Penalty Rates and Overtime Protections Finalised Under New Fair Work Amendments

| September 4, 2025

Further to our recent article regarding the introduction of the Albanese Government’s Fair Work Amendment (Protecting Penalty and Overtime Rates) Bill 2025 (Bill), the Senate Education and Employment Legislation Committee (Committee) considered it in detail, and at the end of its 46 page report, recommended the Bill be passed without amendment.

To recap, the Bill proposed new section 135A be inserted into the Fair Work Act 2009 to provide:   

1. Penalty rates and overtime cannot be reduced in modern awards, and  

2. A modern award cannot include a term that substitutes entitlements in a way that could result with the reduction of the value of the penalty rates and overtime.  

As a result of the Committee’s recommendation, the Bill progressed to the Senate where it passed on 28 August.  

The Bill received Royal Assent last Friday, on 29 August, and has taken effect as an Act to amend the Fair Work Act 2009. 

What does this mean?

The Fair Work Act 2009 now contains a section that protects penalty rates and overtime from being reduced. While they are not legislative entitlements, this protection means penalty rates and overtime will remain part of the Modern Award system, and neither can be reduced by the Fair Work Commission. 

On a practical level, it also has the effect of preventing employers from being able to roll-up penalty rates and overtime into a single pay rate where a reduction is the result.  

Employers with award reliant employees will need to review and monitor pay structures and entitlements to penalty rates and overtime, so that at all times employees are not undercompensated by the payment of a rolled-up rate of pay.  

Final Thoughts

The passage of the Fair Work Amendment (Protecting Penalty and Overtime Rates) Act 2025 is a decisive step toward strengthening fairness in Australian workplaces. With penalty rates and overtime now firmly protected from erosion through rolled-up pay or substitution clauses, employers with award-reliant staff must ensure their payroll practices are fully aligned with the law.

At IRiQ Law, we support organisations in building compliant, fair, and future-ready workplaces. Whether you need to review pay structures, update employment terms, or ensure alignment with modern award obligations, our team is here to help.

Contact us today to ensure your workplace is compliant and ready for these important legislative changes.