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A penalty rate is a higher rate of pay for work done outside usual working hours, such as late at night or on weekends or public holidays. Find out if you’re entitled to penalty rates using our Pay Rates Calculator or check out our information on penalty rates and loadings.
Generally speaking, entitlements to penalty rates are determined by the provisions of a registered agreement or modern award.
With respect to employees covered by a registered agreement, if the registered agreement does not explicitly make provision for altering the operation of penalty rates it may be considered a breach to increase an employee base rate of pay in lieu of paying penalty rates, even if the employee receives the monetary amount they would have received had they been paid penalty rates.
In the case of employees covered by modern awards, these deal with minimum obligations only. They do not require employers to increase or maintain over-award payments already being made.
Most modern awards provide that, if you are making over-award payments, monetary obligations in the modern award may be absorbed into those over-award payments.
However, employers may need to maintain an over-award payment or to allocate payments in a particular way because of their employment contracts with employees. Employers need to consider those employment contracts on a case-by-case basis.
An employer has a legal responsibility to ensure that all of their employees are paid at least what they would receive under an award, registered agreement or national minimum wage order.
If an employee is paid above the relevant award rate of pay and a minimum wage increase occurs, provided the employee’s over award payment still results in them being paid at least the base rate of pay, the employer is considered to have met their obligation with respect to the minimum wage.
Permitted deductions. The Fair Work Act (the FW Act) permits certain deductions to be made by an employer from an amount payable to an employee for work performed. For a deduction to be permissible, section 324 of the FW Act requires that it is authorised:
- in writing by the employee and is principally for the employee’s benefit; or
- by the employee in accordance with an enterprise agreement; or
- by or under a modern award or a Fair Work Australia order; or
- by or under a Commonwealth, State or Territory law, or an order of a court.
Where a deduction is authorised in writing by an employee, the authorisation must specify the amount of the deduction. Any variation to the amount of the deduction must be authorised in writing by the employee. The authorisation may be withdrawn at any time by the employee.
Taxation information and advice is available from the Australian Tax Office (ATO).
You can call the ATO on 13 28 61 or visit their website 
.