Interpreting awards and agreements: penalty on a penalty

Analysis

Interpreting awards and agreements: penalty on a penalty

Continuing his articles on interpreting awards and agreements, Paul Munro provides some insights into the general principle that an employer is not obliged to pay a penalty on a penalty.

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Continuing his articles on interpreting awards and agreements, Paul Munro provides some insights into the general principle that an employer is not obliged to pay a penalty on a penalty.
 
An employer should not be obliged to pay a penalty on a penalty. This is a principle that has been determined by various industrial courts and tribunals, but one which is never clarified in awards or agreements.
 
Shiftwork and overtime
 
Employees performing work that may, on the face of it, attract two or more penalty rates is a common occurrence in the workplace. These rates are generally prescribed by the relevant award or agreement
 
An example of this is where a shiftworker works overtime at the conclusion of their rostered shift. The employee is entitled to a shift allowance for the ordinary shift and an overtime provision that normally provides for time and a half and double time for overtime.
 
Employers may be confused as to whether the overtime rate is calculated on the hourly rate including the shift allowance.
 
In the absence of a specific provision in the relevant award or enterprise agreement, a limitation is usually imposed on the cumulation of penalty rates paid in respect of shift work, overtime, weekend work, and public holiday work.
 
Therefore, a shiftworker receiving a 15% afternoon shift allowance who works overtime would have the overtime penalty rate calculated on the ordinary hourly rate excluding the shift allowance. This is because the shift allowance is deemed to be a penalty and does not form part of a shift worker's ordinary pay.
 
Special rates
 
Most awards and agreements prescribe a limitation on the extent to which any extra rates may accumulate when two or more rates are applicable at the same time.
 
In the case of special rates (eg hot work, cold work, wet work, confined spaces, etc) or disability allowances, it is generally provided that when two or more such rates are apparently payable simultaneously, only the highest of the rates is payable.
 
Also, these extra rates are not ordinarily taken into account in calculating penalty rates for overtime, weekend or public holiday work. The effect of this is that the extra rates are added to the total rate after the penalty rate has been calculated.
 
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