Penalty Rate Reduction

Penalty Rate Reduction 1
INDUSTRIAL RELATIONS
By ( )
Class (Course)
Professor (Tutor)
School (University)
City and State
The Date

Penalty Rate Reduction 2
Introduction
In Australia, the three Industries; hospitality, fast food industries, and the retail do operate on
holidays and Sundays. The government, through the Council of Trade Unions of Australia
(CTUA), proposed a rule to impose a payment penalty on the industries that operate during
holidays. The council ruled that all workers of these industries who are approximately half a
million ranging from the country’s lowest paid to the highly- paid workers would be losing up to
$6, 000 in a year. Although the council stated that the cuts would serve to increase the trade
working hours and services during the Sundays and other public holidays, those changes were
going to cause some workers to experience hardship. In the year 2017, the Senate presented their
grievances to the Australian Fair Work Commission (FWC) requiring the penalties in both the
part-time and full-time workers to be reduced for the retail, fast food, and hospitality industries.
The matter was also referred to as the Education and Employment References committee for
discussion and evaluations. This was because the penalties that were imposed were not regulated
fairly in terms of the level of payments between the highly- paid employees of the large
industries and the low- paid workers from the small business employees. This paper is going to
analyze and discuss the main groups that were involved in the policy-making, and why it was
introduced, the essay further analyzes the impact of the concern parties from those who were
negatively affected or the disadvantaged to those who potentially benefited from the ruling. This
paper will also elaborate on the potential implications for both the employees and employers.
The Main Parties Involved in the Ruling
During the policy-making concerning the reduction of the imposed penalties on the workers,
there were many stakeholders involved. They include the senatorial committee, the secretariat of
major departments, the parliamentary committee involving working commission and penalties,
the Australian Fair Work Commission, the Employment and Education Reference Committee,
and the Australian Institute of Economics and Business (AIEB). The grievances in the bill were
referred to the parliament house for discussion, analyses, evaluation, and implementation. The
public opinions from the most affected people who were employed and the CEOs of the private
sectors were reviewed and used during evaluation. The ruling provoked a broad controversy
from different parties who were impacted and interested from the Unions of the Federal
Opposition to the employer's groups (Forsyth, 2016).

Penalty Rate Reduction 3
Why the ruling was introduced
The complaints about the penalties that were imposed on the wages were from the workers from
the following industries; hospitality, fast food industries, retail, pharmaceutical organizations,
and restaurants. The Senate committee claimed that the employees who work in large scale
businesses received low penalty rates as per their agreements with the enterprises during the
public holidays and weekends than the modem set awards which they receive on other days. This
gave the employers of large enterprises and competitive benefit over the employers with small
scale businesses which pay their employees the award rates. There was a desire to amend the
Fair Work Act of 2009 so that the businesses’ agreements do not involve term specifying the
penalty rates that are lower than the modem awards. The ruling was made to protect the Fair
Work Amendments Bill of 2017 and to solve any other penalty-related issues within the retail,
fast- food and hospitality sectors (Breheny, 2017).
In Australia, the penalty rates are a very crucial long-standing framework in workplace relations.
These penalties are considered as a compensation mechanism to the workers for they often miss
out their family’s interactions, social and other community’s event participation while working
as they build the economic sectors of the country (WORSE, 2017). Penalty rates are useful to
compensate for the time spent working, which should be spent as leisure time. These additional
working hours include; public holidays, weekends, early morning and late night shifts. These are
the time that could be spent by the working individual to interact with their children, relatives,
community events, resting or participating in sports activities. It is quite true that the penalty
rates give the financial reimbursement measure for the sacrificed leisure time, which is spent at
work (Bryan, and Rafferty, 2018).
There are some people who prefer to work on public holiday, weekend and nights because the
pay rate at these periods is very high. These are mostly the employees who work in the
hospitality, retail, and fast food industries. These groups of workers are the ones who mostly face
financial stress and rely on the penalty rates to cater for their living expenses. These were some
of the consideration by the Fair Work commission while making the ruling on penalty rate
reduction. The employees from the three enterprises earn very little, that is, they just earn enough
as they spent and thus have difficulties in saving money or to handle unexpected expenses.
Therefore they considerably face much financial distress. The implementation of the ruling by

Penalty Rate Reduction 4
the Fair work commission would cause hardship to the employees who will be affected by the
ruling, and these are the ones who work on Sundays and holidays. The FWC revealed the fact
that the penalty rates reduction mostly affect the retail workers by making them face hardship
(McIvor, and Markey, 2017).
Evidence that retail workers faced hardship
a.) The resident of retail workers have difficulties in raising emergency funds.
b.) There was a decline in the relative earnings of retail industry workers and all related
industries.
c.) 31- 35% of retail employees work on Sundays.
d.) The retail households were more exposed to financial problem situations than those from
other households.
e.) The retail workforce had low earnings, and this situation of low payment reflected their
low levels of households and low living standards (Knox, 2016.
The Fair Work Commission set out the ruling to commence on 1st July 2017. However, the
economist did not agree with the transitional agreement of the ruling that it will protect the low-
income workers. The Economist, director of the center for future work, Dr. James Stanford
demonstrated that, although the phase of reduction rates may be delayed, the actual salary would
still reduce because of the impact of the current inflation on the consumer price (Stanford, J.,
2017).
The Disadvantaged groups by the Ruling
The FWC proposed that the Sunday pay rates in the three industries, retail, hospitality, and fast
food, will be reduced on both the part-time and the full-time workers as follows;
In fast food workers, the Sunday pay rates for both the part-time and the full-time employees will
be reduced to 125% from 150%.
In the hospitality workers, the wages of both workers who were classified on one level and the
ones working on Sundays was cut from 150% to 175%.
The wages of the retail workers who work on Sundays and public holidays were reduced to
150% from 200% of the standard pay rates.