Cost of living pressures fuelling change for businesses

Over the past few years, Australia (and much of the world) has faced economic and political uncertainty. Since the conflict in the Middle East began in February 2026, cost of living pressures have sharply increased, primarily driven by higher fuel costs. These pressures are having a significant impact across many facets of our society and are creating additional pressures for employers and employees alike.

This article explores some recent cases in the Fair Work Commission arising directly from increased fuel prices, and considerations for employers in the current economic climate.

Increased vehicle allowances

The Australian Council for Trade Unions (ACTU) and several other unions recently made applications to the Fair Work Commission to vary vehicle allowances in 41 modern awards. These applications relate to awards in a range of industries including aged care, healthcare, manufacturing, transport, hospitality, retail, social and government services and education. As part of its application, the ACTU has urged the Commission to consider moving by its own motion to vary all modern awards that contain vehicle allowances in similar terms.

The applications follow recent increases in fuel costs associated with the Middle East conflict and seek to update the award safety net to reflect the increased prices paid by workers. The applications seek to adjust the vehicle allowance in affected modern awards, and provide for a monthly readjustment based on the index figure for Private Motoring published by the ABS.

These applications are listed for hearing on 15 and 18 May 2026.

Road transport contractual chain order – fuel cost recovery

In August 2024, Closing Loopholes amendments to the Fair Work Act 2009 (Cth) (Act) gave the Fair Work Commission the power to make road transport contractual chain orders (RTCCOs). A RTCCO is an order made by the Commission that sets standards for regulated road transport contractors, road transport employee-like workers, and other persons in the road transport contractual chain. Ordinarily, RTCCOs cannot take effect until 12 months after the Commission has published a notice of its intent to make such an order. That period can be reduced to 6 months if the Commission is satisfied that the circumstances urgently require it.

Amendments to the Act which took effect from 2 April 2026 empower the Minister to determine that an application for an RTCCO is an ‘emergency application’ where the Minister is satisfied that an event or circumstance (or series of events or circumstances) is occurring which is having, or is likely to imminently have, a significant national negative impact on the road transport industry, and it is in the public interest to make the determination.

Also on 2 April 2026, the Transport Workers Union and the Australian Road Transport Industrial Organisation filed a joint application seeking a RTCCO which would require participants in the road transport contractual chain to regularly review rates paid for road transport services and adjust them to allow for cost recovery of the increased price of fuel. This application was declared by the Minister to be an emergency application.

Following urgent hearings in respect of the joint application, and the publication of a draft RTCCO, the Commission published its decision in Application by Transport Workers’ Union of Australia and Australian Road Transport Industrial Organization [2026] FWCFB 95 and associated RTCCO on 20 April 2026. The RTCCO took effect on 21 April 2026.

At a high level, the RTCCO will require parties across road transport contractual chains to adjust amounts they pay for road transport services to account for the increased cost of fuel each fortnight or twice per calendar month. This will mean that businesses engaging road transport providers (including manufacturers, retailers, and construction companies) will need to adjust amounts that they pay to providers including small fleet operators, non-employed truck drivers (such as owner-drivers) and employee-like workers.

The RTCCO will cease to apply if the weekly average national terminal gate price for diesel (as measured in the weekly diesel price report of the Australian Institute of Petroleum) falls below $2.00 per litre. The RTCCO will be subject to review by the Commission after its first month of operation and then every three months thereafter.

This decision is significant, not only for those in the road transport contractual chain, but for businesses in almost all sectors. While it will directly impact businesses in the road transport contractual chain, the RTCCO will have a flow-on impact to the cost of materials, food, and deliveries.

Work from home requests

The Federal Government has recently been encouraging employers to allow employees to work from home, both as a way to combat cost of living pressures associated with increasing fuel costs, and as a way of conserving fuel where future supply may be uncertain. At present, there are no specific rules requiring employers to allow employees to work from home, where the request is made due to rising fuel costs. At this stage, the Federal Government has stayed away from suggesting that COVID-era restrictions may be on the horizon.

Employers will need to be mindful that, where employees are entitled to make a flexible work request under the Act, strict compliance with the flexible work provisions under the legislation is necessary. Our recent legal insight sets out considerations for employers when dealing with flexible work requests.

Restructures

The pressures outlined above may be causing your business to consider whether restructures are required. Where a modern award or an enterprise agreement applies to your workforce, consultation obligations will apply. This will be the case even if the restructure needs to be implemented urgently, the business is facing financial hardship (including due to increased fuel costs), or if no other alternatives appear to be available. Early and transparent engagement with employees in these situations can assist with mitigating the risk of disputes.

If your organisation requires assistance in managing workforce implications in the current economic climate, please reach out to a member of our Workplace Advisory and Disputes team.

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Authored by:

Deivina Peethamparam, Partner
Emma Anderson, Special Counsel
Natalie Lambropoulos, Graduate