The claim

For months the Federal Opposition has been talking about cuts to penalty rates.

In February 2017, the Fair Work Commission decided to reduce minimum Sunday and public holiday rates for some award workers in the retail, pharmacy and hospitality industries.

The cuts began on July 1, 2017.

On ABC TV's Q&A program on June 26, 2017, the Opposition spokeswoman for justice Clare O'Neil said "on Sunday, in fact, this penalty rate cut will take effect – 700,000 of the poorest-paid people in the country are going to have an effective pay cut".

Opposition Leader Bill Shorten and other Labor politicians have also used the 700,000 number, including on July 11 when Mr Shorten said: "If we get elected we will reverse the unilateral cuts to penalty rates covering 700,000 low paid Australian workers."

Is that the real story? RMIT ABC Fact Check takes a look.

The verdict

Ms O'Neil's claim is fanciful.

700,000 people did not get an effective pay cut on July 1, 2017.

The 700,000 figure is based on an estimate of the number of people who work under the affected awards, prepared by the McKell Institute, a think tank named after former NSW Labor premier Sir William McKell.

It does not take into account how many of these people actually do or can work on a Sunday.

Even people who work for an employer that never opens on a Sunday are included in the 700,000 number.

And the 700,000 estimate itself may overstate the number of people on awards affected by changes to penalty rates.

Not all award workers in the hospitality industry will see a reduction in Sunday penalty rates – there is no change to Sunday rates for any worker on the Restaurant Industry Award or casuals on the Hospitality (General) Award.

Some employers may choose to pay above the award rate.

Ms O'Neil is on stronger ground when she describes award workers as "poorest-paid".

Compared to the workforce as a whole, workers on the affected awards are low paid.

However, whether or not a particular employee is among "the poorest-paid" based on the number of hours worked will depend on that worker's particular circumstances and work patterns.

What did the commission decide?

The Fair Work Commission (or FWC) has not lowered penalty rates across the board.

What is a modern award? An award provides "pay rates and conditions of employment such as leave entitlements, overtime and shift work, amongst other workplace related conditions"

An award provides "pay rates and conditions of employment such as leave entitlements, overtime and shift work, amongst other workplace related conditions" There are 122 national awards covering particular industries or occupations.

There are 122 national awards covering particular industries or occupations. Awards set the minimum wage for a worker covered by that award.

Under the Fair Work Act brought in by the Rudd Labor government in 2009, the FWC has to review modern awards every four years.

During the review process, some employer groups asked the FWC to vary penalty rates in certain awards

So in 2015 and 2016, the FWC reviewed the weekend and public holiday penalty rates in six hospitality and retail awards:

The Hospitality Industry Award covers venues such as hotels, tourist accommodation, casinos and restaurants operated as part of those venues, whereas the Restaurant Award covers non-hotel restaurants including reception centres, nightclubs, cafés, roadhouses and catering services provided by those businesses.

The FWC says that the hearing on penalty rates took 39 days, it heard evidence from 143 people and considered almost 6000 written submissions.

The decision was handed down on February 23, 2017.

No change was made to penalty rates for workers under the Registered and Licensed Clubs Award.

For other workers, the outcome for Sunday penalty rates was:

Reduced penalty rates for all workers under the Fast Food, General Retail and Pharmacy awards;

Reduced penalty rates for all workers under the Fast Food, General Retail and Pharmacy awards; Reduced penalty rates for permanent workers under the Hospitality Industry (General) award;

Reduced penalty rates for permanent workers under the Hospitality Industry (General) award; No change to Sunday penalty rates under the Restaurant award or for casual workers under the Hospitality Industry (General) award.

The outcome on public holiday rates was:

Reduced penalty rates for permanent workers under the Restaurant award.

Reduced penalty rates for permanent workers under the Restaurant award. Reduced penalty rates for all workers under the Hospitality Industry (General), General Retail, Fast Food and Pharmacy awards.

Reduced penalty rates for all workers under the Hospitality Industry (General), General Retail, Fast Food and Pharmacy awards. No change for casual workers under the Restaurant award.

Award pay rates are the minimum rate that an employer has to pay a worker in a particular category or role: an employer can pay more or keep higher levels of penalty rates if they wish to do so.

Transition arrangements mean that the changes to Sunday rates are being phased in over a period of three or four years (depending on the award and employment status).

For instance, on July 1, the penalty rate under the Hospitality Industry (General) award for permanent employees was reduced from 175 per cent to 170 per cent. The full reduction to 150 per cent will not be in place until July 1, 2019.

Changes to public holiday penalty rates were effective in full from July 1, 2017.

Where does the figure come from?

Ms O'Neil's office tells Fact Check that her claim is based on "independent data".

The 700,000 number comes from a February 25, 2017 report produced by McKell Institute (a self-described "progressive research institute" with many senior staff associated with the Australian Labor Party).

The report, entitled "The Impact of the FWC's February 23 Sunday Penalty Rates Decision", found that "up to 681,378 Australians are currently working under awards that are subject to the proposed changes across the retail, hospitality and fast food sectors."

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Ms O'Neil has taken the number of 681,378 people that features in the McKell report and added 28,149 pharmacy workers, to obtain a total of 709,527 people who will have "an effective pay cut."

Even if it is accepted that Ms O'Neil has accurately calculated the figure of 700,000 people, the report does not say that this many people will get a pay cut.

This number only estimates the total people who work under a particular award, not how many work on a Sunday (or public holiday).

It includes people who never work on Sunday, either by choice or the fact that their employer does not open or need them.

For instance, an award worker in a retail outlet that only operates Monday to Friday would be one of these 700,000 people, but they are no worse off as a result of the penalty rate change.

Chris Oliver, an employment and industrial relations lawyer at law firm People + Culture Strategies, tells Fact Check:

"There is data in the FWC decision suggesting there are 700,000 award reliant workers in the hospitality and retail sectors, but the data also indicates that, on average, only around 54% of award workers across both sectors actually work on weekends." "The figure is likely to fall further when you consider that this data includes all weekend workers, not just those working Sundays," he says.

Edward Cavanough, manager of policy at the McKell Institute and author of its report, would not comment on whether the report's findings support Ms O'Neil's claim.

How reliable is the 700,000 figure?

Fact Check finds that the estimates close to the 700,000 figure in the McKell report may in themselves be overstated.

The figures are based on an estimate of total people in a particular industry who are not on a collective agreement, without subtracting the numbers who are on awards that were not affected by the FWC decision.

This means that the report calculates the number of affected hospitality workers by taking a total figure of 515,820 hospitality industry employees and assuming that 75 per cent of them are reliant on the award.

But Sunday penalty changes do not apply to all types of hospitality workers: casuals and most restaurant workers (who are on the Restaurant Industry award) are not affected.

And the Australian Bureau of Statistics survey on "Employee Earnings and Hours", which was used by the FWC, found that 42.7 per cent (not 75 per cent) of workers in the Accommodation and Food Services industry are paid under an award.

Similarly, the number of potentially affected retail workers is calculated by taking 681,384 retail employees and assuming that 45 per cent of them are on the award.

But the FWC's own Award Reliance Survey (as noted in paragraph [1425] of the FWC decision) indicates that 34.5 per cent (not 45 per cent) of retail employees are award reliant, and out of these only 74.3 per cent work under an award impacted by the FWC decision.

Of course there remains the fundamental issue that the numbers do not take into account the proportion of workers that actually work on Sundays.

What other estimates are there?

Other attempts have been made to estimate the number of award workers who work on a Sunday.

In a piece for The Conversation, the University of Melbourne's Dr Josh Healy applied Australian Bureau of Statistics estimates of people who work on Sundays and/or work on varying days (and so may be a Sunday worker) and came up with a figure of 355,000 people potentially affected.

In the same article, Rebecca Cassells of Curtin University used numbers from Household Income and Labour Dynamics in Australia Survey and reached an even lower figure of 217,270.

But again neither of these estimates take into account the fact that Restaurant Award workers and casual workers on the Hospitality (General) Award are unaffected by the changes.

Dr Healey tells Fact Check "None of Australia's labour force surveys include information about specific award coverage anymore."

"They refer to industry and or occupation of employment, which are overlapping categories in some cases but generally not perfect matches," he says.

The Government has not helped its case.

The day after the FWC's decision in February 2017, Prime Minister Turnbull appeared to support Labor's claim in an interview on Melbourne radio 3AW.

"There are many hundreds of thousands, about 600,000 I think, workers who will receive less on Sundays", he said.

However, by March 2017, in a submission to the FWC, the Government estimated that the number of affected would be between 300,000 and 450,000 people.

All of these calculations can only ever be estimates.

Professor Mark Wooden of the University of Melbourne tells Fact Check "Given the broad assumptions made, the 700,000 figure is not credible and far too high, but no one really knows what the net effect will be."

"While many workers will get a cut in pay per hour, some of these workers will get an increase in hours worked, offsetting some of their reduction in total pay, and still other workers who don't currently work on Sundays will now be offered work on Sunday."

Will pay actually be cut?

The award system sets the minimum that employers have to pay for a certain role, but there is nothing stopping employers paying above the award rate or keeping higher penalties in place.

This is acknowledged by the Australian Council of Trade Unions, which is running a campaign that highlights "supportive businesses" who do not cut penalties.

Dr Geni Dechter of the University of New South Wales School of Economics tells Fact Check:

"Undoubtedly, some workers will be hurt by the change in policy. But not every employer will necessarily reduce wage in response to the policy change. For some jobs, paying higher wages on weekends might be justified by the market conditions and not driven by government regulation."

But lawyer Chris Oliver suggests this is likely to be the exception rather than the rule. He tells Fact Check:

"Certainly there are employers in hospitality and retail who pay above the award, and some may decide to keep penalty rates at the level they have been in the past. In addition, employers who have entered into contracts with employees that specify rates of pay may be unable to reduce these rates. However in my experience, the retail and hospitality industries operate on low margins and it's likely that most small and medium business employers will pass the rate cut on."

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Even if the penalty rates are passed on, they may not be felt by workers in the short term.

This is because a scheduled rise in ordinary rates of pay by 3.3 per cent occurred on July 1 for all of the awards impacted by the FWC decision.

So, depending on when someone works, they may end up better off, at least until the next financial year.

Are these workers the poorest paid?

Ms O'Neil's assertion about "poorest-paid people" is based on the simple fact that the award is the minimum legal wage for a role in a particular industry.

It is fair to say that some of the people working under these awards are among the "poorest paid" in Australia.

Mr Oliver tells Fact Check:

"The Fair Work Commission considers a worker to be low paid if they earn less than two-thirds of median full-time Australian wage.

In their decision on penalty rates, the commission concludes that workers dependent on these awards are 'low-paid'."

But whether someone is the "poorest-paid" will depend on factors including the job classification, age, time of work and casual status.





Lowest and highest paid (non-introductory) permanent adult rates of pay (as at July 1, 2017) Award Classification Hourly pay rate (ordinary hours of work) Hourly rate (Saturday) Hourly rate (Sunday) Hospitality Industry (General) Award Level 1 food and beverage attendant grade 1 $18.81 $23.51 $31.98 Managerial staff – hotel $23.27 $29.09 $39.56 Restaurant Industry Award Level 1 – food and beverage attendant grade 1 $18.81 $23.51 $28.22 Level 6 – cook grade 5 (tradesperson) $23.23 $29.04 $34.84 General retail industry award Retail employee level 1 $20.08 $25.10 $39.16 Retail employee level 8 $24.57 $30.71 $47.91 Fast food industry award Level 1 $20.08 $25.10 $29.12 Level 3 – in charge of 2 or more persons $21.88 $27.35 $32.82 Pharmacy industry award Pharmacy assistant - level 1 $20.08 $25.10 $39.16 Pharmacist manager $32.82 $41.03 $64.00



The current minimum wage in Australia is $18.29.

A worker who regularly receives the lowest weekday rate of pay in the hospitality industry earns close to the minimum wage.

However, if that same worker only works part-time on a Sunday, they earn around $30 an hour.

A Level 1 retail employee gets paid almost $40 an hour on Sunday, while a worker on the highest level of the Pharmacy Award receives $64 an hour on Sunday.

Sources