Money, Money, Money: What you need to know about wages and penalty rate cuts

Annual wage review

The Fair Work Commission has today set the 2017 national minimum wage at $694.90 per week, or $18.29 per hour. This constitutes a 3.3 per cent increase; an increase of $22.20 per week to the weekly rate or 59 cents per hour to the hourly rate. Modern award minimum wages will also increase by 3.3 per cent. Weekly wages will be rounded to the nearest 10 cents.

As is usually the way, neither employers nor employees will be satisfied with the decision. The ACTU had argued for an increase in the national minimum wage of $45 a week or 6.7%; an ambitious claim given the 2.4% increase the Fair Work Commission delivered last year. ACCI proposed a 1.2% ($8.10) increase, and the AiG sought a 1.5% increase.

The increase will apply from 1 July 2017.

A phased in approach approved for penalty rate reductions but not public holiday rates

Since the news broke earlier this year about the cuts to penalty rates, there have been many arguments made about when and how these changes should be implemented.

In a decision announced yesterday, the Fair Work Commission have agreed that:

• Sunday penalty rates will be phased in over four financial years in the retail and pharmacy sectors and over three financial years in hospitality and fast food;
• The initial cuts under all four awards will take place on 1 July and will be relatively small, with much more significant cuts due to take place in later years of the transition;
• Public holiday penalty rates across all five awards (covering hospitality, restaurant, fast food, retail and pharmacy) are to take effect from 1 July, as initially announced, with no transition arrangements.

Both United Voice and SDA will challenge the decision in the Federal Court. Unless an injunction is obtained prior to 1 July, we anticipate that the first rate cut will take place as expected.

Employees covered under the retail and pharmacy awards are facing the largest cuts to their Sunday pay. It was in part the desire to try and balance the employers need for penalty cuts against any potential financial hardship for employees which led to the phased in implementation agreement. The Fair Work Commission hope that through aligning the penalty rate cut each year with the annual wage review, lower Sunday penalty rates might be offset by any minimum wage increase.

It is important to note that each Award has different transitional periods which are dependent upon the employment type. Not all types and classifications will follow the transitional arrangements. An overview of the various transitional periods which apply is included below.

Things to remember

1. The new penalty rates apply to the new Award base rates set by the Annual Wage Review (outlined above). Ensure that you use the new rates before calculating the penalty rates.
2. Remember that changes to late night penalty rates for the Restaurant and Fast Food Awards also come into effect in full on 1 July 2017.
3. All changes to penalty rates commence on 1 July 2017 with only the Sunday penalty rates being transitioned over several years.
4. Read your Award carefully to see if the classification and type of employment has a transitional period.
5. These changes will only apply in full to those of your employees who are paid on the minimum Award hourly rate.
6. When considering an increase to above Award rates, you can take into account the new penalty rates. You cannot decrease any wage rates without the employee’s consent, however provided you are still paying above the Award, any annual increase can be calculated bearing in mind the lesser rates payable.

Transitional rates

Fast Food Industry Award 2010

Hospitality (General Industry) Award 2010

General Retail Industry Award 2010

Pharmacy Industry Award