Protecting Penalty Rates and Overtime

| August 1, 2025

Last Thursday the Albanese Government introduced the Fair Work Amendment (Protecting Penalty and Overtime Rates) Bill 2025 (Bill); a Bill to protect penalty rates and overtime payment entitlements in modern awards.  

The Bill seeks the introduction of new section 135A. This new section provides that: 

a) Penalty rates and overtime cannot be reduced in modern awards, and  

b) 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.  

In effect, b) means that where a flat rate of pay is paid to an employee, at all times that flat rate must continue to include the actual value of the penalty rates and overtime – it cannot result in any reduction. 

Today, the House of Representatives passed the Bill. 

When first introduced last week, the Bill was the subject of discussion about the role of the Fair Work Commission to review modern awards and their provisions as they relate to penalty rates and overtime. This was due to the wording of the Bill, however, this morning the Bill was amended with a new subsection confirming the Fair Work Commission was not compelled by this proposed legislation to undertake a comprehensive review of modern awards. 

The Senate has referred the Bill to the Education and Employment Legislation Committee (Committee), with a report back date of 21 August 2025.  

The Committee may recommend changes to the Bill prior to it proceeding to the Senate for consideration. Likewise, the Senate may also seek some changes to the Bill.  

IRiQ Law will provide updates to the progress of the Bill, and the impact of it once in its final form. 

Final Thoughts

This Bill reinforces the Albanese Government’s commitment to safeguarding minimum entitlements under modern awards—particularly around penalty rates and overtime. While it remains subject to committee review and possible amendment, its core message is clear: award protections cannot be undercut by flat rates or substitution clauses.

At IRiQ Law, we’re closely monitoring the Bill’s progress and its implications for employers and employees alike. We’ll continue to provide timely updates and guidance as the legislation evolves.

📞 Contact us if you have questions about how this Bill could affect your pay structures or award compliance.