Penalty rates, part 4 – calculating penalty rates

One criticism of penalty rates is that they’re complicated to work out. People saying that are right. (although there are bigger reasons as to whether or not penalty rates should survive)

The difficulty comes from phasing in transitional entitlements. Old employee entitlements are being phased out and new entitlements are being phased in. The transitional period ends on 30 June 2014.

The simplest explanation of this phasing we have is:

  • New entitlements are phased in, 20% per year, until 30 June 2014 when those entitlements are in full force
  • Old entitlements are phased out, 20% per year, until 30 June 2014 when those old entitlements are no longer in force

Given the time (between 1 July 2013 and 30 June 2014), businesses apply 80% of new transitional entitlements and 20% of old transitioning entitlements. Then it’s maths to make it a transition.

It does get more complicated than that. There’s concepts of new, identical and equivalent entitlements. If you’re really keen, read FWO’s guidance note on transitional arrangements in modern awards (GN7).

All of this concerns minimum pay. It is possible to pay a higher amount to ‘cancel out’ the need to pay penalty rates and other entitlements. We’ll look at that in a later Small Plate.

For businesses employing staff before 27 March 2006

You have the hardest job.

How penalty rates are calculated depends on:

  • Employment agreements
  • Enterprise agreements
  • Relevant modern award
  • The award or agreement applied to your business before 27 March 2006
  • Which year it is between 2010 and 2014

You need to transition out old entitlements and transition in new entitlements.

For businesses not employing staff before 27 March 2006

How penalty rates are calculated depends on:

  • Employment agreements
  • Enterprise agreements
  • Relevant modern award
  • Which year it is between 2010 and 2014

For all businesses after 1 July 2014

After 1 July 2014, it gets much easier. Transitional period is over.

Look to:

  • Employment agreements
  • Enterprise agreements
  • Relevant modern award

There’s got to be a better way!

Yes, there is. We’ll look at penalty rates for restaurants, cafes, bars, hotels, clubs, breweries, wineries and distilleries by taking some examples in the next few Small Plates.

For a quick answer, head over to Fair Work Ombudsman’s PayCheckPlus. It’s what the Fair Work Ombudsmen’s call centre uses. We use it as well – except when we’re calculating everything from scratch for this Small Plate.

References:

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