A debate over banning employers from cutting penalty rates has advanced to the Senate after passing all three readings in the House of Representatives.
The discussion began in February when the Australian Retailers Association (ARA) applied to the Fair Work Commission (FWC), the national workplace relations tribunal, to allow staff to give up weekend and public holiday pay for a higher regular salary.
The Albanese government quickly intervened, with former Employment Minister Murray Watt filing a submission opposing the move.
On July 24, Labor then introduced the Fair Work Amendment (Protecting Penalty and Overtime Rates) Bill 2025, aiming to amend the Fair Work Act 2009 to protect holiday, weekend, late-night, and overtime entitlements of modern award-reliant employees.
The Bill mandates that the FWC, when creating or altering modern awards, must not reduce existing penalty or overtime rates, and that awards can’t have terms that replace penalty and overtime pay with other arrangements that would reduce employees’ total earnings.
In Australia, 2.6 million workers directly rely on penalty rates, with nearly 1.2 million working weekends and 900,000 on night shifts.
According to estimates from the Australian Services Union, the ARA’s applications to the FWC could cut a worker’s pay by $15,000 annually.
“What’s become clear is that we need added legal protection to make sure penalty rates and overtime are protected in our award system,” Employment Minister Amanda Rishworth said on July 19.
“We want to make it clear in law that these penalty rates and overtime rates should be protected because we don’t want people earning less and working harder.”
Businesses Say Bill Restricts Work Flexibility
Australian business associations told the Education and Employment Legislation Committee that the proposed Fair Work Bill would constrain employees’ ability to seek work arrangements that better suit their circumstances.
“This will restrict the ability for business to provide flexibility that employees increasingly demand, such as the ability to work from home or other hybrid working arrangements where they mutually agree,” said Shaun Schmitke, the director of workplace relations of the Australian Chamber of Commerce and Industry.
Some argue that the Bill will weaken the FWC’s independence by removing flexible methods that help the agency manage complex employment contracts.
“The FWC is unable to include higher base salary terms in awards, such as the banking and finance industry, that significantly benefit a large number of finance workers by increasing their pay and allowing flexibility in when their hours are worked, even if the arrangement was supported by unions and requires individual agreement,” said Kat Eather, the general counsel at Business Council of Australia.
