Is this the end of “All-in Pay”?

What the Fair Work Amendment (Protecting Penalty and Overtime Rates) Bill really means..

If you have not heard, the Albanese government recently introduced the Fair Work Amendment (Protecting Penalty and Overtime Rates) Bill 2025 to Parliament. The bill is a landmark reform aiming to cement penalty and overtime entitlements for modern award‑reliant workers. With roughly 2.6 million Australians depending on those awards, this is a big deal. They claim it’s all about protecting these workers’ income integrity. No doubt union driven this bill has the potential to send shock waves across all industries with 121 Modern Awards currently in existence.

What’s changing in simple terms

1. Say good-bye to all in rates
   Employers will no longer be able to roll penalty and overtime rates into a flat rate of pay, if that ends up making any worker worse off. The Bill strips away loopholes that let employers bundle those allowances into an annual salary without real compensation.
2. Changes to how awards are handled
   When the Fair Work Commission makes changes or revokes modern awards, it must now follow a new high‑level principle (proposed section 135A). That comes after considering the modern awards objective. In short, penalty and overtime rules can’t be sacrificed for flexibility or higher base pay.
3. No worker to be worse off
   This was a clear election promise from Labor. Workplace Relations Minister Amanda Rishworth said no individual employee covered by a modern award will be disadvantaged. She flagged cases in the Fair Work Commission where applications were already underway to diminish penalty rates.

A major question everyone is thinking about is what about IFAs?

For now, IFAs remain on the table. The new Bill doesn’t remove the option to use them under the Fair Work Act. But here’s the catch… The new Bill makes it clear that penalty and overtime rates in modern awards can’t be reduced or absorbed into a flat rate if it means the employee is worse off overall. So, while you can still negotiate an IFA, it must leave the employee genuinely better off and that test could become stricter once the legislation passes.

What this means in practice is still a bit murky. For example, if an employee agrees to an “all-in” rate that clearly compensates them for penalties, and they end up financially better off, could that still be allowed? Possibly. But the Fair Work Commission will have less discretion to approve arrangements that trade off entitlements, even with consent.

So yes, IFAs are still allowed but they’ll come under greater scrutiny, and you’ll need to document the better-off overall outcome more clearly than ever. Sloppy or ambiguous agreements won’t cut it.

Why it came about

Labor pushed this reform because they alleged that various employer groups had applied to the Fair Work Commission to reduce penalty rates, particularly for retail, clerical and banking staff. These cases threatened to trade away penalty rates for small base salary increases, leaving workers financially worse off.

But as you can imagine – not everyone’s thrilled about the proposed changes.

The Australian Retailers Association (ARA) has pushed back, saying their recent application to vary the General Retail Industry Award wasn’t about scrapping penalty rates. Instead, they argued it was about giving retail managers more choice, specifically, the option to opt into an annualised salary that rolled in penalties and overtime, with the goal of providing a higher, more stable income.

ARA CEO Chris Rodwell defended the model as a “commonsense” approach, saying it wasn’t about reducing entitlements, but simplifying pay and supporting job security.

Over at the Australian Chamber of Commerce and Industry (ACCI), the concerns were louder. They say the Bill will effectively ban employers and employees from negotiating salary packages that include penalty rates, something they argue is still relevant in modern workplaces.

ACCI acting CEO David Alexander called the move “a backwards step” that’s out of touch with the realities of a modern economy, where flexibility is often key for both sides.

Who supports it,  and who doesn’t

Supporters: Labor and Greens

The Labour government and union advocates say this is about protecting women, casuals, part-time workers and young workers who dominate award sectors.

The Greens appear ready to support the Bill in the Senate, potentially pushing for additional workplace entitlements.

Critics: ACCI & Coalition

Business lobby groups like the Australian Chamber of Commerce & Industry (ACCI) argue that the Bill removes flexibility, blocking legitimate enterprise bargaining options. ACCI says employers and staff should be allowed to negotiate penalty rates in return for higher base pay if it makes sense commercially.

Coalition MP Tim Wilson is calling for more consultation, especially for small businesses. He questioned the rushed approach and flagged potential impacts on employment levels.

So… what do employers need to do right now?

Honestly? Not much—yet.

The Bill hasn’t been passed into law, so there’s no immediate action required. It’s still working its way through Parliament, and while it’s expected to pass (with Greens support), it’s not law until it’s been formally enacted.

But don’t get too comfy this isn’t one to ignore. Once the Bill is passed, it’ll have real implications for businesses that employ:

• Award-covered employees on annualised salaries (especially where penalties and overtime have been absorbed into a flat rate).
• Casuals or part-timers on “all-in” hourly rates that include weekend or late-night loadings.
• Employees covered by EBAs, when it comes time to renegotiate your next agreement, things could get trickier.

So, while you don’t need to rip up your contracts tomorrow, it’s smart to start thinking ahead. If your pay structure rolls penalty or overtime rates into a single figure, or if you rely on flexibility to offer salary packages that trade off certain Award entitlements, this legislation could require a rethink. This will be super important where your buffers are on the “light on” side. I.e. you are paying a teeny tiny bit over the award and hoping for the best.

Our advice?

Watch this space. When the time comes, we’ll help you review your contracts, award mapping, and enterprise agreements to ensure they comply with the new rules.

Feeling concerned about wage compliance? Then reach out we would love to help, cause although you might hate this stuff, we absolutely LOVE it.