PENALTY rates are a common frustration for many retail and hospitality businesses, but it’s surprising to find they adversely affect even that most transient of enterprises – the food van.
What The Flip food van operator Andrew Shugg has found that selling crepes on public holidays comes at a high risk, due to the cost of the three staff he needs to deliver his product.
He is one of many businesses hoping the issues gains traction as a federal election looms.
Mr Shugg said he appreciated the importance of penalty rates to ensure staff received fair compensation, and the need to pay higher wages on weekends in order to secure labour.
“You’re paying a bit more so you actually can get staff,” he said
However, rates could be excessive on Sundays and public holidays, Mr Shugg said.
For his food truck, the penalty multiple on a Sunday is 1.75 times the normal wage, while on a public holiday it is 2.5 times.
Employees on a public holiday therefore earn almost $50 per hour, plus superannuation.
“If I have a day of trade coming up and it’s on a public holiday, nine times out of 10 I will be closed that day,” Mr Shugg said.
“If you’re not busy, (you have problems).
“Sometimes it’s just not worth the risk, in a business where every dollar counts.”
That was not because of a lack of demand, rather the prohibitive wage cost, he said, and it also meant that there was a trend across the industry of adding surcharges on those days.
A Productivity Commission review of the national industrial relations framework late last year suggested equalising Sunday penalties with those on Saturdays in industries such as hospitality and retail.
Mr Shugg suggested that would still leave room for employers to negotiate higher wages as an inducement for workers if that suited their situations.
Independent Grocers Association president John Cummings agreed that some adjustments to penalty rates were needed, although he considered any action unlikely.
He said a big issue was that larger retailing businesses such as Coles and Woolworths could do deals with unions such as the Shop, Distributive & Allied Employees’ Association, which give them a competitive advantage.
For example, the Coles agreement, which an employee appealed to the Fair Work Commission last year, reduces weekend penalty rates for a higher base rate of pay.
Smaller businesses can’t access similar arrangements, Mr Cummings said.
In South Australia, industry group Business SA secured a deal with the SDA in May 2015 to reduce weekend penalty rates in exchange for higher weekday wages. Very few small businesses opted into the agreement, however.
Chamber of Commerce and Industry of Western Australia chief executive Deidre Willmott said changes to the existing industrial relations system were a high priority for members.
“Our members, particularly in the retail, hospitality and tourism sectors tell us that high Sunday and public holiday penalty rates are stopping them from opening longer hours, hiring more people and delivering the best possible service to their customers,” she said.
“CCI has urged both the federal government and the Fair Work Commission to prioritise reform to our broken industrial relations system to allow entrepreneurs the freedom to grow and create jobs, particularly for young people.
“This includes a flexible penalty rate system that reflects Western Australia’s modern, seven-days-a-week economy, and CCI would strongly encourage all parties to engage in a mature national dialogue on the issue.
“Ultimately, employees need freedom to negotiate directly with employers to give WA flexibility and agility to take advantage of new opportunities.”
While Combined Small Business Alliance of WA chief executive Oliver Moon agreed that changes to penalty rates, and tax reform, were important issues for business, he said the government was unlikely to act.
Effects test
Mr Moon highlighted a series of other policy changes, including the introduction of the small business effects test, which was signed off by cabinet in March.
Other issues he highlighted included the reintroduction of the Australian Building and Construction Commission and new legislation regarding unfair contracts.
The effects test is strengthening a section of competition law so that it applies not just to intentional misuse of market power, but also to actions by large companies that may have the impact of reducing competition, even if that’s not what was intended.
The change was met by some consternation among larger retailers, who argued it could force up grocery prices.
Mr Cummings said the effects test would be a major election issue for small business, however, due the Labor Party’s opposition.
Political fixes were not available for other issues facing small business, however, such as a lack of capital available from banks, and electricity prices.
Mr Cummings said small retailers often paid about 25 per cent more for electricity than larger operations such as Woolworths and Coles, and he questioned if such a price differential was entirely driven by lower billing costs and economies of scale.
