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From the Desk of the Executive Director

Ken Phillips is co-founder and Executive Director of Independent Contractors of Australia. He is a published authority on independent contractor issues and directs research on related commercial and trade practices issues. Through his numerous articles in newspapers and think-tank and academic journals, Ken is known for approaching issues from outside normal perspectives and is frequently sought out for media comment.

Small retailers will suffer the ultimate penalty

Wednesday, March 25, 2015

The political uproar that is the debate over penalty rates could almost be a hysterical comedy written for Australians by the ghost of Shakespeare.

Think of it. Some months ago as Prime Minister Tony Abbott’s popularity polling was crashing, he dared utter the thought bubble that penalty rates should be reformed. There was uproar from his surrogate political opponents, the union movement, headed by the ACTU.

Abbott would be the slayer of the fabric of Australian society his opponents screamed. Boo hiss to Abbott! Workers would be forced into Dickensian poverty, they wailed!

What did PM Abbott do? He stood in stoic silence, hoping resilience would see him through. But the people laughed. They saw the joke. Abbott has been set up, his own words used against him.

Then from behind the audience came a great uproar and an eruption of smoke. Out of the haze danced the prince of employers, crying ‘We’ll save the day!’ They leapt onto the stage hand in hand with the grinning Shop Distributive and Allied Employees Association (the shoppies union). We’ve done a deal, they announced. We’re slashing weekend penalty rates! (That was the deal revealed yesterday by the SDA and the South Australian employers association, Business SA.) The audience screeches.

I love Shakespeare. The politically hapless are painted as evil; the cunning manipulators of ideas ooze through to make themselves appear as heroes. The reality and truths of issues disappear among the flim-flam of political gamesmanship.

Australian politics has ceased to be conducted on the merit of ideas. Maybe it never was.

But let’s consider penalty rates.

Penalty rates are an historical hangover of an Australian lifestyle long faded into the past. Work was nine-to-five, Monday to Friday. Most major shops, hotels and other venues were closed on weekends, particularly Sundays. Saturday morning was for school sports and on Saturday afternoon, people attended the big football games. Sunday morning was church and Sunday afternoon was the quiet family get-together.

Penalty rates were designed not just to compensate the few people who worked on weekends for ‘unsociable hours’; they were an enforcement of that lifestyle! They ensured that it was too expensive for businesses to operate on weekends, thus locking in the life pattern.

But the old lifestyle has gone. The union movement knows this; they’re not fools. Our society has become eclectic, diverse and, I think, infinitely more colourful and interesting.

Business happens any time of the day or night, giving people what they want when they want it. Families are hugely diverse. The work-life balance, if there is such a thing, is decided by each individual given their own circumstances.  So the deal between the shoppies union and the SA employers responds to the reality of modern life? That’s good.

But there’s another Shakespearian twist. The shoppies union/employer deal is technically illegal under the Fair Work Act. It’s an old-fashioned pattern agreement, which is unlawful. It’s designed as an inducement to have small businesses join Business SA and be captured by the union.

Currently, small retail businesses overwhelmingly operate under the relevant retail awards. This locks in penalty rates. If they want to access this new ‘penalty rate fixer’ they have to sign up to the union pattern enterprise agreement. Once signed up they’re in the clutches of the union on a wide range of issues. It’s a membership, control and revenue tactic for the union.    

It’s also a membership revenue tactic for Business SA. The sales pitch they’ll put to small businesses is: come join us and we’ll fix your penalty rates problem.

But the knife twists in. This 34-page agreement reduces the probationary period before unfair dismissal action that is possible from 12 to six months.

The agreement introduces redundancy provisions requiring union agreement to terminate, still has penalty rates ranging from 30 to 100 per cent and 200 per cent on public holidays. It triggers union involvement even over roster changes and involves higher wages. Pity the small business employer who fails to understand this before signing up.

Returning to our Shakespearian play and Prime Minister Abbott no longer looks the fool as others seek to cast him. The fools will be any small businesses that fall for this ‘penalty rate fixer’ con.

[First published in Business Spectator, March 2015]

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