Penalty Rates & Overtime Bill Has Now Received Royal Assent

The federal government have introduced more changes that will impact decisions around penalty rates and overtime

Employers may need to spend more time developing strategies to improve productivity and simplify compliance.

What is the legislation about?  

Author: Tim Dive, Founder & Director.

The changes essentially determine how the Fair Work Commission are allowed to make determinations on the application of penalties and overtime.

The Commission must ensure, in its decisions: 

• The rate of any penalty or overtime rate that employees are entitled is not reduced; and

• Modern Awards do not include terms that substitute employees' entitlements to receive penalty or overtime rates where those terms would reduce the additional remuneration employees would otherwise receive for working times that attract those rates.

Why? 

In my opinion, this is a move from the Government to counter Employer groups expanding employer traditions of paying all-inclusive rates or salaries.

Employer groups have applied to the Commission to establish rules in Modern Awards that allow penalties and overtime to be ‘rolled up’ into a single pay rate, as is the normal process at many workplaces, supported by offsetting clauses in employment contracts.

Employer groups simply presented the Commission should allow Employers to pay a certain percentage above minimum Award rates, which would then satisfy the Employer’s obligations with penalty rates and overtime – making burdensome record keeping obligations a thing of the past.   

Employers believe these arrangements simplify flexibility and improve productivity at the workplace level; a position I’d agree with and find strong evidence for.

The Government, however, believes this leaves employees worse off if they work hours that would attract more pay, if penalty and overtime rates were applied.

Of course - they wouldn’t have any idea if that were true and make these determinations using hypotheticals that provide them with the answers supporting their position.

The fact is, this practice is already undertaken in millions of employment arrangements, without issue. Having the Commission simply amend Modern Awards that will govern a minimum compliance level for these arrangements, would only simplify complicated contract terms, and allow employers and their employees to more freely decide all-inclusive terms at the workplace level.    

So, the Commission will be unable to support these types of applications by Employers, as the legislation will block any decisions that go against penalty rates and overtime applying to hours determined by an Award.

No changes will apply to: 

• existing annualised wage arrangement rules that exist in Awards;

• Our ability to offset penalty and overtime rates, in our contracts;

• EBAs that roll-up penalties into all-inclusive pay rates,  as long as they pass the BOOT; or

• change how individual flexibility arrangements can be made, which allow for variation of penalty and overtime rates provided the required safeguards are met.

Should you worry?

Don’t worry about this one, for now – this legislation was nothing more than the Government blocking our attempts at simplifying Awards and setting up more productive working arrangements.

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