PRODUCTIVITY COMMISSION: Sunday penalty rates for workers should be cut

Photo: Scott Olson / Getty Images.

A landmark report into the Australian labour market by the Productivity Commission (PC) has recommended that Sunday penalty rates be reduced to the same level as the existing Saturday rate for permanent workers in the hospitality, entertainment and retail industries.

The 1200-page report, commissioned last year by former treasurer Joe Hockey, looked at all aspects of the national workplace, from unfair dismissal to awards, migrant workers, and the 24/7 economy, making more than 30 recommendations.

Overall, the PC was reasonably impressed by Australia’s workplace relations system saying that “despite some significant problems and an assortment of peculiarities”, it was “not systemically dysfunctional”.

“Contrary to perceptions, Australia’s labour market performance and flexibility is relatively good by global standards, and many of the concerns that pervaded historical arrangements have now abated. Strike activity is low, wages are responsive to the economic cycle and there are multiple forms of employment arrangements that offer employees and employers flexible options for working” the report says.

The opening remarks are in stark contrast to the claims of business:

Many features work well — or at least well enough — given the requirement in any system for compromises between the competing and sometimes conflicting goals the community implicitly has for the system.

The key message of this inquiry is that repair, not replacement, should be the policy imperative.

It puts bosses on notice early on, saying “the adversarial relationships between the parties that sometimes surface can often reflect poor relationship management, rather than flaws in the WR framework.”

The Commission goes on to say that minimum wages are justified, “and the view that existing levels are highly prejudicial to employment is not well founded”. However, in considering the minimum wage case, the analytical framework needs to be broadened to “consider systematically the risks of variations in economic circumstances on employment and on the living standards of low paid employees”.

Sunday rates

But the critical focus for many was Sunday penalty rates. The PC says there should be a standard “weekend rate” based on the current Saturday figure.

Here’s recommendation 15.1 in total.

The Fair Work Commission should, as part of its current award review process:

• set Sunday penalty rates that are not part of overtime or shift work at the higher of 125% and the existing Saturday award rate for permanent employees in the hospitality, entertainment, retail, restaurant and cafe industries

• set weekend penalty rates to achieve greater consistency between the above industries, but without the expectation of a single rate across all of them

• investigate whether weekend penalty rates for casuals in these industries should be set so that casual penalty rates on weekends would be the sum of the casual loading and the revised penalty rates applying to permanent employees, with the principle being that there should be a clear rationale for departing from this.

There should be one year’s notice before these changes are made.

“Penalty rates have a legitimate role in compensating employees for working long hours or at asocial times. However, Sunday penalty rates for hospitality, entertainment, retailing, restaurants and cafes are inconsistent across similar work, anachronistic in the context of changing consumer preferences, and frustrate the job aspirations of the unemployed and those who are only available for work on Sunday,” the Commission says.

But it was clear that penalty rates for existing public holidays should not be reduced and it also wants to see the South Australian, Western Australian and Queensland governments “remove anti-competitive remnant shopping hour restrictions”.

The proposal has been welcomed by employer organisations such as the NSW Business Chamber, with CEO Stephen Cartwright saying it was a “common sense move” that would allow more businesses to open on Sunday, especially in regional and tourist towns.

“Reasonable penalty rates have a place in modern workplace regulations, but consistent weekend penalty rates on Sundays, when people expect most retail and hospitality businesses to be open and trading, are long overdue,” he said.

Australian Retailers Association (ARA) executive director Russell Zimmerman, said his organisation fully supported the report’s recommendations. The ARA is currently pushing for a reduction in the General Retail Industry Award (GRIA) from double time on Sundays to time-and-a-half

“The fast food and restaurant industry Awards are both significantly lower than the GRIA for Sunday penalties at just 50 per cent, and we would like to see the GRIA brought down to match this,” he said.

But federal employment minister, Michaelia Cash, declined to express a view on the politically-charged issue, saying the matter would be resolved by the Fair Work Commission review currently under way and due to be handed down in March.

If a cut was proposed, she said the Coalition would take it to the next election to get a mandate from voters.

Further changes recommended

The other problems the Productivity Commission found with Australia’s employment system mostly seem to be based around the technical approach of the workplace umpire, the Fair Work Commission.

“While the Fair Work Commission (FWC) undertakes many of its functions well, the legalistic approach it adopts for award determination gives too much weight to history, precedent and judgments on the merits of cases put to it by partisan interest groups,” the PC report says.

“The Fair Work Act 2009 (Cth) and sometimes the FWC can give too much weight to procedure and too little to substance, leading to unnecessary compliance costs and poor outcomes.”

It cites the example of an employee engaged in serious misconduct receiving compensation under unfair dismissal provisions because of procedural lapses by an employer.

The PC wants to see the FWC stripped of some functions, to focus on tribunal and administrative issues, while a new body, the Workplace Standards Commission (WSC), would be charged with determining minimum wages and award regulation.

“Awards are an Australian idiosyncrasy with some undesirable inconsistencies and rigidities, but they are an important safety net and a useful benchmark for many employers. The WSC should address specified troublesome hotspots on a thematic basis,” the Commission says.

Enterprise bargaining “generally works well” but “is often ill-suited to smaller enterprises”, the Commission says, and there should be a “limited menu of bargaining options” when it comes to greenfields agreements, as well as “variations to awards suited to the circumstances of individual enterprises”.

The Commission wants to see the “overly complex processes” for secret ballots simplified and employers given “more graduated options for retaliatory industrial action” other than lockouts.

Its also keen to crack down on sham contracting saying it’s “too easy under the current test for an employer to escape prosecution”.

The Commission was also conscious that migrant workers are more vulnerable to exploitation, especially those working illegally and wants to see measures to encourage them to report any incidents.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.