalty rates changes are fully implemented. That’s money that these workers need to buy local goods and services.
  • Australian workers will lose $1.42 billion in wages each year due to this one decision.

If cuts to penalty rates spread to other industries, the hit to Australian workers’ pay packets will be in the order of $14 billion every year, according to The Centre for Future Work at The Australia Institute. The flow-on effect to local economies would be devastating. These cuts hurt, given that workers tend to spend a higher proportion of their income locally.

Recent Activity