Penalty rate change coming from the top
Australia, we need to talk about Sunday penalty rates, says Frydenberg
A key cabinet minister says cutting Sunday penalty rates could be good for the economy and should be examined by the Coalition government led by new Prime Minister Malcolm Turnbull.Josh Frydenberg, who was last week promoted to cabinet as the new Minister for Northern Australia and Resources, said on Sunday that weekend penalty rates were an issue the government needed to a look at.It comes just days after Prime Minister Malcolm Turnbull said the politically sensitive issue would be up for consideration by his new team.
“Malcolm Turnbull’s absolutely right to point to industrial relations as one area where it does cost business and ultimately it does cost jobs,” Mr Frydenberg told the Ten network.
“In the resources sector it costs 50 per cent more in Australia to have an energy project than if you were to have [it] on the US Gulf coast,” he said. “Now one of the key components of that is industrial relations, which decreases productivity and increases cost.”
Asked whether the government needed to look at cutting Sunday penalty rates, Mr Frydenberg said: “This is an area we need to look at because if it means more jobs and changing there, that could be good for the economy.”
Kate Carnell, the chief executive of the Australian Chamber of Commerce and Industry, welcomed the minister’s comments and said high Sunday penalty rates prevented cafes and restaurants from trading longer hours or opening on the weekend.
ACCI backs bringing Sunday rates – which can be as high as double time – into line with Saturday rates, which are a maximum time-and-a-half. But it does not want to see penalties abolished completely.
“We think it’s really good that the issue of workplace relations is back on the table,” Ms Carnell told Fairfax Media.
“What’s sensible now is we’re looking at having a debate about these issues and not just putting them off the table,” she said.
Ms Carnell said reducing Sunday rates would help ease youth unemployment and help grow the economy, which Treasurer Scott Morrison has said is his key priority.
The Productivity Commission is currently reviewing the Fair Work Act and has already handed an interim report to the government.
The Coalition under Tony Abbott, frightened by the savage backlash to John Howard’s Workchoices, shied away from any attempt to reduce penalty rates and said it should be left to the Fair Work Commission.
This was despite sustained pressure from Liberal backbenchers and the business community.
Mr Turnbull and Mr Frydenberg’s comments constitute a major shift in the government’s positioning on industrial relations compared to Mr Abbott’s approach.
The former prime minister has complained about his dumping as leader as being due to style and not substance because no major policy had been announced in the two weeks since he was deposed. “In a policy sense, there is very little departure,” Mr Abbott told News Corp.
“Border protection policy the same, national security policy the same, economic policy the same, even same-sex marriage policy the same, and climate change policy the same. In fact, the rhetoric is the same.”
Labor frontbencher Anthony Albanese said he agreed with Mr Abbott.
“At the moment it is about style rather than substance, I think Malcolm Turnbull does need to change the substance of his government going forward,” he told Sky.
Labor opposes any changes to penalty rates.
Sunday penalty rates are hot reform topic
Every Sunday afternoon at 4 o’clock, Belinda Daggett shuts down the oven at her Bakers Delight franchise.
Baking ends two hours early and customers miss out on their free bread samples. Sunday is purely “no-frills” service at this southern NSW bakery.
Up the coast in the holiday town of Ballina, Sunday means no sandwiches, pies, pizzas or pastries are on the shelves of Graeme Gough’s deli.
Closing the shop is not an option because tourists don’t see weekends as any different.
“If we weren’t open on Sundays, our customers would go to our competitors and this would in turn affect sales on the remaining days of the week, as we would be at risk of losing those customers on a permanent basis,” Gough explains.
At the heart of these stories is wages and the penalty rates businesses pay workers on Sundays. These penalties are a central part of the Australian national economy and are now firmly in the frame of political debate.
The other side of the argument comes from workers like Jane Grundy. She cares for the aged and chronically ill as a home care worker. The money she earns on Sunday makes up almost 30 per cent of her $584.81 weekly wage.
Grundy, Daggett and Gough are part of a procession of lay witnesses through the Fair Work Commission this week. The commission gathers these stories as a way of cutting through the rhetoric from unions and business groups that makes up much of the public discussion of the issues.
It heard conflicting stories about the impact of penalty rates on Australian small businesses and employees.
Retailers made submissions echoing a recommendation from the Australian Productivity Commission, that Sunday penalty rates should be cut to the same level as Saturday rates.
It would mean staff would be typically paid 1½ times the standard hourly rate compared with the existing double-time rate for Sundays.
Emergency service workers, including paramedics, would be exempt.
There has already been some change in this area.
In May, the Fair Work Commission cut Sunday penalty rates for tens of thousands of casual restaurant and cafe staff.
The judgment means that the loading for working on Sundays dropped from 75 to 50 per cent for some casual workers. The restaurant and catering industries welcomed the changes, estimating that businesses would save $112 million each year.
Millions claim penalties
Grundy represents an estimated 4.6 million Australians entitled to Sunday rates, on which many of them depend to bring them into reach of joining the Australian middle class.
The travelling roadshow of Fair Work Commission hearings will help determine if the Productivity Commission’s recommendation is ultimately adopted.
The future of penalty rates is emerging as a defining issue in the lead-up to the next federal election. The Greens, Labor and trade unions have vowed to campaign strongly against any threat to Sunday penalty rates.
The Federal government is facing intense pressure from the business sector to deliver the cut.
Some of the nation’s biggest fashion houses, including the Sussan Group and Jeanswest, are campaigning for change.
Employing 4700 staff spanning 493 outlets of Sportsgirl, Sussan and Suzanne Grae nationally, the Sussan Group says Australian fashion companies are facing “one of the most difficult and challenging periods in recent history” due to declining consumer confidence and international online retailers.
Now more than ever, the businesses say they would hugely benefit from a lowering of Sunday penalty rates.
Sundays increasingly important
While Sundays have become an increasingly important trading day for fashion retail in the past 10 years, some stores remain closed due to excessive labour costs. For those that do open, Sundays are effectively a “service-only day”, meaning there are no stock deliveries and limited administrative tasks.
“Taking into account the higher Sunday labour costs, Sunday employees engage entirely in selling activities and operating hours are restricted to busy periods to ensure turnover can cover the additional labour costs,” says Sussan Group chief operating officer Barry Barron.
“Reduced Sunday penalty rates would allow us to open additional stores and provide more hours of work in existing stores on Sundays, while engaging employees to work beyond purely selling activities.”
In Victoria and New South Wales alone, Jeanswest provided just under 60,000 hours on Sundays in the 2014-15 financial year, according to its submission to the Fair Work Commission.
Jeanswest general manager of retail Jorge-Daniel LeRoy D’Oreli says reducing Sunday penalty rates from an additional 100 per cent to an additional 50 per cent would mean the company could offer an extra 30,000 work hours a year.
”I believe that all, or at least the substantial majority, of the labour costs savings brought about by a reduction in Sunday penalty rates would be reinvested into labour hours within stores,” he says.
Hoteliers were also prominent. Joanne Blair, who operates three hotels in NSW, argues she could save about $300 to $350 in labour costs on a Sunday, and this would allow her to hire a solo guitarist. It would also let her open the bistros for an extra five hours.
Blair, who regularly travels between the Milestone Hotel in Dubbo to those of the same name in Leichhardt and Kingswood, estimated she pays about $1500 in wages on Sundays for $500 in sales.
Among other submissions from hotel owners was one from Daryl Walker, revenue manager for Lilianfels in Katoomba, who said that as a five-star hotel, it had no choice but to stay open on Sundays.
Walker said the hotel rosters 80 of its 117 employees on Sundays and said many of them preferred days off midweek “because it suits their lifestyle”.
“Those people include our students who study during the week,” he said.
But the case made by retailers and hotel owners is not always clear. During the first week of hearings in Sydney this week, Fair Work Commission president Justice Iain Ross put the Australian Hotels Association’s barrister on notice for some flimsy evidence produced during cross-examination.
A string of hotel owners had shared similar stories about how they had to limit trading and staff numbers on Sundays because of higher penalty rates. But when it came to testing their assertions, there was in some cases little evidence to support the claims.
“I think the quality of the evidence is going to need to lift,” an exasperated Ross said after one witness.
“Take that on board, but I am putting you on notice now.”
After claiming that a reduction in penalty rates would allow him to hire more staff, it became apparent there was no difference in the number of cooks he employed on a Saturday and Sunday. There were no costings for trading on Sundays and no evidence staffing levels would be any different if penalty rates were lower.
“He says on the one hand in cross-examination that he doesn’t employ a cook on the Sunday. When I ask him a question he says he employs a cook on a Saturday and the Sunday,” Ross said.
“At the end of the day I’m left not knowing how many extra shifts would he offer on the Sunday if there was a reduction in the penalty rate. I’m left with a handful of not very much”.
Under a grilling from lawyers representing United Voice, the union for workers in hospitality, aged care and children’s services, it also turned out that some of the witnesses had not done any sums before making submissions.
It’s a pittance any way.
Working on Sundays means sacrificing family time for many other employees, including Maire O’Connor, 62, who works as a caterer in an aged care facility in Footscray, Victoria.
She has been told that working weekends is a fact of life in a 24/7 economy. From a retail perspective, there is little difference between Sunday and Saturday.
While a small proportion of the population would consider Sunday as a religious day of rest, for many it still represents a special time with family.
The main reason O’Connor is prepared to give up her Sundays is because she believes elderly people deserve good meals every day of the week. The second reason is the higher rate of pay, which at $30 an hour on a Sunday, is still modest.
“That’s not too much to ask for any time of the week,” she said.
“We deserve the pay for the work we are doing.”
“We are talking about a pittance any way.”
Jane Grundy, who also works in the aged care sector, says she loves her job and works every second weekend.
As a home care worker, Grundy helps elderly people and those with chronic illnesses and disabilities to stay at home and out of nursing homes. She has a passion for helping people have a better quality of life.
“Home care is a crucial service for the community,” she said.
Without penalty rates, which contribute up to 30 per cent of her wages, there would be no incentive other than her love for the job, to work on Sundays.
Her standard rate of pay is $23.43 an hour. Her Sunday penalty rate is $46.86 an hour and on a Saturday she earns $35.15 anhour. At the top of her salary scale, she earns $584.81 gross for the 14.26 hours she works every second weekend.
“If they took away the Sunday penalty rate and I earned the Saturday rate on Sunday, I’d lose $71,” she says.
“In the last year I have earned a reasonable amount of money, but I have to work 12 days a fortnight, which is really difficult.”
Grundy is a scout leader but laments she is unable to join weekend camps because of her Sunday work.
“If I lost my penalty rates, I would not be keen to work on weekends,” Grundy said.
“I would be better off spending time with my family and doing other activities. I am a single parent with two kids at home. We are making a big sacrifice and deserve to be compensated.”
Taking penalty rates away would simply push her into a lower income bracket.
“The argument that it will create more jobs is just bullshit,” she says.
“This is just an onslaught on lower-paid workers. The aged care industry is exploding but encouraging people to work in our industry is very difficult.”
A high proportion of home care workers are over 50, “but how are we going to attract younger people into the industry if the wages and conditions are so low”?
Lower wages ‘deliver jobs’
Australian Chamber of Commerce and Industry chief executive officer Kate Carnell has long argued that the reduction in Sunday penalty rates will “will deliver new jobs”.
“We have 280,000 under-25s that are out of work and it is becoming an intractable figure,” Carnell says.
The Restaurant and Catering Industry Association has submitted results from a national telephone survey of 1000 restaurant and cafe owners it commissioned from Jetty Research.
Conducted between April 22 and May 4, it found 1. 9 per cent of respondents opened on Sundays or public holidays, mainly “to keep customers happy” or because it was a busy and profitable day.
When asked directly, 51 per cent of respondents believed opening on Sundays and public holidays made them more profitable overall. Almost a quarter said it made them less profitable, and 19 per cent said it made no difference.
More than half the respondents said they would employ more staff if penalty rates were reduced, and 42 per cent said they would open additional hours.
The businesses who said they would take on extra staff would employ around three per day. And of those who said they would open extra hours if penalty rates were reduced, the average number of extra hours was 5.07 per day.
Greens industrial relations spokesman Adam Bandt has vowed to campaign against any cut to penalty rates, saying it would be a “body blow” to young workers.
“With housing prices so high and wages growing so slowly, young people working in retail and hospitality depend on penalty rates to support themselves and make ends meet,” he says.
Shadow employment minister Brendan O’Connor also argues that cutting penalty rates is “unfair”.
He says the Fair Work Commission, and not government, is best placed to determine any changes.
Even so, he says Prime Minister Tony Abbott should rule out support for penalty-rate cuts, which would affect about 4 million workers.
“If you cut the take-home pay for the lowest paid in this country, you starve the economy because they spend all of their savings,” O’Connor said.
“You end the stimulus that occurs … so it’s not just some social issues here about what’s fair. It’s the economic effect if you take money from the bottom third of the workforce and give it over to employers.”
Employment Minister Eric Abetz has confirmed the Coalition’s position is that the Fair Work Commission will set or change penalty rates, although the government is still awaiting the final Productivity Commission report.
“Once the final report has been released, the government will carefully consider all recommendations and those that the government would seek to implement will be taken to the 2016 election to seek the endorsement of the Australian people,” Abetz said.
He urged the opposition and unions to take a “national-interest approach … [and] not a sectional interest approach” to the commission’s inquiry and to provide evidence to the commission rather than engage in “political mantra” about workplace relations.
Abetz said Opposition Leader Bill Shorten had, as the previous workplace relations minister, overseen a review of modern awards that brought a reduction in casual penalty awards.
Australian Council of Trade Unions secretary Dave Oliver said proposed cuts to penalty rates were a sign the commission wanted to “resurrect Work Choices”, hitting some of Australia’s most vulnerable workers.
United Voice – the union representing some of Australia’s lowest-paid hospitality, cleaning and retail workers – has called on the Abbott government to rule out the introduction of a two-tier wage system.
It says the suggestion that some people’s weekends matter more than others’ is outrageous, describing it as “economic apartheid”.