The Penalty Rates Cut: What Does This Really Mean For You?

Deakin University's Sage Cafe - hospitality workers

The Fair Work Commission announced cuts of 25 to 50 percent to penalty rates for workers in the hospitality, fast food, restaurant, retail and pharmaceutical industries.

This decision, ruled by the Fair Work Commission in late February of this year is intended to create more jobs and allow businesses to offer their employees additional hours.

Last week, hairdressers feared that their weekend pay rates will also be slashed, resulting in questions being raised on whether these changes will actually tackle Australia’s unemployment rate, save costs for businesses, and ultimately what this means for those primarily affected?

The New Daily, released an article in early April, stating that according to 78 experts, ‘penalty rate cuts are bad for the economy’.

According to the Australian Bureau of Statistics (ABS) the number of unemployed persons has risen to 749,500 from March 2017. 

Professor Beth Webster, public policy expert at Swinburne University said it was hard to know what impact the FWC’s decision would have. She said that because overall unemployment was quite low in some sectors it was “quite possible that nothing happens as a result of these changes”, because employers realise that unless they pay these incentives, they will struggle to retain their staff.

Prof Webster said any drop in take-home wages could lead to a fall in consumer spending as workers have less cash to splash. She warned, there may be a “secondary effect and a negative effect on other industries as a reduction of wages”.

On the move positive side however, Prof Webster said that businesses could take the increased profit from lower wages and “put it into investments” or choose to expand their café for example, which would have “a stimulating effect on the building industry”.

These new policy changes created quite an uproar, with many workers being notified through social media and online news channels.

Full-time arts degree student at Monash University, Maudie Osborne works part-time at JB HI FI and has not been informed by her workplace about how the changes will affect her. 

Ms Osborne is appalled by the prospect of these pay cuts, which would greatly impact her current lifestyle and “possibly” her employment. She believes a pay cut would be another example of “exploitation” of the “labour of the working classes”. She said: “It pains me knowing that there will be people in worse off situations; people with families, mortgages, insurances that they need to pay and provide for.”

Ms Osborne scoffed at the notion that a pay cut for some could help employers hire more workers. “You don’t decrease worker’s wages as a means to create more employment. It means that the bosses can pocket money and attempt to undermine unions,” she said.

Labour economist, Professor Mark Wooden from the University of Melbourne analyses the consequences of both sides of this issue.

Prof. Wooden said the working conditions could change most in the hospitality sector because employers may choose to employ more employees during ‘rush periods’ on a Sunday because they would be cheaper, rather than have one, more expensive, worker run off their feet. 

On the other hand, Prof. Wooden said the new policy may have very little effect on family owned or very small businesses. Restaurants such as “Mum and Dad fish shops” and “Chinese restaurants are ignoring the award and not paying the double time or award rates” to their employees. These businesses who are likely to employ “family members or friends” will not be impacted by these revised penalty rates. 

Prof. Wooden argues that the idea of this policy is “to reduce costs a little” for businesses, as “work on Sundays are expensive”. Wooden finds it “bizarre” that workers receive high rates on Sunday until midnight, however “at 12.01 they receive normal rates”.

Prof. Wooden concludes that it “does not make sense” for all businesses to pay more on Sundays when these industries like restaurants choose to open on Sundays so they can pocket extra money. 

Jeremy Bartholomeusz – Monash University, Secret Garden Eatery.

Secret Garden Eatery, a new addition to the café precinct at the Monash University Clayton campus, notified its staff of the recent pay cuts decision. 

This café, run in partnership by Jeremy Bartholomeusz, is currently open on Saturday and Sunday and Mr Bartholomeusz has welcomed the move to cut weekend pay. He said it was difficult to keep the cafe open at the weekend while paying employees time and a half because he could not pass that cost on to his customers. He said being a university café meant, “charging prices which kids can afford”.  Therefore, Bartholomeusz argues that “by not having to pay leave loading” it will make it “easier to survive”. However he added: “At the end of the day it probably isn’t fair. I think people should be entitled to a benefit for working these days.”

Moorabbin Woolworths & BWS

Some workers won’t be affected by the new rules for sometime. Julie Morrison, a part-time worker at BWS in Moorabbin, will not see her pay cut instantly because the liquor retail franchise, owned by supermarket giant Woolworths, will only change its pay when it negotiates the next EBA.

“I think there should be compensation for working a public holiday and a Sunday. Every day will become the same, and I don’t think that is right,” said Ms Morrison

“Nobody knows the impact or who will most likely be affected”, Professor Wooden contends. However, he stresses that “these penalties are minimum” and that “there is nothing to stop employers paying more”.

Changes to public holiday penalty rates will take effect on 1st July, 2017. It is still unclear when the Sunday pay rate cuts will come into effect. 


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