An Executive View of Penalty Rates

Whether or not they are paid a premium for it, working unsociable hours has become a reality for many Australians and indeed employees around the world.


In a 2014 survey of 571 executives around the world, BlueSteps executive search service found that the modern lifestyle (including globalisation and mobile technology) had decreased the leisure or personal time of 64% of its respondents.

53% of respondents said they always stayed connected to their office (via phone, email and social media) while they were on vacation. An additional 44% said they sometimes did, with only 3% saying they were never contactable on vacation.

Executive respondents worked an average of 58.5 hours a week, compared to the average full-time Australian worker, who worked for just under 40 hours a week according to ABS data for November 2014.

Yet 52% of executives are satisfied or extremely satisfied with their work-life balance. This contrasted to 45% four years ago. Executives appear to have come to grips with the new work reality with the help of flexible work schedules and telecommuting.

A major debate in 2015 will be whether other workers should also be adjusting their mindset to embrace the modern working reality. As part of its four-yearly review of modern awards, the Fair Work Commission is examining penalty rates for retail and hospitality awards.

Employers argue that in today’s 24/7 environment, penalty rates have become an outdated concept and one that leads to reduced productivity and profitability, shorter opening hours and lower employment in their industries. The rates are too high for businesses to viably open during certain periods, they claim.

Although employer groups are still gathering evidence and consulting as to what exact changes they will seek to penalty rates in the relevant awards, the complete abolition of penalty rates is not on the agenda for most. Rather they seek a rate reduction and recognition that for most Australians, Sunday is no longer any different to Saturday.

Unions respond that major events are still held mainly on weekends and that children are home on weekends and evenings – therefore recognition of unsociable hours must continue. They also draw attention to the fact that retail and hospitality workers often earn minimum wage, or close to it, such that penalty rates may represent the only way employees can make ends meet.

Research conducted in 2014 by the University of South Australia across 2,690 employees covering a range of occupations revealed that of those employees who received penalty rates for working unsocial hours, over half reported that they would cease working non-standard hours if penalty rates or additional pay were not offered. Exceptions to the rule were workers aged 18 to 24 years and those with combined annual household incomes of $90,000.

Executives also value the premium they receive for additional work (which in many cases will be conducted at unsocial hours). Although over half of the respondents to the BlueSteps survey said that work-life balance was just as important to them as pay, only 37% said they would work a lower number of working hours for a proportional drop in pay.

The question for either group of employees is “Is the premium paid for unsociable hours reasonable?”

For executives this is complex, as it is not always clear how much of their (admittedly higher) remuneration is for expertise and financial accountability, how much for their unsociable work hours and how much for their exposure to excessive travel. Yet there is a certain level of flexibility and simplicity in executive arrangements as they are negotiated on an individual “whole of job” basis.

The discussion of penalty rates in an award is a different matter. It must consider a broad variety of employees of different age, background, culture and religious persuasion, who may be prepared to work at different times in the day and different days of the week to suit their personal domestic circumstance and be paid variable casual (hourly, daily (shift)) rates, overtime rates, allowances and leave entitlements (or lack of in the case of casual employees).

In addition, while the world of work has gradually changed over time, the review will occur at a single point in time and likely recommend a step change. In this sense, it becomes a pay revolution rather than the pay evolution created by multiple changes to individual executive contracts.

Revolutions are seldom as peaceful as evolutions.