Penalty Rate Cuts: How Have Retailers and the Hospitality Industry Been Affected?


After increasing calls for cutting back penalty rates coming from the Federal Government and various groups representing the interests of the business community, the measure has been put into action as of 1st July 2017. The Sunday penalty rates have been cut in an effort to increase the nation’s level of productivity and the profitability of companies. While the effects of such a measure are expected to be deeply and widely felt throughout the nation, around kitchen tables, there is a disproportionate impact on the local economies and towns in regional and rural Australia. With the new penalty rate cuts, how have retailers and the hospitality industry been affected?

Rural vs Urban Affects of the Penalty Rates Cut

The Census data shows that that retail workers in rural Australia already earn on average 7 per cent year less than their counterparts in the urban cities. Now, this potential change will push them all to face a disproportionate burden. The impact of cuts in penalty rates in the hospitality and retail industries is felt the most in rural Australia. For rural workers, the hospitality and retail sectors account for around 18% of their total income.

In a study by the McKell Institute it is forecasted that depending on how many local retail stores are owned, rural workers in Australia would lose between $370 million and $1.55 billion each year. It is also estimated that the disposable income in regional areas has reduced and ranges from $174.6 million to $748.3 million.

The extent of this impact varies from region to region. In addition, the change in penalty rates will also have a broader impact on those employees that receive them, as well as on the communities in which they live in. These changes can be detrimental to the companies that rely on local employees’ wages to survive.

A reduction in penalty rates will likely have a significant negative impact on both the financial security and the emotional wellbeing of workers. Less money is available for discretionary spending. Those affected would need to reduce their expenditure on some activities and items including social activities, dining out, events, tourism, extracurricular activities for their kids, home renovations, minor leisure items, and insurance products.

While workers are worried about their future, some entrepreneurs and owners of small businesses are cheering. Meanwhile, many of us are left confused after this decision to reduce the penalty rates for work on Sundays.

The measure will affect consumers, employers, and workers alike. If you are a budget conscious boss, a double time loving waiter, or just one of the consumers who like going out for dinner on the weekend, you need to understand how the changes may affect you.

What Has Changed?

In hospitality and retail, employees are paid extra on public holidays and weekends. However, not everybody thinks that they should, especially the owners of small businesses, who oppose this under the pretext that they cannot afford the penalty rates. Hospitality and retail business groups have been asking for the reduction of penalty rates for work on Sundays to the level of penalty rates in place for work on Saturdays. In other words, they have been asking that these penalty rates are reduced from double time to one and a half.
Across retail, fast-food and hospitality industries, the penalty rates have been reduced by the new measure by varying degrees. Some changes will also be implemented to night and early morning shifts for fast food and restaurant workers.

Will I Be Affected?

Those employees who are the most affected are those working in the fast food, hospitality, and retail industries. Aussies who rely most on penalty rates are those who earn relatively low wages. According to experts, it is forecasted that these penalty rate cuts will have negative consequences for the Australian economy and almost one million Australian workers. It is forecasted that this decision will reduce the income of low paid workers by $6000 a year.

For Those Working in Hospitality

Part time and full time workers in the hospitality industry will have their Sunday rates reduced to one and a half. For an employee on the $17.70 per hour national minimum wage working a Sunday shift of eight hours the difference is $35. For someone earning more, for example, $30 per hour, the difference for working on Sunday on an eight hours shift is $60.

Part time and full time employees will also have their rates on public holidays cut from two and a half to two and a quarter.

For Those Working in Fast Food

Part time and full time fast food workers will have their penalty rates for work on Sundays dropped from one and a half to one and a quarter.

For Those Working in Retail

Part time and full time retail employees will have their rates for work on Sundays reduced from two to just one and a half.

For Those Working in a Pharmacy

Part time and full time workers in a pharmacy with a work schedule on Sunday will have their penalty rates reduced from two to one and a half.

For Employers

Those who have been pushing the most for these penalty rate cuts have been the entrepreneurs and owners of businesses in these industries. According to them, the penalty rates are affecting their business because it has become too expensive to efficiently operate on those days requiring extra pay. Business owners claim that this change ultimately will create more jobs for Australians because it would become easier to afford giving more shifts to their employees.

For Consumers

This measure could signal the end of surcharges on public holidays. If workers are paid less then it would make sense that we should not have to pay more in order to cover their penalty rates on those days. However, it is possible that even with Sunday rates lowered, the consumers will still have to pay the surcharge.

When Will These Changes be Applied?

While hundreds of thousands of workers have already seen their Sunday pay reduced, the full cut will be implemented in some cases only by 2020. However, the further implementation of this measure is uncertain, since unions and Labour plan to fight against the penalty rate cuts.



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