Impact of Penalty Rate Cuts on Employees: A Human Resource Report

This report provides an in-depth analysis of the impact of penalty rate cuts on employees, focusing on the challenges and implications for human resource management (HRM). It begins by defining penalty rates and their significance, particularly for workers in industries like healthcare and hospitality. The report explores the arguments for and against penalty rate cuts, examining the potential effects on employee income, motivation, and retention. It delves into HRM strategies for managing employee reactions, including communication and adjustments to payment structures. The report also offers recommendations to mitigate negative impacts, such as phasing in cuts and implementing transitional agreements. The analysis emphasizes the importance of employee retention through fair pay, incentives, and strong social ties within the workplace. Finally, the report concludes by highlighting the potential consequences of penalty rate cuts on both employees and businesses, offering insights into how HRM practices can help navigate these challenges.

Running head: HUMAN RESOURCE MANAGEMENT
Human Resource Management
Name of Student:
Name of University:
Author’s Note:

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Executive Summary:
The aim of this report is to discuss about the impact of the penalty rate cuts in organisations and
the problems which it poses for the employees. The analysis of the impact of the penalty rate cuts
has been discussed and in addition to this the possible recommendations have also been
mentioned regarding the way in which the situation can be solved.

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Table of Contents
Introduction:....................................................................................................................................3
Analysis of penalty rate cuts:...........................................................................................................3
Human resource management and employee retention:..................................................................4
Managing the employees and their reactions:.................................................................................5
Employee motivation:......................................................................................................................6
Recommendations:..........................................................................................................................6
Conclusion:......................................................................................................................................8
References:......................................................................................................................................9

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Introduction:
Penalty rates are the increased amounts of compensation that are provided to the
employees for working overtime or in cases where they work under abnormal conditions.
Research reports show that on an average around 20% of the income of the workers is from the
penalty rates. In the hospitals the nurses’ incomes, midwifes and the workers responsible for care
of aged are hugely dependent on the penalty rates. It must also be understood that any cut to the
penalty rates threatens to considerably reduce the “take home pay” of nurses, midwives and aged
care workers. In case of the hospital and the healthcare industry, meeting the challenges of an
ageing population are significant. Therefore much of the influence of the penalty rate cuts is
responsible for the lower turnouts of the workers. It is thus an effect which is to be kept in mind
depending on the situation at the hospitals. The rates of penalty make sure that staff are attracted
in un-manageable hours. The penalty rates also help in protecting the living standards of the low
paid workers (Burgess, Cameron & Rainnie, 2014).
Analysis of penalty rate cuts:
The employees in the hospitality, entertainment, retail and others industries, are the
strongest proponents of these changes. In case the Sunday rates are reduced, the employees will
be able to afford to stay open for longer in shops and restaurants and bars which in turn will be
responsible for creation of further employment (Adisa & Olasupo, 2015).
Another argument which has been put forward is that in a society which works all around
the day, there the importance of weekends and also Sundays in connection to Saturdays for time

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off work has declined significantly. In case this is true it can be said that the main reason for the
penalty rates us that they are actually the compensation for working unsociable hours.
The income of the weekend workers tend to be low. Only about one third of the workers
work weekends only and over half work Sundays only. These people rely on the penalty rates to
fulfil their household expenses (Skinner et al., 2014).
The demographics of weekend workers do not help in coming to the conclusion that a
majority are single, dependants or students thereby having less critical need for living incomes.
Majority of the weekend workers are young and the largest group are usually single or young
couples without children. This might not be true in all cases. However it needs to be kept in mind
that greater employment in all centres is not very high.
Human resource management and employee retention:
In the present world, a significant role is played by the human resources. They have a
enormous impact on the human resource considerations on the employees. HRM should work is
such a way so as to enhance the overall workforce productivity and commitment, enhanced job
satisfaction and discouraged unionism. Proper human resource management contributes towards
the individual’s improvement in addition to the performance of the company. They need to focus
on individualism rather than on the concept of collectivism and aim to improve the overall
performance of the employees (Panhwar, Channar & Brohi, 2012).
Regardless of the position on the changes in the organisations, it is necessary to
acknowledge that the penalty rates are not regardless in anything. These also need to be
subjected to review, specifically as there are changes in the society (Onikoyi, Awolusi &
Ayodeji, 2015).

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It has been seen that the function which was usually served by the penalty rates are no
longer done as such. This is due to the reason that the changes in the “composition of the
workforce, reductions in the length of the standard working week and also the working year as
also the growth in unemployment, the hour preference of the employees” have changed. It has
been mentioned by the FWC that the existing penalty rates on Sunday in case of the hospitality,
fast food, retail and Pharmacy awards, do not achieve the objective of the Modern Awards. This
is because a fair and relevant minimum safety is required (Odeku & Odeku, 2014).
There are some small business owners state that that they cannot operate on Sundays due
to the high costs of the employees’ wages and thereafter the small margins. Despite the fact the
business needs to operate throughout the week. Other people have argued that high penalty rates
reduce the business profits and increases the costs to the government, reducing the demand for
labour and productivity across the Australian economy (Totterdill, 2015).
Managing the employees and their reactions:
The employees who need to react to the new rates, it is needed to prepare for the new
rates need to review the present payment rates and agreements. There are certain workplace
arguments which affect the way in which the penalty rates and the allowances are paid including
the salary payments, employment contracts, individual flexibility agreements and also a
guarantee of the annual earnings. The payments made as wages under these arrangements need
to offer other penalties and loadings in the way of awards. An employee needs to receive at least
the same amount under the arrangements as needed to be done based on the award. It needs to be
understood that the penalty rates does not necessarily provide employees with the right of

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varying to the agreed rates. In case the employees are being given a loaded rate already, a weekly
or hourly rate which is above the reward cannot be flowed into the loaded up rate (Cascio 2012).
Keeping good record and communicating are essential to avoid mistakes. The most
important way to fix it is speaking to employees so that they are not severely negatively
motivated. The employees also need to review the existing status of their payroll and agreements.
The arrangements at the workplace regarding the penalty rates and allowances payment need to
be taken care of. The employers who pay more than the award rate cannot rely on the rules for
reduction of the amounts which they are going to pay (Candelon & Lieb, 2013).
Employee motivation:
It is the responsibility of the organisation to ensure that the employees remain motivated
and stay with the company. To ensure this the management needs to motivate the employees by
providing suitable compensation and benefits such that the employees feel the need to remain a
part of the company.
Recommendations:
In order to prevent the hardship from the cut in the penalty rates there needs to be an
exemption of current workers in comparison to phasing the reduction over the years. The penalty
rate cuts need to be prevented at any cost and the current workers need to be protected from the
significant decision so that the organisation does not suffer in any way. Despite the fact that the
business groups are in tandem with the decision to cut the penalty rates, the employee aspect of
the decision also needs to be kept in mind. The transitional agreements to apply the cuts will
have to take certain submissions on the questions (Daly, 2014).

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The human resource management team of the organisations should effectively
communicate with the employees so that they do not feel uncared for or terrorised and do not
leave the organisation. The human resource managers need to understand the situation of each
and every employee so that the penalty rate cuts are implemented in such a way so that they do
not get affected.
Much amount of differentiation or demarcation could not be made between the workers
so that they left the job as a result of the penalty rate cuts (Oloyede, 2012). The research of the
person assumed that the average annual inflation would be less than the minimum wage. It has
been observed that thousands of Sunday workers will have their wages fall significantly as the
penalty rate cuts and inflation will negate the effect of the annual minimum wage increase. The
workers on certain instances also propose legal changes so that the penalty rate cuts need to be
accompanied by beneficial pay and the conditions suitable enough such that the workers are not
left worse off.
Human resource practices need to be performed in such a way that the employees who
work for the company diligently are retained. In order to ensure that the employees be retained
their pay levels need to be revised the structure of payment needs to be fair, bonus and incentives
provided to the employees need to be fair and non-financial rewards should also be ensured.
There need to be social ties and teams which should ensure employee retention.
Frequent meetings need to be arranged with the employees in order to understand their
opinion on the topic of penalty rate cuts. Their schedules and time frames need to be arranged in
such a way that the benefits of employees are given major importance. The employee roles
should be clearly defined, the goals which they need to achieve need to be clarified from the

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beginning. The employees need to be prevented from either physical or psychological job
withdrawal. Thus it needs to be understood that if employees are not satisfied in their work, no
amount of penalty rate adjustments will help retain them in the company. . Lower amount would
be given as wages and will also be able to buy goods and services such as meals at restaurants
and these would be such that would better suit their lifestyle.
Conclusion:
In connection to the concept of penalty rates it can be said that on certain occasions the
businesses might have to pay a penalty amount for imposing conditions on the disadvantageous
employees. From the reduction of the penalty rates, the turnover would be increased and the
business could be managed in a much more proficient way. It would be responsible for much
more amount of employment as a result of the increased amount of turnover. There would be
more shifts available and more employment opportunities for those people who were
unemployed.
In case of many employees though the rates of their wages would fall, they would receive
higher total amount of earnings as the potential to work a higher number of hours would
increase. The people who will be most benefited from the removal of the penalty rates are the
consumers.

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References:
Adisa, A. L., & Olasupo, M. O. (2015). REDEFINING EMPLOYER-EMPLOYEE
RELATIONSHIPS FOR HIGH AND SUSTAINABLE PRODUCTIVITY IN
NIGERIA. International Journal of Social Sciences and Humanities Review, 5(2).
Burgess, J., Cameron, R., & Rainnie, A. (2014). Contemporary research on work, workplaces
and industrial relations in Australia.
Candelon, B., & Lieb, L. (2013). Fiscal policy in good and bad times. Journal of Economic
Dynamics and Control, 37(12), 2679-2694.
Cascio, W. F. (2012). Methodological issues in international HR management research. The
International Journal of Human Resource Management, 23(12), 2532-2545.
Daly, T. (2014). Evenings, nights and weekends: Working unsocial hours and penalty rates.
Odeku, O. F., & Odeku, K. O. (2014). In pursuit of the employees’ welfare in the workplace:
issues in perspectives. Mediterranean Journal of Social Sciences, 5(15), 652.
Oloyede, D. O. (2012). Comparative study of casual and regular workers' job satisfaction and
commitment in two selected banks in Lagos State. IFE PsychologIA: An International
Journal, 20(1), 380-393.
Onikoyi, I. A., Awolusi, O. D., & Ayodeji, B. M. (2015). EFFECT OF ABSENTEEISM ON
CORPORATE PERFORMANCE: A CASE STUDY OF CADBURY NIGERIA PLC, IKEJA,
LAGOS STATE, NIGERIA. British Journal of Marketing Studies, 3(2), 58-71.

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Panhwar, I. A., Channar, Z. A., & Brohi, N. H. (2012). Gender penalty in the employees of
different age groups. Global Management Journal for Academic & Corporate Studies, 2(1), 1.
Skinner, N., Elton, J., Auer, J., & Pocock, B. (2014). Understanding and managing work–life
interaction across the life course: a qualitative study. Asia Pacific Journal of Human
Resources, 52(1), 93-109.
Totterdill, P. (2015). Closing the gap: The fifth element and workplace innovation. European
Journal of Workplace Innovation, 1(1).