Productivity Commission backs penalty rate cut and unfair dismissal reform

Productivity Commission backs penalty rate cut and unfair dismissal reform


The Productivity Commission has backed a cut in penalty rates on Sundays, a two-tier rate system and a restructure of the Fair Work Commission in a draft report released today.

In a conference this morning Productivity Commission chair Peter Harris announced the Commission wants to safeguard the penalty rates for essential services staff such as nurses and paramedics and radically overhaul the system for workers in the retail and hospitality industries. 

“There is a good case for extra payments for those who work at times that most of us would prefer not to and there is no case for changing penalty rates for essential services where community attitudes established long ago have not shifted,” he says.


Weekend rates


But Harris says there is “good information” to show in some industries penalty rates are “structured wrongly”. 

“For those who work abnormal hours including weekends the social and personal cost to them is greatest from evening and night shift,” he says.

“And Saturdays and Sundays not so much. But the penalty rates are set the other way around.”

The Productivity Commission recommends the Sunday rate be made equal to the Saturday rate for industries which are not essential services such as hospitality and retail.


Public holidays


Harris recommends penalty rates are retained for public holidays but says the problem is the “unilateral declaration” of new public holidays in a pointed reference to Victoria’s newly announced Grand Final Eve public holiday.

“Employers should not be required to pay under the National Employment Standards beyond current numbers of such holidays and there are also ways to have some additional flexibility about when to take a public holiday, to swap one date for another if employees and employers agree,” he says.


Minimum wage and industry awards


Harris says the Commission is happy with the current “small increases” in the minimum wage.

He says the National Employment Standards and industry awards should be retained but need to be modernised.


Unfair dismissal laws


According to Harris unfair dismissal laws in Australia “have a bad name”.

He says there are cases of people properly dismissed still receiving a

payment due to “simple process mistakes” by an employer.

“We propose that the Fair Work Commission is not bound by this sort of rule and focuses instead on the substance of the issue and not the form,” he says.


Fair Work Commission


Harris also wants to restructure the Fair Work Commision as he says “history and precedent” have played too large a part in its decisions and independent research and analysis too small a part. 

“We recommended as a restructure to have two separate groups to focus on its primary areas of work – a modern dispute resolution entity and an analytical body addressing significant social and economic questions,” he says.

“Restructuring will strengthen the Fair Work Commission.”


Enterprise bargaining for small business


The Productivity Commission also wants to help small businesses engage in enterprise bargaining.

“Enterprise bargains involve potentially lengthy exchanges with the regulator and unions both of which have more experience in setting and navigating the

process than a small business,” Harris says.

“We have designed a concept that may assist those small businesses which would like to remake an award to suit their business but don’t want to breach the law.”




Small business advocates are still reviewing the Productivity Commission report but their initial reaction has been positive.

Peter Strong, chief executive of the Council of Small Business of Australia told SmartCompany he isn’t opposed to a two-tiered penalty rates system.

“It sounds wrong but we already have a multi-tier system at the moment”, he says.

Russell Zimmerman, chairman of the Australian Retailers Association, says he backs the move to cut Sunday penalty rates to Saturday levels.

“As an association we are trying to see penalty rates reduced but not taken away completely,” he says.

“The industry would welcome the ability to reduce the fixed costs of the current penalty rates particularly Sundays and public holidays.”



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