Penalty Rates & Small Business: Why it’s time for change

Penalty Rates & Small Business: Why it’s time for changeBy Bradley Woods – CEO of the Australian Hotels Association (AHA) WA

Whether politicians like it or not, laws cannot be legislated free of future obsolescence, because change is inevitable.

Australian penalty rate laws are obsolete because the social and cultural landscape of Australian society has changed dramatically over the last 40-plus years. No longer do shops close early on a Saturday, no longer is there a typical Monday to Friday working week and no longer is Saturday a day for sport and Sunday an exclusive day of rest.

In 1919, the then Commonwealth Conciliation and Arbitration Commission said penalty rates on Sundays were compensation for working ”unsociable hours”. This is clearly no longer the case. People now work from home and around the clock, there are no longer defined boundaries in a 24/7 world.

Work practices have become more flexible, trading restrictions have eased; people spend more time at leisure and they earn a higher disposable income. The international economy has globalised and never sleeps, but Australia’s award system still bases its penalty regime around a Monday to Friday working week and has failed to keep up.

Thousands of Australian jobs are being lost and hours of work are being reduced because some businesses cannot afford to open when penalty rates apply on weekends, evenings or early mornings.

Employer groups in the hospitality industry are fighting to have penalty rates reduced and the days in which penalty rates apply changed so that it’s fairer and more equitable for business to operate. This will maintain the hours of work available and ensure that people continue to receive a fair day’s pay for a fair day’s work.

To facilitate employment and growth, penalty rates need to be eased. This will allow businesses to operate for higher margins of profit rather than fighting to survive, because when businesses close workers receive nothing at all.

In my home State of Western Australia, our unique location means that it is more expensive to ship the infrastructure and supplies that we need to do business. The higher cost of conducting business in WA along with the burden of penalty rates means that on public holidays in regional WA many small businesses can’t afford to open, meaning less productivity and less wages for local workers.

For the businesses that do open on public holidays, costs have to be passed on to consumers. The national unemployment rate fell from 6.2 per cent to 6.1 per cent in December 2014, but WA’s jobless rate surged from 5.3 per cent to 6 per cent on a seasonally adjusted basis.

The hospitality industry is the hardest hit, given the nature of the industry, with people enjoying hospitality primarily on weekends with spikes during public holidays. If penalty rates do apply, small businesses should be able to nominate the days in which they are paid.

Penalty rates in hospitality should be in line with the majority of other industries. Small hospitality businesses shouldn’t have to absorb burdensome costs because of peaks in demand. This is the same principle as a Monday to Friday work week for a tradesperson.

Likewise, as I’ve outlined, Sundays and Monday are no different to Saturdays which is why the same rates payable on a Saturday should apply regardless of the day.

A typical line from many of our federal politicians is “small business is the engine room of the Australian economy”. This is true, but small business owners in Australia are screaming for help.

It’s time for change.

Brad Woods


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