Ideas@TheCentre
Penalty rates and job insecurity
The government’s plan to enshrine penalty rates in the Fair Work Legislation should be seen as part of a broader campaign against insecure work run by the Australian Council of Trade Unions. Unfortunately, moves to strengthen penalty rates may have the perverse effect of creating further job insecurity.
This week a full bench of the Fair Work Commission, headed by President Iain Ross, rejected a bid by employers to reduce penalty rates for retailers and fast food companies.
Retailers applied to have the 25% Saturday penalty scrapped and the 100% Sunday penalty reduced to 50%. Fast food retailers sought to scrap the 25% penalty rate for Saturdays and the 50% penalty rate for Sundays, in addition to a 10% penalty to apply on weeknights after 10pm to replace the current 15% which applies from 9pm.
President Ross claimed that ‘while aspects of the application are not without merit – particularly the proposals to re-assess the Sunday penalty rate in light of the level applying on Saturdays – the evidentiary case in support of the claims was, at best, limited.’
Moves to remove penalty rates signal a growing dissatisfaction among the business community with the costs of the award system, particularly since the changes to award wages and penalty rates brought about by modern awards. The award modernisation process, plus the recent Safety Net Review, has culminated in significant hikes to labour costs.
It comes at a time where unprecedented competition from online retailers, both at home and abroad, has created downward price pressure. Small retailers are essentially getting squeezed at both ends – their revenues are falling at the same time that labour costs are increasing.
What this means is a very uncertain business environment for small retailers, and further job insecurity for the workers they employ.
A removal or reduction in penalty rates would give small retailers much-needed relief from cost pressures and allow them to operate for longer and at higher capacity during non-standard hours. For many retailers, these are the most important trading hours and would represent significant employment opportunities for workers in a fickle job market.
Penalty rates are proving more and more incompatible with the nature of the modern retail environment. A less onerous penalty rates system will alleviate cost pressures and contribute to greater business activity and better employment opportunities.
Alexander Philipatos is a Policy Analyst at The Centre for Independent Studies.
