Wage rise to hit microbusiness… Franchising private member action… Dollar surge hurts exporters… R.I.P. sole practitioners?… Labor’s promise on independent contractors… Broadband hold up


Microbusinesses to be hardest hit by minimum wage pay rise

Yesterday’s $10.26 per week minimum wage pay rise could have its biggest bottom line impact on micro and small businesses, industry groups say.

National Association of Retail Grocers of Australia chairman and IGA store owner John Cummings says businesses most using collective agreements or AWAs will have already factored in pay rises above the 2.4% awarded by the Australian Fair Pay Commission.

“It will mostly be small and microbusinesses that are employing people on award rates that will be affected. Our business is covered by a union-negotiated EBA (enterprise bargaining agreement) so we’re not really affected, and I’d think the majority of retailers would be in that boat,” Cummings says.

Although the pay rise will make life more difficult for struggling microbusinesses, Cummings says that modest pay rise won’t generally be a burden for the SME sector.

The Restaurant and Catering Industry Association of Australia says it would have been self-defeating for the AFPC to deliver a higher pay rise.

“A large increase in wages would have meant that restaurants had no alternative other than to put prices up, which would negate the increase for the many wage earners that eat out,” president and café owner Con Castrisos says.

The decision does not apply to employees working under pre-Work Choices collective agreements, pre-Work Choices AWAs or preserved state awards, provided they deal with minimum wages, law firm Minter Ellison says.

They advise that employers with staff who are affected by the decision must ensure they are paying in accordance with the new minimum wage pay scales from the first pay period on or before 1 October 2007.

– Mike Preston


Franchising private member bill

Disgruntled franchisees are gathering support among parliamentarians for their plight and there are reports that a private member bill to reform franchising regulation is under discussion.

Coalition House of Representatives member Don Randall named chicken franchise Lenard’s in Parliament in connection with allegations of unconscionable conduct by three Bakers Delight franchisees.

“Rochelle Bailey, a former franchisee of Lenard’s Mirrabooka, and Leanne McCullagh, who had the Lenard’s franchise in Livingston, which is in my electorate — are my constituents,” Randall said. “They have also brought to my attention, and I have had contact from, Sue Brown, an ex-franchisee of Lenard’s in Bull Creek.”

Randall said he attended a meeting with Labor Senator Graham Edwards with disgruntled franchisees. Referring to franchisors that let franchisees go broke and then re-sell the franchise (also called “churning”) he said: “Throughout our electorates across this country we are finding people who may well have been deliberately sent to the wall by these people.”

Randall said he also planned to meet with Lenard’s CEO Bruce Myers. He said: “I want to know what they are going to do to help these people retrieve their money out of the business. They have had to walk away from these businesses.

“I am going to pursue this matter along with other members of Parliament to get justice for the people who are getting caught up in what could be a potential scam on behalf of major franchisors and their operatives in each state as master franchisees.”

There is an unconfirmed report from one disgruntled former Midas car care franchisee, Cher Borradale, that Randall and Edwards are to introduce a private members bill on August 17. But neither politician has returned SmartCompany.com.au’s calls before publication.

Last year Small Business Minister Fran Bailey ordered an inquiry into regulation into the franchising industry. The Government accepted some of the recommendations for change earlier this year but there has been no indication as to when the changes will be made law. The Minister’s office did not return SmartCompany’s call before publication.

Tony Fraser, the CEO of Franchisees Association of Australia, which claims to have 2500 members through alliances with small business industry associations, say these reforms are not enough. “We don’t believe that the code of conduct works. There should be a franchising act that regulates the behaviour of parties all through agreement. Franchisors need to be registered, like stockbrokers and regulated by ASIC.”

Craig Emerson, the opposition spokesman for small business, says he will support the Government changes to the franchising code when it comes before Parliament. “I met with the Franchise Council yesterday. They are happy with the Government’s changes and don’t see any reason to have a different view,” he says.

Emerson says there are bound to be some unhappy franchisees. “It’s not the role of government to ensure happiness for everyone. It is not for the Government to insert themselves in every commercial relationship in Australia.”

See our earlier stories about the unravelling of the Midas franchise, as well as the negotiations this prompted, and also the consequent allegations of a campaign against Midas owner Phil Bonney. The latest twist was covered in last week’s Briefing about the sale delay.

Click here to read about troubles at franchise Bakers Delight

– Jacqui Walker


SMEs feeling the pain as Australian dollar surges

SME exporters are being hardest hit by the surging Australian dollar, which last night smashed the US86c mark for the first time in 18 years.

The dollar reached a high of US86.09c overnight before falling back in subsequent trading. At 11.15am the dollar was worth US85.67c.

Small and medium sized businesses tend to suffer most heavily from rapid currency movements, says Australian Institute of Export executive director Ian Murray.

“Businesses at the big end can hedge against these things, but SMEs often either don’t fully understand the need to hedge or don’t have the ability to do so, so there is no doubtt the very strong Australian dollar is hurting them,” Murray says.

Only exporters that enjoy extremely strong demand for their product will benefit from the dollar rise, Murray says, although there are larger groups that enjoy some protection because they will enjoy cheaper prices for imported components.

One SME in that position is South Australian agricultural spraying technology company Enviromist. Managing director Chris Vasey says while Enviromist enjoys a natural hedge against the high Australian dollar because it imports some parts from the US, it is still taking a hit to its US export income.

“We export on about 90 to 120 day trading terms, so stuff we exported some time ago at 78c we’re now receiving less Australian dollars for, and of course as long as the dollar keeps rising that will keep happening,” Vasey says.

The value of the Australian dollar will definitely be a factor when Enviromist sets its 2007/08 price list, Vasey says, but for the moment they have chosen not to lift prices.

“We have kept our prices steady and that means our margins are being squeezed,” Vasey says. “It cuts our margins by about 2%, which maybe isn’t earth shattering stuff but we certainly feel it.”

– Mike Preston


Will sole practitioners disappear?

Many accounting firms will be forced to merge and radically change the way they operate or they will not survive. A report called “Firm of the Future” by the CPA Australia paints a grim picture for sole accounting practitioners in the year 2020, which will be besieged by new challenges.

One major challenge will be to attract and retain staff. Management skills will need to improve so they can manage people and conflict as well as learn to share success with staff. They will also have to be adept at trying to balance the needs of the baby boomers and Gen Y, and have to boost their marketing skills.

Many firms will also be forced to specialise in value adding services such as business and financial planning, and to invest in technology to reduce the cost of low margin work. They will have to master the internet, knowledge management and automation of financial data handling. Better technology will also allow more staff to work from home, which will also test management skills.

Succession planning is also a problem because Gen X and Y seeking flexibility will be reluctant to buy a firm. More practitioners will die before attending to succession issues.

Meanwhile consolidation will continue with listed companies and existing companies buying up available firms.

– Amanda Gome


Liquidator trouble

Liquidator Robert Edge, 57, has been prohibited by the Supreme Court of Victoria from being a liquidator, voluntary administrator or administrator of a deed of company arrangement or controller for 10 years.

It follows an inquiry into the conduct of Edge as liquidator, administrator and deed administrator of 24 companies. Edge was also ordered to pay over $207,000, which represented money drawn down by him for remuneration without appropriate approval in 11 external administrations. He also was ordered to repay $224,000 to The Pines Stud Bloodstock and ASIC’s costs.

– Amanda Gome


Labor’s independent contractor promises

Labor will not give unions new rights of representation over independent contractors, small business spokesman Craig Emerson says.

In a question and answer session with the Independent Contractors of Australia group, Emerson made it clear (not for the first time) that Labor will maintain the legal difference and separation between independent contractors and employees and will not legislate to give unions preference in negotiations.

However, Emerson was less than clear when asked whether Labor will outlaw clauses in industrial instruments that prohibit, restrict or control the use of independent contractors. He told the ICA that Labor will not allow closed union shops, but this leaves the door open for legal arrangements that could favour employment of independent contract arrangements.

Small Business Minister Fran Bailey says Labor is being duplicitous in its statements on independent contractors.

Bailey says Labor plans to abolish sections 799 and 800 of the Workplace Relations Act, which were put in specifically to prevent the unions from using industrial instruments to draw independent contractors into employee-employer relationships.

“Labor has pledged to abolish the Building Commission and the protections guaranteed by law for independent contractors. My fear is by the time Labor is through with their agenda for independent contractors, they will exist in name only,” Bailey says.

– Mike Preston


Broadband hold-up

The review that will decide whether Optus or Telstra gets to build a new $4 billion network are being held up with consultations with industry yet to begin.

The Federal Government’s broadband taskforce has met to examine the review’s guidelines but has been bogged down with questions over the scope of the review.

The review will look at the structure of the telecommunications market, particularly at competition issues including Telstra’s market power if it gets control of the new fibre network.


Economy round up

Australia’s construction industry experienced a slight pick up in activity in June after two consecutive months of decline, according to The Australian Industry Group – Housing Industry Association Performance of Construction Index released today.

By sector, the construction industry’s improvement in June reflected stronger growth in commercial construction, combined with an easing in the rate of decline in house and apartment building, AiG economist Tony Pensabene says.

The S&P/ASX 200 is down 0.5% on yesterday’s close to be 6331.0 at 12.20pm.

– Mike Preston



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