Give ‘better off’ test the boot

Small Business Ombudsman, Kate Carnell. Picture: Kym Smith
Small Business Ombudsman, Kate Carnell. Picture: Kym Smith

If the federal government wants to bring about post-COVID reforms that genuinely improve productivity, especially involving small business, it will have to finally confront the BOOT.

It stands for the better off overall test and has been blocking industrial reforms for 11 years.

Section 193 of the Fair Work Act, 2009, says that for an enterprise agreement to be approved, the Fair Work Commission must be satisfied that “each award-covered employee and each prospective award covered employee” would be better off overall under the new agreement.

Not “no worse off”, but better off; and not just existing employees, but all future ones.

In 2015 the Productivity Commission recommended replacing it with a “no disadvantage test”, but successive Coalition prime ministers have baulked at this, presumably because they were haunted by the ghost of WorkChoices.

The Small Business Ombudsman, Kate Carnell, has now issued a challenge to the current PM, Scott Morrison, with a comprehensive “COVID-19 Recovery Plan” for small business that includes among its many recommendations a new omnibus award for small business that would, among things, allow 24/7 rostering at the same rate.

READ MORE:‘Loaded’: higher pay for penalties trade-off|Revival road to a dynamic, more productive Australia|‘Home work’ tests nation’s productivity drive

Those working Monday to Friday would get more; those working only weekends would probably get less. As Kate Carnell told me over the weekend, “if every person has to be better off, you can’t improve productivity”.

Not only that, it’s fair to say that weekend penalties are an anachronism: these days business have to operate seven days and can’t charge more on the weekends.

Under Carnell’s plan, the single small business award would be opt-in so that businesses that don’t have HR and legal departments could, if they wanted to, escape the complexity of a 250,000-word Fair Work Act, and 122 different awards.

Although she is saying the award could include loadings for weekends, public holidays and late nights, the test would be “better off on average” not “better off overall”, taking into account 12 months of earnings.

I’m not sure that wording goes far enough because it leaves in the words “better off”. It’s certainly not what the Productivity Commission recommended five years ago, which would have put the onus on the Fair Work Commission to prove that an employee was worse off before rejecting an agreement, rather than an employer having to show he or she was better off.

But baby steps, perhaps. In any case, if Carnell’s full list of recommendations were accepted by the government it would be a revolution for small business in this country.

The other main recommendations handed to the government are:

* Replace depreciation with a permanent instant asset write-off of $150,000;

* Legislated 30-day payment terms;

* Removal of fringe benefits tax for small business;

* Creation of a small business government procurement panel;

* A federal small business claims tribunal;

* A one-off grant for small businesses in financial trouble to get professional help;

* Introduce a government provided revenue-contingent small business loan to allow for the phase out of JobKeeper.

By the way, Carnell is defining a small business as one with less than $10 million in annual turnover. Obviously, all of those benefits would be a powerful incentive for a business to not tick up to $10.1 million revenue, but you’ve got to draw the line somewhere.

In my view 30-day payments terms should be legislated for all businesses, not just small ones.

Clearly the government understands the importance of this since it has had a “pay on time” 30-day policy since 2014 and has just cut that to 20-day terms for contracts up to $1 million as part of its coronavirus stimulus packages.

There is no excuse these days for anyone to take longer than 30 days to pay invoices, let alone delay payment for 60 and 90 days as many big (and small) firms do. No one sends a cheque by mail anymore – it’s all digital, and instant.

The idea of abolishing fringe benefits tax for small business is so they can compete for staff against big companies that offer in-house gyms, childcare and food services that are not taxed as fringe benefits.

Replacing depreciation with an instant write-off up to $150,000 would generate a huge small business investment boom, and the other measures would be designed to level the playing field further, going beyond the unfair contracts legislation – while toughening that as well.

Scott Morrison and Treasurer Josh Frydenberg are apparently looking for a reform agenda to help the recovery from the recession that has been deliberately caused to fight the pandemic, and apart from that they need to do something about Australia’s declining productivity growth.

Was that decline caused by the BOOT? The issue is far more complex than that but it didn’t help.

So for his reform agenda, Morrison could do worse than give the BOOT the boot and focus on small business, which have been hardest hit by the pandemic recession and need the most help.