Over the last 20 years or so, Australians have developed a true appreciation for the social ritual of the Sunday morning catch up with friends or family over breakfast or lunch at our local café or restaurant.
Yet, as the demand from customers for access to weekend dining steadily increases, it seems odd that more and more cafes and restaurants are closed on Sundays. Why is that?
The simple truth is that small business owners of cafes and restaurants are being hammered by an out of date workplace relations system that penalises them with huge employment costs for just trying to open during these peak demand periods.
The term “penalty rates” is appropriate given that they penalise everyone involved – the business owner can’t afford to open, the customer goes without service, the staff are not hired for the shift and the government is denied taxes from the extra day of trading – it is a lose/lose/lose/lose scenario.
The idea of penalty rates stems from a time in the past when weekends were considered sacrosanct, where most businesses were closed and where the main streets of suburbs and towns were empty and quiet as a result.
Community expectations have long since changed, and our suburban and regional shopping strips are now alive on weekends, but the employment laws have barely left the 19th century, and are driving us back to the olden days of closed weekends.
The Federal Government started the process of ‘modernising’ Australia’s industrial awards system back in 2009. Awards are the rules that govern how workplaces operate in hundreds of industries across the country, and particularly how much an employee gets paid on which days and during which times. There used to be thousands of such awards, but the Government decided to cut them down to just a few hundred. Sounds like a good idea. But the process of rationalising the number of awards has resulted in a “highest common denominator” approach where the most generous award provision have been adopted and then applied to all industries regardless of the vastly differing needs of those sectors. And it’s these new higher penalty rates that are killing Sunday trade. Just another example of how good ideas deliver unintended consequences when they are poorly executed.
Did you know that in January, a major cruise liner came into Sydney Harbour, unloaded its passengers to enjoy breakfast in the city, but within half an hour most had returned to the ship because there were such limited options for dining in Sydney on a Sunday morning!
Currently, a café or restaurant which opens on a Saturday has to pay 25% more in wages, and a shocking 50% more on a Sunday, regardless of whether the staff would actually prefer to work on weekends due to week day commitments like university. The owner is being slugged for providing the service that their customers demand. The current award system is simply unfair. It’s unfair for the business owner who has to close or operate at a loss for trying to meet their customers’ expectations, and it’s unfair on the staff that want to work but are being denied shifts due to exorbitant penalty rates.
That’s why the NSW Business Chamber, in partnership with Restaurant & Catering Australia, are asking Fair Work Australia for a new way of paying penalty rates.
Penalty rates are appropriate in certain circumstances, but we need a fairer approach to how they are applied. We are simply seeking to remove the penalty that is attached to trading on particular days of the week.
Under our proposal, employees will be paid penalty rates if they work more than five consecutive shifts. Basically, the sixth time someone gets out of bed and heads to work, they will be paid a 25% bonus, and then a 50% bonus for the seventh or more time that they work in any week. This is a common sense approach that will remove the financial burden that is preventing small businesses from opening on weekends and reward the loyal staff that work extra shifts to support their employer’s business.
If a business is closed, it doesn’t matter what the penalty rate is, no employee will be receiving it. It’s in everyone’s interest for a business to be open, providing services to its customers, creating jobs and contributing much needed tax dollars to the government’s coffers. But we need a new “modern” approach to penalty rates if this is the outcome that we want to achieve.
The so called “modern” award system is broken, and the time has well and truly come to fix it.
Stephen Cartwright
Chief Executive Officer
NSW Business Chamber
Posted:
1/05/2012 8:10:10 AM by
Stephen Cartwright
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3
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Extract from speech NSW Premier Barry O’Farrell delivered to a NSW Business Chamber, Sydney Business Chamber and Business Council of Australia luncheon marking his first anniversary in office.
To get our economy growing, we must make NSW competitive within Australia, and in a global context.
If you were to receive a report that said that a government entity had a deficit of more than $4 billion, that this deterioration had started four years ago, and that it had increased by $1.7 billion in six months, you would take immediate action to get it under control.
The Government has received an actuarial report by Pricewaterhouse Coopers, into the outstanding claims liability under the WorkCover scheme.
The $4 billion deficit equates to more than $15,100 per employer, and more than $1,300 for every worker.
Growth in the scheme deficit from June to December 2011 cost NSW more than $9 million per day.
Premiums paid by NSW employers are already estimated to be between 20 and 60 per cent higher than equivalent employers in our competitor states.
Under present projections, the scheme would not return to surplus within 10 years, and to return it to full funding within five years would require premiums to rise by around 28%.
To help you put this into perspective let me use a few examples:
A NSW residential construction company paying around $250,000 in annual wages has a base premium of $12,600.
If we do nothing;
this employer’s premium will go up by $3,500 to more than $16,000 – a premium around 6 times higher than that of a similar company in Victoria (who pays around $2,600), and a similar Brisbane firm (who pays $7,000).
A NSW café with 11 staff pays a base premium of over $8,600.
If we do nothing;
this café’s premium will increase by more than $ 2400 to over $11,000 - more than double its Queensland counterpart (who pays around $4,000), and five times more than a similar Victorian company (who would pay around $2,000).
And if that isn’t enough to concern any employer, another example:
A cleaning company paying around $150,000 in annual wages has a NSW base premium of $10,700.
If we do nothing;
this employer’s premium will increase by around $3000 to $13,700 - more than double its Queensland counterpart (who pays around $4,900), and three times what a similar Victorian company would currently pay (which is around $3,700).
There was no leadership by the former government to rein in spiralling scheme costs, produce better outcomes for injured workers, and a competitive deal for employers.
Labor saw NSW employers as a bottomless pit of cash, and operated WorkCover on a ‘cost-plus’ basis – ignoring the professional skills of good people who tried to fix a broken system.
The PWC report makes clear that if no action is taken, the scheme will rapidly and dramatically worsen.
It also warns that even while reforms are implemented, the scheme performance will likely get worse before it gets better.
Getting WorkCover right - and competitive - represents one of the most significant drivers of economic improvement within our control in NSW.
And we are committed to starting this second year of change in NSW with a process to repair this broken system, to:
- ensure that injured workers get the best possible and most timely result in returning them to a productive and appropriate working life, and
- to make sure that individuals with catastrophic injury are looked after in the way that any of us would want to see our loved ones cared for.
The Government is now considering these issues – including the projected $4 billion deficit, and its consequences for management and policy.
We are aware that schemes in other states strike a better balance between looking after injured people, promoting incentives for safe workplaces, and setting competitive premium rates, and we will be working closely with employers, peak groups, individuals and employee representatives in long overdue reforms to the WorkCover scheme.
While I don’t agree with new Employment Minister Bill Shorten’s public defence of penalty rates, it’s a good thing there is debate about what is fair reward for hours worked.
Australian employers pay good wages. For a wealthy country that wants high living standards that’s fair enough. But is it fair to pay people different amounts for doing the same job depending only on the time of day or the day of week?
Most employers can fund their wage obligations, so long as wages rise somewhere in line with sales, profits or productivity.
But Australia’s industrial relations system is riddled with high on-costs. These are compulsory payments on top of wages. They include penalty rates, shift rates, overtime rates, allowances, annual leave loading, superannuation levies, workers compensation premiums and different forms of paid and unpaid leave. Some are forced on business by governments, some by industrial tribunals like Fair Work Australia. None of them take account of different capacities of businesses. Small or not for profit employers are assumed to afford them in the same way as large corporates.
These on-costs add at least 30% to the wages bill of today’s employers. It’s one reason why Australia has become a high cost country to employ and do business.
Understandably, staff don’t see much difference between dollars in the pay packet from wages and those from penalty rates. They should. The case for good wages is strong. The case for high penalty rates is weak, and weakening as each year passes.
Penalty rates were introduced to penalise employers from trading and employing staff during what were unsociable hours – late nights or weekends. A generation later, the community expect shops, cafes, pharmacies and tourism operators to be open 24/7. In service industries, the Monday to Friday trading week has gone with the horse and buggy.
Longer trading hours has not meant longer working hours. A generation ago, the standard working week was 40 or 42 hours. Now it’s 38. Businesses now hire casual and part time staff, often university students who don’t find working evenings or weekends an inconvenience but the very opposite – they are the hours when work is possible around the week’s study or family commitments.
The industrial relations system should be honest with all of us. Don’t call penalty rates compensation for hours a businesses should not trade when they are in fact the hours customers now expect a business to open.
The same goes for the 17.5% annual leave loading. It was meant to be paid to people who earned shift loadings when at work so they didn’t drop income when on leave. Trouble is, it’s now paid to almost all workers whether they ever work shifts or not. How stupid is the system when it pays us more for being on holidays than when we are at work?
Taking a penalty rate or loading to compensate for something that no longer exists is an ethical dilemma for the system, even if it’s legally fair enough whilst the law stays that way.
If these penalty rates and loadings are from another era and don’t fit their original purpose, then what should be done about them?
There are two sensible answers. Governments and industrial tribunals that set them up should have an honest review of whether their original rationale still exists. If it doesn’t, the lawmakers should phase them out on an industry by industry basis.
And businesses should be allowed to incorporate penalty rates into base rates of pay on an enterprise by enterprise basis. This way staff don’t lose income from one pay packet to the next, and an anomaly in the system gets addressed.
For this to happen, the rules about bargaining and agreement making need to be more flexible than Julia Gillard’s fair work laws. And before anyone claims that this would be a return to WorkChoices, it is not.
Twenty years ago, almost to the day, I negotiated the removal of penalty rates in a key retail industry award in return for Saturday afternoon trading and a higher base rate of pay. One of Australia’s largest unions, the SDA, was a party to that agreement and none of us had even heard of WorkChoices. It was just common sense.
Peter Anderson
Chief Executive
Australian Chamber of Commerce and Industry
Posted:
20/01/2012 11:22:34 AM by
Peter Anderson
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Yesterday’s announcement of a review of the Fair Work laws by new Workplace Minister Bill Shorten isn’t an early Christmas present to the business community. It’s simply what a government which wants to responsibly manage the labour market needed to do if labour relations in Australia are to contribute to productivity, competitiveness and job security.
Claims by Rudd and Gillard government Ministers over the past three years that its IR system had ‘got the balance right’ have progressively stretched credulity, not to mention the patience of even middle of the road business owners and managers.
For many employers, the Fair Work laws introduced a double whammy - broader regulation and deeper regulation. Matters that weren’t previously regulated, such as union demands over contracting and business management, now are subject to good faith bargaining orders; and matters that were previously regulated, such as awards and penalty rates, are now regulated at higher and more costly levels.
Not surprisingly, different impacts have arisen for different businesses. For larger businesses the problems relate to unworkable rules on business transmission, wider union power over entry and compulsory bargaining, union interference in direct employee relations, low thresholds for strikes and threats of strikes, and union agreements that are not win-wins but least-worst options.
For small business it’s a case of higher penalty, overtime and casual rates and loadings, awards which re-regulate rosters and hours that wrongly assume one size fits all, a lack of scope to tailor award rules to local conditions, wage rises above growth in sales or profits, a bargaining system that doesn’t cater for non-unionised businesses and unfair dismissal laws that allow justly dismissed staff to sue for money.
The common thread in business concerns is that the Fair Work laws force square pegs in round holes. Tension exists between centralised rules and union powers and actual conditions in enterprises. None of the laws have contributed to productivity or efficiency gains.
While high profile disputes like Qantas grabbed public attention, the Fair Work review is warranted because these tensions in smaller less profiled businesses make the system a slow burn on the wider economy.
While the announced review is not everything business might have wanted, it’s a step in the right direction. Employers and business organisations need to get behind it. Opportunities need to be taken to make the case for change. It’s not in the interests of employers, staff or the government for domestic laws to suck productivity from the economy.
The review needs to focus not just on the law but also policy behind the law. While the IR system is very legalistic, with thousands of legal rules, an analysis of the law only tells half the story. We won’t smooth out the friction created by square pegs in round holes unless we get a better policy balance between how businesses and staff work, and how the system sets its safety net of wages and conditions.
In fact instead of regulating so much, a good start would be to return the system to a safety net role only.
Important as the Fair Work review is, it’s not the only IR game in town. Behaviour of employers, of staff and of unions ultimately affects the level of disputes, the quality of working life and the level of employment.
While the Fair Work review isn’t charged with looking at behaviour, it needs to make sure that excessive power in the hands of unions or tribunals does not restrict the creativity and entrepreneurship of enterprises and people that work locally.
And with union membership now down to 14% in the private sector, the system needs to be honest about way most employers deal with staff – one on one, not as collectives. With its exclusive focus on collective regulation and collective bargaining the system assumes a false reality.
Bill Shorten’s review has the opportunity to capture the middle ground in the IR debate. It’s ground not filled by an unbalanced set of laws, and ground kept vacant by an Opposition that has declined to enter the IR contest until recently, and even then only tentatively.
Soothing words and well-intended reviews will only go part way to re-establish business confidence in the Gillard government’s IR system. That can only be done by action. A review that leads to needed changes will be a big tick for the new Minister. A review that takes industry through the motions but squibs the hard calls won’t cut the mustard.
Peter Anderson
Chief Executive
Australian Chamber of Commerce and Industry
Posted:
21/12/2011 11:43:24 AM by
Peter Anderson
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Finally, a public debate has started about how appropriate the nation’s Fair Work laws are to contemporary business needs. It's about time.
I am concerned that the current spate of industrial action is heralding a return to the bad old days of the sixties and seventies with massive disruption to business and the community. The current widespread strike activity is the direct result of too much power returned to the unions under the Fair Work Act introduced by the Rudd/Gillard Government in 2009. What we are seeing is businesses being hamstrung by guerrilla tactics intended to force specific outcomes on those companies. The claims made by the unions against Qantas are made without any regard to the long-term consequences for the company’s ability to compete in the global market. If they succeed, we will have many fewer jobs in Australia than if Qantas’ plans for a hub in Asia were implemented, with airfares well beyond many a traveller’s budget.
Business owners require the ability to run their business and take difficult decisions in the face of damaging union action. Providing sustainable jobs depends on a workplace system which encourages and assists businesses to improve, thrive and innovate. It also depends on nurturing the right culture within the enterprise.
The Fair Work laws have given Australia the most comprehensive safety net in the world. For some that might be a source of pride, but the sad reality is that it’s a safety net which focuses on employee entitlements and rights. It’s not balanced. The Fair Work laws concentrate on how the pie is cut up, not how to make it bigger.
Under the Fair Work laws, collective bargaining is supposed to drive productivity improvement. There is no evidence of that in the figures. Instead, we have seen a growth in collective bargaining over union and delegate rights, union bargaining to restrict management capacity to change, and even proud boasts that there is no productivity gain in this agreement.
There are many other changes that should be considered. Unfair dismissal laws that encourage more and more claims result in payments of 'go away' money, simply because many businesses (particularly small businesses) cannot afford to close shop and attend court.
There are also Modern Awards that still have massive penalties for working hours, which in many cases, are the norm of work hours in this modern world.
A big task lies ahead. We can only hope that the government takes note of the concerns of these legitimate concerns and recognises the long-terms benefits that flow to all Australians from healthy, productive and growing businesses.
On a personal note, my two-year term as the President of NSW Business Chamber officially ends in February.
I would like to thank the CEO, Stephen Cartwright, and all the Chamber managers and staff who have done a wonderful job in growing the influence of this Chamber. I would also like to thank all the Councilors for their generous support, and in closing, my Board Colleagues whose hard work and unfailing support made it all worthwhile.
Roger Hood
President
NSW Business Chamber
Posted:
12/12/2011 5:01:44 PM by
Roger Hood
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