The Great Penalty Rates Debate

For over 100 years penalty rates have provided hospitality and retail employees with a little extra incentive to throw on their uniform and head to work on a Sunday morning when most would prefer to be sleeping in or relaxing with family and friends. However, in a looming decision by the Fair Work Commission, employees could see their bumped-up Sunday rates gone for good.

Penalty rates were established in 1909 under the precedent that employees should be compensated for working at inconvenient and unsociable times. In 1950, the NSW Industrial Relations Commission reaffirmed this with a statement that said, ‘employers must compensate employees for the disturbance to family and social life and religious observance that weekend work brings.’

More recently, in 2014, the former Labor Government introduced the new modern award objective which essentially provided a safeguard for penalty rates. However, since the election of the Liberal-National Coalition Government in 2013, there has been an increase in employer groups advocating for a reduction or removal of penalty rates all together.

An inquiry, released by the Productivity Commission late last year, has been the cause of major controversy as the possibly of cuts to Sunday penalty rates becomes a reality. Commissioned by the Abbott Government, the inquiry reviewed Australia’s industrial relations system and workplace rates, with its recommendations towards penalty rates attracting more attention than any other aspect of the report.

There are two sides to the argument. The workplace unions and a large proportion of employees are deadly against the cuts to penalty rates, but on the other hand, employers and small business owners are excited at the benefits this change could bring to their businesses.

The Fair Work Commission has accepted penalty rates as a legitimate feature of workplace relations across all industries, but the appropriate level for weekend penalty rates, in a number of customer service industries, has become a highly controversial issue.

The Sunday penalty rates for permanent employees are between one and a half to two times the wage rate paid on a weekday. The lowest skill level retail employee earns $18.99 per hour during weekdays, but $37.98 per hour on a Sunday.

The Productivity Commission recommends cutting Sunday penalty rates to align with Saturday penalty rates as the economic environment and community attitudes, on which penalty rates were originally based, have changed. The report argues that policy should enable wages that attract people to work on weekends, but are not so high that businesses are unable to open and have a negative impact on hiring.

Penalty rates arose at a time when married women and students were hardly in the workplace, when Sunday work often also involved long hours, and when Sundays had a privileged role as a day for rest and religious observance, the Productivity Commission states.

Many employers in hospitality, entertainment, retail, restaurants and cafes, where consumer demand is high on weekends, are concerned about the high rates on Sundays.

Consumers today commonly expect to be able to shop, eat at cafes and access other services seven days a week. These services are vital to cities and regional communities however some business owners choose not to open their doors on Sundays because they cannot afford to pay the high wages to staff.

The Productivity Commission report states that the total hours worked by employees in these industries is likely to increase substantially on Sundays, as is the amount of staff employed, so business owners are likely to reduce their very long working hours.

Kym Chapman, owner and manager of a small business in regional South Australia, says cuts to Sunday penalty rates will affect the amount of stores that are open on a Sunday because they will be more inclined, like everyone else, to pay staff to work on Sundays.

‘At the moment shop owners won’t open on Sundays mainly because it’s the shop owner and the family who have to work, and if they want time off it’s usually a Sunday because that’s the most expensive day to open,’ Mr Chapman says.

‘Cuts to penalty rates will help small business and it’ll help the casual kids who are trying to get jobs to work on weekends. Employers will have more hours because they will have to pay less money to kids to work, so they will be more inclined to have more people working for the same money.’

‘On Sundays now, we’re more inclined to get family members to work instead of paying staff, so there will be more hours available for regular staff to work and earn money.’

Consumers would be also benefit from cuts to penalty rates. With lower Sunday rates, consumers would gain access to more services for longer hours and with higher staffing ratios. Sunday surcharges would be likely to disappear and average prices for consumer services throughout the week would likely be a little lower, the report states.

The Productivity Commission does acknowledge that many people prefer weekends than weekdays for time off, which reflects the social impacts of working on weekends. Although they do argue that there is little evidence that says the social impacts are greater working on a Sunday compared to a Saturday.

Sonia Romeo, Shop, Distributive & Allied Employees’ Association (SDA) Secretary at the SA/NT Branch, disagrees with this statement. She says it is important that workers receive a higher rate of pay for working on a Sunday because it recognises that time off is valuable and the weekend is still important to the Australian people.

‘When workers work on Sundays it means they miss out— on watching a game of footy, special occasions with family and friends, study time, or just spending time with the kids when they’re not at school,’ Romeo says.

‘The vast majority of Australians don’t have to work on the weekend—that’s when the kids are home from school, no Uni classes are on, that’s when people catch up with friends or play sport or get organised for the week ahead. If you don’t receive penalty rates on a Sunday, there is no recognition that you’re working unsociable hours.’

‘For many workers, penalty rates make up a substantial amount of their take-home pay each week, which is
why they are willing to give up their weekend to work. Penalty rates help put petrol in the car and food on the table. Without that nancial incentive, many retail workers may choose not to work on a Sunday.’

The SDA is running a national penalty rates campaign that calls on community-wide support. So far over 34,000 people have signed up to the campaign and over 6,000 workers have made direct submissions to the Fair Work Commission, telling them how cuts to penalty rates would leave them worse off.

Melissa Mikhail, casual retail employee at Target, says if penalty rates were cut she would never work a Sunday again.

‘It’s just always been a thing and it’s always motivated you to work on Sundays, so if that’s taken away you’re not going to have much motivation to go to work,’ Miss Mikhail says.

‘No one wants to work a Sunday in the first place, regardless of whether or not there’s penalty rates, but those penalty rates help those of us who are students and those of us who can only work weekends, get more income because they’re the only days we can work.’

Romeo also argues that reducing penalty rates will have a negative effect on the Australian economy.

‘Research from the McKell Institute indicates that if penalty rates in the retail and hospitality industries were abolished, it would result in a loss of between $445.6 million and $748.3 million per year to local economies in rural Australia. In South Australia, it would mean a loss of up to $36.1 million per year to local economies,’ Romeo says.

‘This is because workers need wage increases to help drive the economy. If you cut the wages of thousands of workers it will mean workers will cut spending. It reduces their ability to spend in local shops, cafes and restaurants, which will hurt local businesses and the economy.’

The Fair Work Commission is expected to make a decision on whether or not changes should be made to Sunday penalty rates soon after the Federal election.

Words by Ashleigh Chapman

Image by Sash Corowa

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