Fair Work Commission - Monetary Policy

On 23 February 2017 the Fair Work Commission handed down a decision on penalty rates, effective from 1 July 2017.

Outline the background and nature of this decision. Discuss this decision and analyse the implications of the decision on individuals, businesses and the economy.

Every four years, the Fair Work Commission is charged with the responsibility of reviewing Australia’s penalty rates such can be seen as the weekend rates as well as public holiday penalty rates. Penalty rates are defined as “an increased rate of pay for overtime or for work performed under abnormal conditions”. Furthermore, throughout its history, penalty rates in Australia has seen significant disparities in both sequential decreases since the 1990’s as well as a recent subsequent drop over the past few reviews. It is vital to note that the Fair Work Commission has to ensure that adequate compensation is given to employees for working outside their normal scheduled hours as well as to dissuade employers in scheduling work outside normal hours in an attempt to gain better rates for themselves.

On the 23rd of February 2017, after the Fair Work Commission had conducted their extensive review, they handed down a decision on penalty rates to take immediate effect from the 1st of July 2017. This decision outlined how the weekend Sunday penalty rate for hospitality, fast food, retail and pharmacy awards previously did not exceed expectations and furthermore, did not provide a sensible minimum safety net. The Fair Work Commission decided to reduce the penalty rates in these four areas for both casual workers as well part time workers by up to 50% to try and moreover, establish a fair safety net for everyone. Additionally, the Fair Work Commission decided to make alterations to public holiday penalty rates. This consisted of subsequent drops in hospitality, fast food, retail and pharmacy awards for both casual and full/part time employees. A minimal drop of 25% was revised for these areas however, the commission ruled that Clubs rewards were to the stay the same as well as casual working in restaurants.

The Fair Work Commission concluded these revisions to be within in reasons due to several problems with the current penalty rates. The current levels had led to the reduction of labour costs in several areas of employment such as hospitality, retail and fast food. This has caused operational limitations such as restricted trading hours, lower staff levels as well as has led to more restrictions on the range of services provided by the employers. Likewise, the commission also found that areas such as Hospitality and Retail had engaged in considerable levels of non-compliance. This means that these sectors have been providing flat wages in an attempt to ease their payroll process. Furthermore, the two sectors underestimate the additional premium needed to compensate workers