The Fair Work Amendment (Protecting Penalty and Overtime Rates) Bill 2025 amends the Fair Work Act 2009 to enshrine a principle that penalty and overtime rates in modern awards cannot be reduced or rolled up into a single flat rate. It also closes loopholes that allow employers to substitute these rates in a way that diminishes workers’ additional remuneration.
The Fair Work Amendment (Protecting Penalty and Overtime Rates) Bill 2025 inserts new section 135A into Division 2 of Part 2-3 of the Fair Work Act 2009. Under s 135A, when the Fair Work Commission makes, varies or revokes a modern award it must ensure that:
The principle applies prospectively to all exercises of the Commission’s powers on or after commencement—including applications already on foot—but does not affect individual flexibility arrangements under s 144 or technical variations under s 160. By codifying these safeguards, the Bill reinforces the modern awards safety net that provides extra pay for work during unsocial hours, weekends, public holidays and overtime. The Bill is not expected to have a direct financial impact.
Modern award-reliant employees—often low-paid workers in retail, hospitality and care sectors—depend on penalty and overtime rates to secure a decent standard of living when working irregular or unsocial hours. Legislating protection for these rates ensures fair and equitable compensation and helps reduce income inequality in the workforce. [Judgment]
By closing the loophole that allows employers to “roll up” penalty and overtime pay into a single bundled rate, the Bill preserves transparency in remuneration. Workers can accurately compare job offers and understand their entitlements, while employers retain clear incentives to roster staff efficiently. Properly compensated unsocial hours also support social welfare by enabling employees to balance work and personal commitments with financial security.
While protecting penalty and overtime rates is a worthwhile aim, rigidly codifying this principle may constrain the Fair Work Commission’s ability to adapt modern awards to changing labour market conditions. Locking in fixed rates can limit the scope for innovative rostering and mutually agreed compensation structures that better suit some workplaces. [Judgment]
Moreover, banning all “roll-ups” even where total remuneration remains equal or higher could impose significant compliance costs on small and medium-sized enterprises. These extra administrative burdens may discourage employment growth or lead firms to reduce staff hours, ultimately harming the very workers the Bill intends to protect. [Judgment]
2025-07-24
Passed Both Houses
Unspecified
Employment and Workplace Relations
Labour, Industrial Policy, Social Support / Welfare