Opening statement to the Senate Education and Employment Legislation Committee Inquiry into the Fair Work Amendment (Pay Protection) Bill 2017
Alana Matheson Deputy Director | Workplace Relations
Melbourne | 25 August 2017
Check against delivery
The Australian Chamber thanks the Committee for this opportunity to address it in relation to the Fair Work Amendment (Pay Protection) Bill and the broader issue of penalty rates.
We note that both legislation and references Committees are undertaking parallel inquiries into penalty rates and intend to share evidence that comes before them. The Australian Chamber contributed to both inquiries – and we continue to rely on our written submissions which we hope are useful to you.
These inquiries were triggered by the decision of the Fair Work Commission to modestly reduce Sunday, public holiday and some evening penalty rates in retail, pharmacy, hospitality and fast food industry awards. These modest reductions to some penalty rates in a specific subset of awards followed a massive evidentiary case and are to be phased in across as many as four annual wage review cycles.
Employers are concerned that politically directed debate on penalty rates risks obscuring why employers sought changes to penalty rates and the reasons why the Fair Work Commission awarded the outcomes it did, which fell short of the changes employers wanted.
The industries impacted by the decision have special characteristics:
- They have higher closure rates than other industries and face a tough competitive environment.
- They have high levels of small business representation.
- They trade on weekends, and are expected, if not compelled, to do so.
- They make a significant contribution to youth and low skilled employment and have traditionally been entry points into the labour market for many Australians.
- They offer working patterns that enable people to balance work with other priorities, including study.
The Fair Work Commission accepted evidence that the levels of penalty rates in these industries are leading employers to reduce labour costs by imposing operational limitations such as:
- Restricting trading hours;
- Lowering staff levels; and
- Restricting the type and range of services provided to our community.
The Fair Work Commission found that modestly reducing penalty rates is likely to lead to:
Increased trading hours on Sundays and public holidays;
- A reduction in the hours worked by owner operators;
- An increase in the level and range of services offered on Sundays and public holidays; and
- An increase in overall hours of work.
We want to stress that the independent decision maker reached its decision after weighing mountainous evidence. We can confidently say that there have been few if any more evidenced cases in the history of the Commission.
Employers did not get all the relief we sought or needed from the Penalty Rates decision – far from it. However, it will over time provide modest relief to some Australian businesses that are facing tough conditions and it will benefit jobs seekers, those wanting more hours, and local communities.
The focus of today’s inquiry is one of the myriad of Bills following the penalty rates decision. That is, the Fair Work Amendment (Pay Protection) Bill introduced by Senator Rhiannon on 29 March 2017. The Bill would require that rates of pay payable under an enterprise agreement not be less than the ‘full rate of pay’, which would include incentive-based payments, loadings; monetary allowances; overtime or penalty rates and any other separately identifiable amounts in an award.
In the Australian Chamber’s submission, the legislation before us would be a step in the wrong direction, and would be a radical recentralisation of setting wages and conditions. If enacted, it would provide a further disincentive to enterprise bargaining at a time where it is already in decline. If we don’t arrest this decline employers, employees and the broader economy will miss out on the benefits that enterprise bargaining is designed to deliver.
Enterprise bargaining has provided a means of trading various award terms, including penalty rates for other conditions in the workplace on the basis that employees are better off overall under the agreement compared to the award. This concept of being able to trade conditions for other benefits is not new, was intended, and is fundamental to our bargaining system. The very lifeblood driving the first wave of bargaining in the 1990s was identifying outdated entitlements and practices and eliminating them through trading off for higher wages and for alternative, more relevant terms and conditions.
Our written submission recounts the history of what enterprise bargaining was designed to deliver and how our enterprise bargaining system is performing.
It explains that the Bill before you would further complicate enterprise bargaining and will have the practical effect of entrenching award conditions, constraining innovative approaches and preventing employees from exchanging both monetary and non-monetary benefits of value to them for changes to award conditions.
Passage of the Bill would also be at odds with bargaining experiences that have seen millions of working Australians, often with the support of unions, assess and make their own judgements on whether they would be better or worse off from a proposed package of terms and conditions, with the protection of tightly regulated voting and statutory tests guarding against overall disadvantage.
The Bill is also at odds with the bipartisan consensus across more than 20 years that bargaining should be encouraged, and that is should be the mechanism to deliver productivity and competitiveness and to meet the needs of enterprises and employees.
We recommend against the passage of the Bill and encourage all in our Parliament to return to the spirit and commitments of the 1990s and to examine and combat the real challenges being experienced by those seeking to bargain.