Penalty rate increases for 350,000 retail staff

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As part of its four year review of Modern Awards, the Fair Work Commission (FWC) has increased casual retail workers’ penalty rates for weekday evening shifts and Saturdays but effectively reduced them for Sunday shifts.

The new penalty rate changes, that will be phased in over the next three to five years, will affect more than 350,000 workers in the retail industry.

What’s changed?

Saturday penalty rates for casual retail employees working between 7am-6pm will increase to 25% by 2020 in the following transitional stages:

  • 1 November 2018 – a casual employee must be paid an additional 15% for all work performed on a Saturday;
  • 1 October 2019 – a casual employee must be paid an additional 20% for all work performed on a Saturday; and
  • 1 March 2020 – a casual employee must be paid an additional 25% for all work performed on a Saturday.

Penalty rates for casuals performing weekday evening work after 6pm will increase to 25% by 2021 in the following transitional stages:

  • 1 November 2018 – an additional 5% will be paid to casuals for hours worked after 6pm;
  • 1 October 2019 – an additional 10% will be paid to casuals for hours worked after 6pm;
  • 1 March 2020 – an additional 15% will be paid to casuals for hours worked after 6pm;
  • 1 October 2020 – an additional 20% will be paid to casuals for hours worked after 6pm; and
  • 1 March 2021 – an additional 25% will be paid to casuals for hours worked after 6pm.

The Sunday penalty rate for full-time and part-time shiftworkers will reduce from 200% to 175% by 2020 in the following transitional stages:

  • 1 November 2018 – the penalty rate will reduce from 200% to 195%;
  • 1 July 2019 – the penalty rate will reduce from 195% to 190%; and
  • 1 July 2020 – the penalty rate will reduce from 190% to 175%.

The Sunday penalty rate for casual shiftworkers will reduce (including casual loading) to 200% by 2020 in the following transitional stages:

  • 1 November 2018 – the penalty rate will reduce to 220%;
  • 1 July 2019 – the penalty rate will reduce from 220% to 215%; and
  • 1 July 2020 – the penalty rate will reduce from 215% to 200%.

The FWC outlined that the above transitional arrangement would ensure that shiftworkers’ and non-shiftworkers’ Sunday penalty rates would be in alignment by 1 July 2020.

Why were these changes made?

The FWC was essentially concerned that currently, as a result of the way the 25% casual loading interacts with weekend penalty rates, casuals may be short-changed for working odd hours on Saturdays.

The FWC stated that the “current casual rates for Monday to Friday evening work and Saturday work lack logic and merit”.

The FWC also outlined that casual loadings are paid for different reasons than penalty rates.

Casual loading compensates casual workers for leave and entitlements owed to full-time and part-time employees, whilst penalty rates compensate workers for working at unsociable hours, including weekends.

What do these changes mean for other retail businesses?

From 1 November 2018, employers will need to pay casual retail employees an additional 15% for all work performed on a Saturday. Casuals will also need to be paid an additional 5% for work performed after 6pm on a weekday.

As these changes are occurring gradually over a three- to five-year period, businesses will need to ensure that their payroll processes are in place and that their pay rates are reviewed to take into account the alterations over the following years.

Given the announcement of these changes, in the lead up to Christmas, businesses may also want to ensure that their staff budgeting for the Christmas period is viable given the potential additional wage cost.

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