Penalty rate

Penalty rates are additional wages that employees earn for working outside normal working hours. These rates are a form of extra compensation for working at times that are often considered inconvenient or outside typical business hours, like late nights, weekends, or on public holidays. The specific rate of this additional pay and when it applies are detailed in the employee's award or agreement. This system ensures fair compensation for employees working these less desirable hours.

How penalty rates work

Penalty rates are set out in each modern award and enterprise agreement and are usually a percentage of the ordinary hourly rate. Depending on the award, examples include 125% on Saturdays, 150% or more on Sundays and 225% or more on public holidays. They apply to the hours worked at those times. A flat rate can only replace penalty rates if it covers everything the employee would have earned under the award. For example, an employee under the General Retail Industry Award 2020 who works on a public holiday is paid the higher public holiday rate for those hours.

Read our guide to modern awards, or book an HR compliance audit.