The Federal Government’s legislation to protect penalty and overtime pay has passed both houses of parliament, following Senate approval on Thursday, 28 August 2025.
Workplace Relations Minister Amanda Rishworth explained during her second reading speech on 24 July that the Fair Work Amendment (Protecting Penalty and Overtime Rates) Bill introduces a new section to the Fair Work Act. This provision establishes a guiding principle for the Fair Work Commission when making, varying, or revoking modern awards.
Under the change, the Commission must ensure that award provisions do not reduce an employee’s entitlement to penalty or overtime rates, nor replace those entitlements with arrangements that leave workers financially worse off.
Employer applications for annualised wage arrangements
The Bill follows recent proposals in the retail, clerical, and banking industries to incorporate penalty rates into annualised wage structures. From now on, any proposal affecting penalty or overtime rates will need to be assessed against this new principle.
Impact on industrial instruments
The legislation will apply to new or current applications to vary modern awards but will not apply retrospectively to awards that already include annualised wage arrangements. It also does not affect individual employment contracts, flexibility agreements, or the enterprise bargaining framework.
Enterprise agreements will continue to provide a forum for negotiating workplace flexibility, with safeguards such as the “better off overall test” remaining in place.
That said, it is possible that future applications may seek to remove the 22 annualised wage arrangements that currently exist across modern awards.
Commencement
The amendments will commence the day after they receive royal assent, expected within the coming week. Employers are not required to take immediate action. Any obligations will arise only once relevant changes are made to the awards applying to their workforce.
Business Chamber Queensland will continue to monitor developments and keep businesses updated on any impacts arising from these reforms.
If your business needs support to navigate penalty rates or overtime pay for employees, or to apply modern awards, our Workplace Advisory team can help. Businesses with a Business Essentials or Business Evolve membership can make unlimited calls to our Workplace Services Hotline for general advice. The team also offer expert, practical and affordable workplace consulting for all Queensland businesses. Reach out to us today on 1300 731 988 to find out more.
