Why Abbott must rethink penalty rates

Cutting penalty rates and establishing a small workplace industrial award would breathe much-needed life into small businesses and communities across Australia.

If the government honours its election promises, there could soon be a major change in workplace relations in this country. As part of this change, a cut to penalty rates is needed to breathe life into small businesses and communities across the country. 

When Tony Abbott and Senator Eric Abetz announced their workplace relations policy in May last year, Abbott said: “These are incremental, evolutionary changes to improve a system based on practical problems not on some kind of ideological preoccupation”. 

This is what small businesses need: A system that is practical, not one based on the ideology of the Left or the Right or the needs of big business and unions. 

This approach could result in a much-needed small business industrial award. For small businesses -- and there are some 850,000 of them that employ almost five million people in Australia -- access to an award that has less complicated clauses and easy-to-understand information is crucial.

Abbott has flagged a Productivity Commission review of the current act, which would allow for a public and independent discussion on the real issues and should also help to highlight the differences between big and small business.

But the main area of continued concern is around penalty rates. The current high rates, particularly on Sundays and public holidays, have forced many businesses to close on those days, which has in turn cost the jobs of many people who can only work on weekends. It has also effectively led to country towns closing down on weekends, which has an ongoing impact on community culture. 

The Fair Work Commission may review penalty rates later this year as part of a four-year review of all modern awards. When it does review rates, more than anything it must be more practical and less ideological about small workplaces.

The Commission will need to consider the broader social context of what constitutes unsociable working hours in order to properly and appropriately consider the penalty rate issue. It is one of the biggest problems facing small businesses across retail, hospitality, tourism and the broader service sector. 

The Coalition must forego ideology in favour of increasing productivity and create better informed employers and employees in the 80 per cent of workplaces in Australia that are small businesses.

A small workplace industrial award should not be the only award available for small business. There are various industry sectors that have very good industrial awards already, including the hairdressing industry, where the award allows for reward for skills development and is designed to develop a training culture within that industry. 

The award for the pharmacy sector is also something that the industry has worked on for many years, and it has been designed to create a good culture of reward for effort and flexibility for those that need it.

Both of these awards are particularly focused on female issues in workplaces dominated by women. Both sectors have faced a long, uphill battle over the last four years to have their awards better reflect employees’ needs, but there is more work to be done.

A small business industrial award would definitely be an option for people who are employing just one or two people, or for those who employ on an irregular basis.  

Workplace awards that are easy to understand will also decrease confusion in the small workplace, which inevitably leads to disputes or mistrust. An employee might think he or she should be paid one amount, but the employer will be looking at different information and pay another amount. Unfair dismissal, discrimination, overtime rates, the time when penalty rates start, rules for weekend work, call-in processes and many other issues will differ from award to award and industry to industry. One award for small workplaces will make life easier and add to stability and trust in the workplace.

In the end, a system that is designed for experts in human resources will be more confusing for small workplaces. A workplace relations system for small business employers must be flexible and designed by the industry to suit the needs of both employees and businesses. Equally, it needs to be easily understood by employers and employees alike. 

Awards that are easier understood will only add to productivity and competitiveness.

Are wages too high?

Firstly,there is no desire to pay low wages; no one wants to work with a miserable employee standing next to them. What employees want is a fair day’s pay for a fair day’s work. Employers want the same, but they also want a return on the risk taken in becoming employers in the first place, as well as return on investment in the business.

It’s time to stop and consider the impact of increasing wages on the small business community and its employees. High penalty rates are a vice on the neck of communities, small business people, their employees, productivity and the economy. Small businesses that used to earn good income on weekends and public holidays now find they have a reduced income, while small business owners trapped in shopping malls are being forced to work seven days a week and their health is suffering.

Penalty rates and loadings have a place for those who work in certain conditions, but a community where a pharmacy has to close on Sundays is one that is not as healthy as it should be. A community where school children don’t get to earn extra money and learn about working life in weekend jobs is one where a complete education is not available to the next generation. A community where service stations have to close on Sundays and don’t open past 9pm due to penalty rates is not a complete community.

Any review of workplace relations cannot come quick enough for the health of small business owners and communities. We must decrease penalty rates to make weekend jobs once again viable; make sure wages do not rise if the impact on the economy and jobs is negative; and focus on the small workplace as different to big workplaces that have different ideologies.

Peter Strong is the executive director of The Council of Small Business Australia.

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