Untangling the penalty rate knot

The Australian, February 27, 2017, Robert Gottliebsen

A large number of politicians, journalists, union officials and security analysts have not understood how the “reduction” in award penalty rates will impact workers and listed enterprises in the retail sector.For in the vicinity of 300,000 retail workers (around one third of the total) there has been no reduction in penalty rates at all.

Indeed, a significant number of retail workers are actually set receive a pay increase and there will certainly be no big profits boost to the large retailers.

This is in direct contract to many media reports, the statements of opposition leader Bill Shorten and at least one security analyst.

In many ways the conclusions of the Fair Work Commission brings award payments closer to what was actually happening in larger retailers and will enable smaller retailers paying awards to be paying the same amount as larger retailers and so no longer be at a disadvantage.

Across hospitality, fast food outlets and pharmacies the story is also more complex than the raw numbers suggest.

On the surface the figures look straightforward. In the case of retail, the award rate for full and part time employees on a Sunday will be reduced from 200 to 150 per cent of the base pay. On a Saturday the penalty rate of pay stays at 125 per cent of the base.

But in the case of large retailers such as Woolworths, Myers, Coles, Bunnings, Kmart and Target, the corporations entered into an enterprise bargain agreement with the retail union — the Shop, Distributive and Allied Employees’ Association.

Each company has a different enterprise deal but, in the broad, they went along these lines: all permanent full- and part-time workers including Monday to Friday workers (who tended to be different people than weekend workers) would have a higher base pay than the award.

On a Saturday, there would be no penalty rates although the official award had them at 125 per cent. On Sunday the agreed rate would be 150 per cent rather than the official rate of 200 per cent.

The Fair Work Commission approved these enterprise agreements between the union and the employers, even though clearly some workers received payments that were lower than the award stipulation, although when the agreements were signed in total the work force received greater payments. (The legislation requires that no worker be adversely affected.)

The lower weekend penalty payments became more and more important to retailers because there was a dramatic swing to weekend shopping.

But then the enterprise bargain wheels began to get the wobbles. A worker at Coles successfully applied to Fair Work to have the 2014 enterprise bargain set aside because a number of workers were adversely affected.

Coles immediately switched to its 2011 agreement which did not cover all if its workers but with adjustments enabled existing pay rates to be maintained.

A night worker then challenged the 201ll agreement and that case is still proceeding before Fair Work (The huge consequences of the supermarket wage decision, July 26 and Uncertainty casts a shadow over major supermarkets, August 23).

How was it that the Fair Work Commission overturned agreements previously approved by the Fair Work Commission?

It appears that the original approval relied on statements by executives of the union and the companies. An important part of the enterprise agreements was that the majority of the work force involved in the deal be members of the union, which then became the largest in the land and a major funder of the ALP.

A number large of retailers, including Aldi, did not want a unionised work force so paid the higher rates under the award.

Small retailers were not covered by any enterprise bargaining arrangement but, as in hospitality and fast food, often, but not always, different arrangements were made with the work force including cash payments, to lower the penalty rate impact. The whole situation was a mess.

In the case of Coles, the latest Fair Work statement confirms the Sunday rate set out in the enterprise agreement but increases the Saturday rate significantly. The large retail sector faces an extra bill on Saturday but if Coles and other large retailers were to simply shift to award payments base rates would fall across the board.

Once the 2014 Coles agreement was overturned and a full inquiry was announced for penalty rates, companies and unions stopped signing enterprise agreements and conducted negotiations on a token basis. As a result, the majority of enterprise agreements have expired or are coming close to expiry.

Fair Work Australia has its own internal difficulties and it is not clear just how the new arrangement will be implemented — a process made all the more difficult by political controversy.