Penalty rate cuts: What is the fallout?


You will have been hard-pressed to make it through the weekend without getting caught up in the chatter about the Fair Work Commission’s ruling to cut weekend and public holiday rates for full-time and part-time workers in the hospitality, retail and fast food industries. As the Government defends the move – and Unions prepare for an appeal – we look at how businesses are responding, and how HR might go about managing the fallout.

Workers will continue to receive penalties under the new rules, but they will be reduced.

Sunday pay rates for full-time and part-time hospitality workers will be cut from 175 per cent of their standard wage to 150 per cent.

In retail, Sunday wages will be reduced from 200 per cent of the standard rate to 150 per cent for full-time and part-time staff.

For fast-food workers, Sunday pay for some full-time and part-time employees (classed as “level one” workers), will be cut from 150 per cent to 125 per cent.

And while the Fair Work Commission has not yet decided when the Sunday rate cuts should come into effect, they have indicated it should be within a year. The public holiday penalty cuts, however, will come into effect on 1 July, 2017.

Unions have responded to the news with anger, saying that low-paid workers will struggle to make ends meet. The news media has been awash with opinion pieces decrying the changes – along with personal stories of workers who will be financially impacted by the new rates.

The Australian Council of Trade Unions (ACTU) has said that nearly half a million people, including some of the country’s lowest-paid workers, will lose up to $6,000 a year, and many have noted that those who will be the hardest hit will be young workers, as 40% rely on these rates to survive.

The fallout has already resulted in at least one PR fail. When Opposition Leader Bill Shorten held a press conference last Thursday, he invited Coles employee Trent Hunter to speak to the media.

“I rely on Sunday penalty rates,” he said. “I am rostered on every single Sunday. I will now lose $109 a week.”

However, the supermarket chain responded that this was inaccurate. A Coles spokesperson said: “Store team members at Coles are employed under an enterprise agreement and therefore are unaffected by this week’s decision.”

Other retailers rejecting penalty rate changes

While the Coles pay structure occludes their workers from the changes, other retailers are choosing not to adjust their pay rates.

One example is cosmetics company LUSH, who has taken an ethical stand on the issue.

“Increasingly we feel that fair trade is a focus needed now [for] the employees of multinational corporations, as life choices become harder globally for those who work in the lower pay sectors”.

“With that in mind, LUSH Australia will not be applying Fair Work’s reductions to the award wages paid to employees on Sundays and Public Holidays”.

The organisation clearly believes that the positive press from this stance outweighs any savings from lowered pay rates.

A cause for celebration

Some retailers, on the other hand, say the decision means they can extend opening hours and improve profits amid increasing competition from international retail giants in the Australian market.

The Australian Retail Association is one of them.

Russell Zimmerman, executive director of the ARA, says today’s decision is an incredible outcome for Australian retailers as it will sustain growth in the sector and increase employment rates across the board.

The association, which has pushed for lowered penalty rates for some time, says that it is  “one of the most progressive decisions the Australian retail industry has seen in a number of years”.

Similarly, the Council of Small Business Australia (COSBOA) CEO, Peter Strong says that the ruling is “good for community, good for small business, and good for those seeking work on Sundays”.

He noted that 80 per cent of Sunday workers will not see a change, as the majority are employed by big business and franchises that have enterprise agreements with the unions.

A legal view?

The decision to cut penalty rates makes it transparent that the Fair Work Commission is very much about protecting employers over employees, says Alan McDonald, managing director at McDonald Murholme lawyers.

“100 years ago when it was founded, the arbitration commission was very much about protecting everyday Australian’s standard of living,” McDonald explains.

“When business is bigger and stronger than it’s ever been, it is curious that the Fair Work Commission favoured business over Australian workers”.

“It has clearly broken with the early legal precedents where a ‘living wage’ for workers was considered more important than business profit”.

How should HR respond?

David Bates, managing director at Workforce Guardian, an HR and employment relations service for employers, suggests that HR should ignore the media furore and focus on the facts at hand.

While it’s inevitable that some employees will be unhappy with the Commission’s decision, he says, it’s worth remembering Australians enjoy some of the highest minimum wages in the world, and ‘penalty rates’ are almost unique to Australia.

“Ultimately, the penalty rates decision will also expand employment opportunities for younger workers, who will find more employers now willing to trade on Sundays and public holidays”.

Particularly when it comes to contentious issues, it’s imperative HR has the ability to effectively manage and communicate with employees.

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Peter Chapman
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Peter Chapman

So when will the media enter the discussion that an Award sets the minimum rates? Any employer is at liberty to pay over award at anytime. All employers I consult for pay over award except for apprenticeships.

sheilafrancesbaker
Guest
sheilafrancesbaker

I agree with you Peter. None of my clients pay Award rates either because they won’t keep their employees. The market sets pay rates, not the Award. Not in any businesses that are interested in maintaining an engaged workforce.

The media in this country has a lot to answer for. I urge all employers – as well as employees – not to listen to media outrage – we all need to make up our own minds on issues, all of them. The Coles employee has learnt the hard way – with egg on his face.

Philip Pearson
Guest
Philip Pearson

Having worked with employers in the Restaurant and Catering sector, who often operated on the smallest of profit margins, this will give those small businesses who are struggling to make ends meet, a fighting chance. This change helps the small businesses remain in business and to continue employing those who would have a harder chance of being employed if not for businesses trading during the unsociable hours when everyone wants businesses to be open for social reasons. My hope is this change can create opportunities for more stable (part-time or full-time) employment and more job opportunities as small businesses become… Read more »

More on HRM

Penalty rate cuts: What is the fallout?


You will have been hard-pressed to make it through the weekend without getting caught up in the chatter about the Fair Work Commission’s ruling to cut weekend and public holiday rates for full-time and part-time workers in the hospitality, retail and fast food industries. As the Government defends the move – and Unions prepare for an appeal – we look at how businesses are responding, and how HR might go about managing the fallout.

Workers will continue to receive penalties under the new rules, but they will be reduced.

Sunday pay rates for full-time and part-time hospitality workers will be cut from 175 per cent of their standard wage to 150 per cent.

In retail, Sunday wages will be reduced from 200 per cent of the standard rate to 150 per cent for full-time and part-time staff.

For fast-food workers, Sunday pay for some full-time and part-time employees (classed as “level one” workers), will be cut from 150 per cent to 125 per cent.

And while the Fair Work Commission has not yet decided when the Sunday rate cuts should come into effect, they have indicated it should be within a year. The public holiday penalty cuts, however, will come into effect on 1 July, 2017.

Unions have responded to the news with anger, saying that low-paid workers will struggle to make ends meet. The news media has been awash with opinion pieces decrying the changes – along with personal stories of workers who will be financially impacted by the new rates.

The Australian Council of Trade Unions (ACTU) has said that nearly half a million people, including some of the country’s lowest-paid workers, will lose up to $6,000 a year, and many have noted that those who will be the hardest hit will be young workers, as 40% rely on these rates to survive.

The fallout has already resulted in at least one PR fail. When Opposition Leader Bill Shorten held a press conference last Thursday, he invited Coles employee Trent Hunter to speak to the media.

“I rely on Sunday penalty rates,” he said. “I am rostered on every single Sunday. I will now lose $109 a week.”

However, the supermarket chain responded that this was inaccurate. A Coles spokesperson said: “Store team members at Coles are employed under an enterprise agreement and therefore are unaffected by this week’s decision.”

Other retailers rejecting penalty rate changes

While the Coles pay structure occludes their workers from the changes, other retailers are choosing not to adjust their pay rates.

One example is cosmetics company LUSH, who has taken an ethical stand on the issue.

“Increasingly we feel that fair trade is a focus needed now [for] the employees of multinational corporations, as life choices become harder globally for those who work in the lower pay sectors”.

“With that in mind, LUSH Australia will not be applying Fair Work’s reductions to the award wages paid to employees on Sundays and Public Holidays”.

The organisation clearly believes that the positive press from this stance outweighs any savings from lowered pay rates.

A cause for celebration

Some retailers, on the other hand, say the decision means they can extend opening hours and improve profits amid increasing competition from international retail giants in the Australian market.

The Australian Retail Association is one of them.

Russell Zimmerman, executive director of the ARA, says today’s decision is an incredible outcome for Australian retailers as it will sustain growth in the sector and increase employment rates across the board.

The association, which has pushed for lowered penalty rates for some time, says that it is  “one of the most progressive decisions the Australian retail industry has seen in a number of years”.

Similarly, the Council of Small Business Australia (COSBOA) CEO, Peter Strong says that the ruling is “good for community, good for small business, and good for those seeking work on Sundays”.

He noted that 80 per cent of Sunday workers will not see a change, as the majority are employed by big business and franchises that have enterprise agreements with the unions.

A legal view?

The decision to cut penalty rates makes it transparent that the Fair Work Commission is very much about protecting employers over employees, says Alan McDonald, managing director at McDonald Murholme lawyers.

“100 years ago when it was founded, the arbitration commission was very much about protecting everyday Australian’s standard of living,” McDonald explains.

“When business is bigger and stronger than it’s ever been, it is curious that the Fair Work Commission favoured business over Australian workers”.

“It has clearly broken with the early legal precedents where a ‘living wage’ for workers was considered more important than business profit”.

How should HR respond?

David Bates, managing director at Workforce Guardian, an HR and employment relations service for employers, suggests that HR should ignore the media furore and focus on the facts at hand.

While it’s inevitable that some employees will be unhappy with the Commission’s decision, he says, it’s worth remembering Australians enjoy some of the highest minimum wages in the world, and ‘penalty rates’ are almost unique to Australia.

“Ultimately, the penalty rates decision will also expand employment opportunities for younger workers, who will find more employers now willing to trade on Sundays and public holidays”.

Particularly when it comes to contentious issues, it’s imperative HR has the ability to effectively manage and communicate with employees.

3
Leave a reply

avatar
100000
  Subscribe to receive comments  
Notify me of
Peter Chapman
Guest
Peter Chapman

So when will the media enter the discussion that an Award sets the minimum rates? Any employer is at liberty to pay over award at anytime. All employers I consult for pay over award except for apprenticeships.

sheilafrancesbaker
Guest
sheilafrancesbaker

I agree with you Peter. None of my clients pay Award rates either because they won’t keep their employees. The market sets pay rates, not the Award. Not in any businesses that are interested in maintaining an engaged workforce.

The media in this country has a lot to answer for. I urge all employers – as well as employees – not to listen to media outrage – we all need to make up our own minds on issues, all of them. The Coles employee has learnt the hard way – with egg on his face.

Philip Pearson
Guest
Philip Pearson

Having worked with employers in the Restaurant and Catering sector, who often operated on the smallest of profit margins, this will give those small businesses who are struggling to make ends meet, a fighting chance. This change helps the small businesses remain in business and to continue employing those who would have a harder chance of being employed if not for businesses trading during the unsociable hours when everyone wants businesses to be open for social reasons. My hope is this change can create opportunities for more stable (part-time or full-time) employment and more job opportunities as small businesses become… Read more »

More on HRM