Industrial Relations

Penalty rates decision fires up political debate, but rollout for small business still unclear

Emma Koehn /

The Fair Work Commission’s decision to slash Sunday penalty rates across four awards has sparked political conflict, but exactly how and when the changes will be rolled out remains unclear for small business owners.

On Thursday Fair Work Commission president Iain Ross handed down a ruling that will lower the Sunday penalty loadings for workers covered by the hospitality, fast food, retail and pharmacy awards after more than a year of deliberations and several delays. Penalty rates for public holidays will also change under some awards.

In explaining the ruling, the Commission said it believes working Sundays does result in some “disutility” for workers, but the current schemes to compensate staff for weekend work are not fair and in line with the preferences of consumers.

The decision has strengthened a clear battle line in Australian politics, with the Labor Party pledging to attempt to alter the decision with legislation to help protect low-paid workers.

“We are going to do our best to convince the Fair Work Commission not to implement this decision,” Opposition Leader Bill Shorten said yesterday, reports the ABC.

“If we are unsuccessful, we will also be changing the law in Parliament to change the rules that the Fair Work Commission operate under.”

Senator Katy Gallagher, shadow minister for small business and financial services, echoed Shorten’s message, telling SmartCompany the policy was not what business needed.

“Labor doesn’t support a reduction in penalty rates for any worker. The decision of the Fair Work Commission is not good for workers and ultimately we do not believe it is good for business either,” Gallagher says.

But small business minister Michael McCormack told SmartCompany he has heard from businesses on the ground that have said say any move to bring Sunday rates in line with Saturdays would mean more hours for casuals.

“Across the small business sector, I have heard feedback from many small businesses that bringing Sunday rates in line with Saturday rates will allow more operators, particularly those in country communities, to open themselves to Sunday trade and offer more hours to casuals and employees,” McCormack says.

Meanwhile, the minor parties are adopting different positions on what to do next in order to strengthen small business, while also delivering more hours to workers.

Liberal Democrat Senator David Leyonhjelm told SmartCompany that while the decision could lead to some businesses opening longer on weekends, he believes the overall rate changes don’t go far enough.

“It will encourage some businesses to consider opening on Sunday. That will create more jobs, although I would like to see penalty rates cut further,” he says.

The Greens have questioned whether the decision will actually lead to greater productivity, saying the only clear impact of the changes is that workers on Sundays will eventually get paid less.

Industrial Relations spokesperson Adam Bandt told SmartCompany focus is on the bigger end of town, and ensuring staff employed by bigger businesses like Coles get paid minimum standards under enterprise agreements, which won’t be affected by these changes to awards.

“The Greens have introduced a bill that would prevent big businesses, like Coles, McDonalds and KFC, from striking unfair deals that allow them to pay their employees below the award,” Bandt says.

“This move has been supported by the head of the COSBOA [Council of Small Business Australia] as it ensures that both small and big business are on a level playing field when it comes to paying wages.”

Meanwhile, business groups welcomed the Commission’s decision yesterday.

Ai Group chief executive Innex Willox said in an interview on Sky News the group “hoped” the changes would help with job numbers.

“We hope that the circumstances will be created in the retail and hospitality and fast food sectors for more jobs to be created. And that’s something that we really should have as a bottom line demand that we all have and that’s the creation of more jobs,” Willox said.

The number of extra hours and the results created by the changes will vary from business to business, says COSBOA chief executive Peter Strong.

“That’s the thing, it’s all very diverse,” he says of the small business community.

What happens next

What the changed penalty rates actually mean for smaller operators in the long run is not clear at this stage, with the full bench of the Fair Work Commission yet to decide what transitional arrangements for the new rates will look like.

The decision also includes lowering penalty rates for public holidays across a number of awards, and while this is scheduled to come into effect on the July 1, 2017, exactly how the changes for Sunday work will be implemented remains unclear.

“I’m even confused about when it starts myself,” Strong tells SmartCompany.

Strong says discussion around the changes so far has been full of confusion and misinformation about who is affected, and in the long run it will be up to business owners to sit down and determine what difference the changes will actually make to their operations.

“Some of [the business owners] will be thinking ‘let me do my sums, now can I have Sunday off?’” he says.

“Employees and employers will have to work it out—they’ll sit down and come to some agreement. There’s even some businesses that will look to make some of the part timers full time [after this]—it gives people a new chance to have a look at their rates budget and see what they can do about it.”

In its provisional views around the transition, the Commission says the changes should take place over a series of annual adjustments at the start of July each year, which would most likely be a process that takes two years, at least.

Strong says that the fairness of the transition is incredibly important.

“Most of us have got kids. If they came home [if it changed straight away] and said ‘this isn’t fair’, you’d say, ‘it’s not’,” he says.

Strong says ultimately it will be up to businesses to work out what the changes will actually save them and what to do from there, but he reminds businesses that the decision does not mean businesses can start paying workers less from this Sunday.

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Emma Koehn

Emma Koehn is a former senior SmartCompany journalist.

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