Fair Work Commission ruling renews penalty rate push

The Australian, September 30, 2016:

Small business will push to have retail and fast-food companies not pay employee penalty rates and overtime in exchange for a 25 per cent increase in their hourly rate of pay following the Fair Work Commission’s ­“historic” move to drive more flexibility into the nation’s award system.

Employers welcomed yesterday’s announcement by commission president Iain Ross that the tribunal would investigate ­allowing award-covered retail and fast-food companies and employees to trade off penalties and overtime for higher hourly pay without the need for an ­enterprise agreement.

Council of Small Business of Australia chief executive Peter Strong said the announcement was “historic”. “We think it’s a ­really big thing,’’ he told The Australian. “What it adds is flexibility and simplicity, which is what we have always wanted.’’

Mr Strong said he supported a single higher hourly base rate operating across seven days as a simple alternative to the existing system of penalty rates and overtime payments.

He said a “potential model” would be the hospitality industry award, which allows employers and employees to enter into an arrangement that pays 25 per cent above the weekly award rate in lieu of overtime and ­penalty rates.

Provided subsequent due diligence backed a 25 per cent higher single rate, Mr Strong said, “we would support that”.

The commission’s announcement it would revisit “loaded rates’’ after it handed down its long-awaited penalty rates decision later this year surprised critics of the Labor-appointed Justice Ross, and sparked concern at the senior levels of the union movement.

Australian Council of Trade Unions secretary Dave Oliver said unions would be “very cautious about any proposal like loaded rates because the potential for individual employees to be worse off is very high”.

“No one wants unnecessary complication, but the reality is retail is a complex sector with a large and diverse workforce,” he said. “One size does not fit all and workers are always left behind in the quest for ‘simplicity’.”

With the commission expected to agree to some reduction in weekend penalties when it hands down its penalty rates ­decision later this year, Mr ­Oliver asked if the tribunal would also increase the hourly rate at that time.

The commission, however, will not ­address the issue of loaded rates in the retail and fast food sector until next year.

Small businesses have long complained they are disadvantaged by the current system given major retailers have struck contentious enterprise agreements with the shop assistants union that apply “loaded” rates to tens of thousands of workers.

Under the commission proposal, the so-called “loaded rate” would be included in a schedule to the award and would benefit award-covered employers who would be saved the cost and time involved in negotiating an enterprise agreement.

“It should be possible to develop a schedule to the award which provides that employees are paid a higher, ‘loaded’, hourly rate of pay in lieu of an entitlement to penalty rates,’’ Justice Ross said. “There would need to be appropriate safeguards and interested parties would be given an opportunity to comment on any proposal.”

He said small businesses faced practical impediments to entering into enterprise agreements.

“A loaded rates schedule would allow small businesses to access additional flexibility, without the need to enter into an ­enterprise agreement,’’ he said.

The Australian Industry Group welcomed the consideration of a loaded rates schedule for the retail award.

“There are, of course, many ­issues that would need to be worked through but as a general proposition, an appropriate loaded rates schedule would provide welcome flexibility for employers and employees,” the Ai Group’s head of national workplace relations policy, Stephen Smith, said.

“The schedule should be able to be accessed by all employers covered by the award rather than, for example, it only being applicable to small businesses.”

University of Adelaide law professor Andrew Stewart supported the initiative but said the challenge would be for the ­commission to determine appropriate rates to apply.

“There will be opposition to this,’’ he said.

“It will be almost impossible to find the sweet spot here.’’

Professor Stewart said the agreements between the major supermarkets and fast food chains with the shop assistants union were unfair to smaller companies not covered by agreements. “They have really distorted things,’’ he said. “They have given an advantage to the big retailers and fast food chains that small business doesn’t have.’’

He said it would be better to have “officially sanctioned” loaded rates within the award rather than potentially unlawful agreements being struck by employers and workers.