Retail penalty rates are increasing: Here’s what the changes mean for your business

The Fair Work Commission (FWC) has decided to increase Saturday penalty rates for casual employers under the General Retail Industry Award, with the first tranche of changes slated for November 1.

Unsurprisingly, employer groups are unhappy about the changes, while unions have welcomed them.

In short, employers will have to pay casual staff more on Saturdays and also on weekdays (Monday to Friday) after 6pm.

Unions say about 350,000 casual retail workers will be affected by the decision.

What the changes mean for your business in the lead up to Christmas

From November 1, casual retail employees will be entitled to an additional 15% pay for all work performed on a Saturday, bringing their total loading to 135% of the base award rate.

Casuals must also be paid an additional 5% for all work performed after 6pm on weekdays (Monday to Friday).

Previously, casual workers received no penalty rates for working after 6pm weekdays, although they were entitled to the 25% casual loading.

What about after that?

Casual retail workers will receive two additional increases to Saturday penalty rates and evening rates during the week.

By 2020, casual workers will be entitled to a 25% Saturday penalty rate on top of their withstanding 25% casual loading, bringing their total pay to 150% of the base award rate.

Casuals will also be entitled to an extra 15% loading for all work performed after 6pm on weekdays (Monday to Friday).

Actual pay rates differ depending on the responsibilities of each individual worker. The Fair Work Ombudsman has a handy pay calculator to help.

Why have the FWC made this change?

The FWC released a 94-page document detailing their decision, which is quite onerous to read, so let’s boil it down.

In 2015 the Shop, Distributive and Allied Employees Association (SDA), the union that represents retail workers, made an application for increases to Saturday penalty rates for casuals.

This came in response to a Productivity Commission report from earlier that year, which noticed some anomalies in penalty rate loadings for casual workers under the retail award.

Essentially, because of the way the 25% casual loading interacts with weekend penalty rates for casuals, the FWC is concerned casuals can sometimes be shortchanged for working odd hours on Saturday.

“The current casual rates for Monday to Friday evening work and Saturday work lack logic and merit,” the full bench of the Commission said.

The FWC is of the view casual loadings are paid for a different reason than weekend penalty rates. Casual loadings compensate workers for leave and other entitlements available to permanent staff, while penalty rates compensate for working on the weekend or at odd hours of the day.

“The casual loading is not intended to compensate employees for the disutility of working on Sundays,” the Commission said.

In order to bring back “logic and merit” into casual penalty rates at these times, the FWC has opted to vary the award, favouring a so-called ‘default approach’ whereby casual loading is added to applicable weekend penalty rates when working out what casuals should be paid.

What do employer groups and unions think about the changes?

The usual split of opinion between prominent employer groups and unions has emerged.

The Australian Retailers Association (ARA), representing employers, says the change will put a strain on businesses.

Additionally, ARA executive director Russell Zimmerman has lamented the timing being so close to Christmas.

“What a horrible time of the year for it to happen,” he tells SmartCompany.

The concern, Zimmerman says, is retailers will have to re-assess their rosters leading into the silly season on short notice and with shallow pockets from a difficult winter.

When asked whether he’d look to challenge the decision with an appeal to the Federal Court, he was non-committal.

“We have to suck it up,” he says, adding the ARA will be consulting members on next steps.

What about the SDA?

“This will result in significant pay increases for over 350,000 hard-working retail employees on the award and will have important flow effects for employees on enterprise bargaining agreements right across Australia’s retail sector,” SDA national secretary Gerard Dwyer said in a statement on Friday.

The FWC cut Sunday penalty rates for casual and permanent employees last year, which made the unions upset and even resulted in a Federal Court challenge.

These increases offset some of those original reductions, but the SDA stressed the Saturday increases go only “some way” to addressing what they believe are appropriate casual entitlements.

What’s your view on the penalty rate changes? Let us know at news@smartcompany.com.au.

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