Penalty rates are additional payments to employees working outside regular hours, such as evenings, weekends, or public holidays. Penalty rates are determined by the Fair Work Commission in Australia. For small businesses and employers, getting penalty rates right is crucial. These penalties also motivate employees to support employers during busy periods and weekends. In this guide, we explain the history of penalty rates, different types of penalties, and employer obligations around penalties in Australia.
What are penalty rates?
Penalty rates are higher pay rates that employees in Australia may be entitled to when working on weekends, public holidays, overtime, early in the morning, and/or late at night, provided they are covered by an Award, enterprise agreement, or registered agreement.
Penalty rates are higher pay rates that employees in Australia may be entitled to when working on weekends, public holidays, overtime, early in the morning, and/or late at night, provided they are covered by an Award, enterprise agreement, or registered agreement.
The exact rate, multiplier, and loading to be applied are outlined in the relevant industry Award or agreement. In Australia, penalty rates differ across industries and are determined by the Fair Work Commission.
Weekend penalty rates
Weekend penalty rates are higher pay rates applied to employees who perform work on the weekend. The purpose of weekend pay rates is to offer compensation for employees who work outside “normal” weekday hours. Not all workplace agreements or Modern Awards require payment at a higher rate. This will depend heavily on the applicable award / industrial instrument,
Public holiday rates
For public holidays, penalty rates are usually significantly higher. In the same awards mentioned above, public holiday rates can be double the ordinary hourly rate depending on the specific award or agreement.
Allowances and extra payments
Some employees are entitled to extra payments due to the nature of their jobs. This may apply to employees who do certain tasks or have a unique skill, use their tools and equipment, or work in harsh or dangerous conditions. Employees may also be entitled to a meal allowance when working overtime.
An employee is entitled to allowances as compensation for:
- Tools and equipment.
- First aid kits.
- Special clothing and uniforms.
- The cost of travel, fares, and tollways.
- Cars and phones provided by the company.
- Associated costs for working in a particular industry.
Most employees may also receive additional compensation in the form of annual leave loading, a percentage of their base wage paid to them when they take annual leave. This extra payment is meant to provide employees with additional financial support during their time off. An employer’s obligation to pay annual leave loading may be outlined in their workplace agreement or Modern Award. If you have any questions about employee entitlements or your payment obligations as an employer, call the Peninsula team for expert advice.