Is It Illegal Not To Pay Public Holiday Rates In Australia?

Public holidays can be great for customers (and for business), but they can be stressful for employers - especially when you’re juggling rosters, wage costs, and last-minute staffing gaps.

If you’ve ever wondered whether it’s illegal to not pay public holiday rates, you’re not alone. It’s one of the most common payroll compliance questions we hear from small business owners, particularly in hospitality, retail, health services, and businesses that trade seven days a week.

The short version is: sometimes it is illegal - and sometimes it isn’t - depending on the employee’s minimum entitlements under the relevant modern award or enterprise agreement (if any), the National Employment Standards (NES), and their employment arrangement.

Below, we’ll break it down in plain English so you can confidently set your payroll up correctly and avoid costly underpayments.

What Do “Public Holiday Rates” Mean In Australia?

In Australia, “public holiday rates” usually refers to penalty rates or loadings payable when an employee works on a public holiday.

However, it’s important to know that public holiday pay entitlements aren’t one-size-fits-all. What applies depends on a few key factors, including:

• the employee’s classification and pay basis (full-time, part-time, casual)
• the applicable modern award (or enterprise agreement)
• any relevant individual flexibility arrangements (where lawful)
• the employee’s employment contract terms (as long as they don’t undercut minimum entitlements)
• whether the employee actually worked, or was absent on a public holiday

Public Holiday Penalty Rates vs Ordinary Public Holiday Pay

There are two common situations small business owners need to separate:

• Employee works on a public holiday: penalty rates may apply (for example, 200%–250% of the base rate, depending on the award).
• Employee does not work on a public holiday: full-time and part-time employees may still be entitled to be paid their “base rate” for their ordinary hours that would have been worked (again, depending on the rules).

Casual employees are often treated differently (because casual loading is intended to compensate for some entitlements), but if a casual employee actually works on a public holiday, their award or agreement may still require a public holiday penalty rate (often expressed as a separate public holiday rate for casuals).

Is It Illegal to Not Pay Public Holiday Rates?

It can be illegal to not pay public holiday rates if:

• the employee is entitled to a higher rate for working the public holiday under the NES, an award, or an enterprise agreement, and
• you pay them their ordinary hourly rate (or another rate that is less than their minimum entitlement).

In other words, the legality depends on what the minimum lawful pay rate is for that employee on that day.

For many small businesses, the biggest compliance trap is assuming that:

• “my staff are casual so public holidays don’t apply”, or
• “they agreed to work, so normal rates are fine”, or
• “they’re on salary so penalty rates don’t matter”.

These assumptions can be risky. Even if an employee agrees to be paid less, you generally can’t contract out of minimum NES/award entitlements.

Where Do Public Holiday Pay Rules Come From?

As an employer, you’ll usually be working across:

• The Fair Work Act and the National Employment Standards (NES) - which set baseline rules about public holidays, payment for absent employees, and requests to work
• Modern awards - which set minimum rates, classifications, penalty rates, allowances, and rostering rules for many industries
• Enterprise agreements - if your business has one in place
• Employment contracts - which should fit within (not undercut) the minimum legal framework

If you’re still building your employment documentation, having a properly tailored Employment Contract is a good starting point - but remember, the contract is not the only source of pay rules.

What Happens If You Get It Wrong?

If an employee is underpaid for public holidays, the business could face:

• backpay liabilities (often for multiple employees and multiple years)
• interest and administrative time to fix payroll records
• Fair Work Ombudsman involvement, including investigations and enforceable undertakings
• civil penalties for breaches (which can be significant)
• reputational damage (especially for customer-facing businesses)

It’s also worth keeping in mind that underpayments aren’t just a “big business” issue - small businesses are frequently audited or investigated too, especially where payroll is managed informally or manually.

If you want an overview of how exposure can arise, it’s worth understanding how Fair Work Act penalties can apply when minimum entitlements aren’t met.

When Do You Have To Pay Public Holiday Rates (And When You Don’t)?

This is where many employers want a clear checklist - but the answer depends on the scenario. Let’s walk through the most common ones.

1. If the Employee Works on the Public Holiday

If an employee works on a public holiday, they may be entitled to:

• public holiday penalty rates (often higher than weekend rates), and/or
• a minimum engagement period (depending on the award), and/or
• alternative arrangements like a substituted day or a day in lieu (but only if allowed under the award/agreement and implemented correctly).

Don’t assume that paying a “flat higher rate” is compliant unless you’ve checked it against the award or agreement. Public holiday pay can change based on the day, time, classification, and employment type.

Public holidays can also overlap with other pay triggers. For example, if your employee works beyond ordinary hours on a public holiday, you may also need to consider overtime rules. Many businesses find it helpful to review the basics of overtime rates so they can spot when multiple entitlements stack up.

2. If the Employee Doesn’t Work on the Public Holiday

Full-time and part-time employees may still be entitled to be paid for the public holiday if:

• the public holiday falls on a day they would ordinarily work, and
• they are not rostered on, or they are absent because you did not make a reasonable request for them to work (or they reasonably refused a request, depending on the circumstances).

In many cases, this means paying their base rate of pay for their ordinary rostered hours on that day (not penalty rates, because they didn’t work).

Casual employees are generally not entitled to be paid for public holidays they don’t work. However, if a casual has an established, regular roster, it’s still important to check the applicable award or agreement and keep clear rostering records to avoid disputes about what hours were offered and worked.

3. If You and the Employee Agree to Substitute the Public Holiday

Some awards and enterprise agreements allow an employer and employee to agree to substitute a public holiday for another day. This can be a legitimate way to manage operations - but it must be done properly.

Key things to check include:

• Does the applicable award or agreement allow substitution?
• Does it require agreement in writing?
• Are there consultation or notice requirements?
• Does the employee still receive their correct entitlements for the substituted day?

If you substitute incorrectly (or treat it as a “verbal understanding”), you can accidentally create an underpayment.

4. If the Employee Is on Salary

Salary arrangements can be tricky. A salary doesn’t automatically “wipe out” penalty rates or public holiday rates.

If your employee is award-covered, you generally need to ensure the salary arrangement is structured so the employee is not worse off than their minimum award entitlements for the hours and patterns they actually work (this may require an annualised wage arrangement that meets award rules, and/or regular reconciliations).

This is where many small businesses get caught out - especially where:

• the employee works lots of public holidays, weekends, or late nights, or
• the role changed over time, but the salary didn’t.

Common Small Business Mistakes That Lead to Underpaying Public Holidays

Even well-intentioned business owners can fall into payroll traps, particularly when they’re growing quickly or relying on a mix of casual and part-time staff.

Relying on “Weekend Rates” Instead of Public Holiday Rates

Public holiday penalty rates are often higher than Saturday/Sunday rates. If your payroll system defaults to weekend settings, you might unknowingly pay the wrong rate.

If your business regularly trades on weekends and public holidays, it’s helpful to understand the difference between ordinary time, weekend penalties, and public holiday penalties. Many employers start by getting clear on weekend pay rates and then layering public holiday rules on top.

Not Checking the Right Modern Award (or Classification Level)

A lot of pay disputes come down to one issue: the wrong award or classification level was applied.

For example, two employees in the same business might be covered by different awards depending on what they actually do, or they might fall under different pay levels depending on experience and duties.

Once the award is wrong, public holiday rates are usually wrong too.

Poor Rostering Records (Or No Clear “Ordinary Hours” Pattern)

Public holiday pay for employees who don’t work on the day often depends on whether the holiday falls on a day they would “ordinarily” work.

If rosters are inconsistent or not properly documented, disputes can arise about whether the employee should have been paid for the day off.

Having a clear rostering process helps reduce this risk, especially if you operate in an industry with variable shift patterns. Many businesses put rules in place aligned with employee rostering obligations so expectations are clearer from the start.

Assuming Casual = No Public Holiday Entitlements

It’s true that casual employees typically don’t get paid when they don’t work a public holiday.

But if a casual employee does work on a public holiday, they may still be entitled to a public holiday penalty rate under their award (often as a specific public holiday casual rate).

This is one of the most common reasons employers ask whether it’s illegal to not pay public holiday rates to casuals. It can be, if the applicable award or agreement says a higher rate applies when they work.

Practical Steps to Stay Compliant With Public Holiday Pay

If you want to reduce payroll risk without getting buried in legal jargon, you don’t need to memorise every award clause - but you do need a reliable process.

Here are practical steps many small businesses adopt to stay on track.

1. Identify the Correct Award and Pay Classifications

Start by confirming:

• which modern award covers each role (if any), and
• the correct classification level and pay point.

If you have a mixed workforce (for example, supervisors, admin staff, and frontline workers), don’t assume everyone is covered by the same award.

2. Build Public Holiday Rules Into Your Payroll System

Where possible, automate the application of public holiday rates by:

• setting up public holiday calendars by state/territory (public holidays differ across Australia)
• creating pay categories for public holiday ordinary hours vs public holiday worked hours
• checking pay slips and timesheets for the first few public holidays after setup

Automation doesn’t replace compliance, but it can reduce human error.

3. Use Clear Contracts and Policies (So Everyone Knows the Rules)

Your employment documents won’t override minimum legal entitlements, but they can help prevent confusion by clearly setting expectations about:

• ordinary hours and rostering practices
• requests to work on public holidays
• how you handle substitutions or time off in lieu (where lawful)
• approval processes for overtime and shift changes

That’s why many businesses put proper documentation in place early, including an Employment Contract that matches the role and the way the business actually operates.

4. Train Your Managers (Especially Those Who Approve Shifts)

Payroll underpayments often happen because the person rostering staff doesn’t understand the pay consequences.

Even basic training like “public holiday shifts must be flagged” and “don’t swap public holidays verbally” can make a big difference.

5. Run Regular “Health Checks” on Pay and Records

It’s much easier to fix a small issue early than to unwind years of underpayments later.

Consider reviewing:

• timesheets and rosters around public holidays
• employee classifications (especially after promotions or role changes)
• salary arrangements where employees regularly work weekends/public holidays (including any annualised wage requirements and reconciliation processes)
• record-keeping and payslip accuracy

If you find a mistake, it’s usually best to deal with it quickly and transparently - and get advice on the cleanest way to correct it.

Key Takeaways

• Is it illegal to not pay public holiday rates? It can be, if the employee is entitled to a higher public holiday rate under the NES, a modern award or an enterprise agreement and you pay less than the minimum.
• Public holiday entitlements are not universal - they depend on the employee type (full-time/part-time/casual), the applicable award or agreement, and whether the employee actually worked.
• Full-time and part-time employees may be entitled to be paid their base rate for ordinary hours on a public holiday even if they don’t work, if it falls on a day they would ordinarily work.
• Casual employees may still be entitled to a higher rate if they work on the public holiday, even though they usually aren’t paid when they don’t work the public holiday.
• Common payroll risks include applying weekend rates instead of public holiday rates, using the wrong award/classification, and having unclear rostering and record-keeping.
• Clear payroll processes, accurate award coverage, and properly drafted employment documents help reduce the risk of underpayments and Fair Work issues.

If you’d like help reviewing your pay compliance and employment documents (including public holiday rates), you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.