Flat White

Penalty rate revision a win for jobs and commerce

23 February 2017

4:42 PM

23 February 2017

4:42 PM

Earlier today, the Fair Work Commission announced that Sunday and public holiday penalty rates for hospitality, restaurant, fast food, retail and pharmacy workers would be reduced from 200 per cent to 150 per cent, bringing them in line with the Saturday ‘time-and-a-half’ penalty rate. In a rather ironic twist, the review comes at the behest of Bill Shorten’s Labor party which commissioned it as part of a four-yearly penalty rate review by the independent FwC.

The move is an excellent decision and a win not just for consumers and businesses, but for job-seekers and many workers as well.

Penalty rates exist to recognise the sacrifice that workers in many industries make by having to work on weekends due to the nature of their industry and community expectations. Even today, most workers in western societies regard weekend work as ‘socially undesirable’ and penalty rate advocates have often asserted that they are a necessary enticement for businesses to find workers during these times.

But the notion of forcing businesses to pay Sunday workers 133 per cent of what they would earn on their Saturday penalty rate is a creature of an earlier, bygone era when the ‘Sabbath’ was sacred as a biblical day of rest. Today, Sunday church attendance has shrunk to barely 15 per cent of the community and in any case, it fails to justify a 200 per cent premium on Sunday hours. Moreover, way back in 1947 when penalty rates were introduced, the mostly-male workforce worked mostly full-time from 9 am to 5 pm and the weekend was especially valuable as it offered 2 days a week off the standard schedule.

Things are a tad different today. A third of the workforce works part-time and work patterns tend to be a lot more variable and flexible in many industries than they were in the past. Consumers also expect access to a range of services and products on weekends and the high, often prohibitive costs of keeping business open on a Sunday due in large part to compulsory penalty rates for staff do not help matters.

In the forties, for example, a majority of family women stayed at home and were able to shop during standard weekday hours while their husbands were away at work. In today’s age, women often juggle family and career – the weekend is usually the only time for many families to grab the groceries they need. The discrepancy between Sunday and Saturday penalty rates for hospitality and other industries with a large young workforce also make little sense when you consider the arguably greater sacrifice of giving up a Saturday night out on the town to service others enjoying their Saturday nights out.

Rows of closed shops on a Sunday afternoon are a sorry sight – for workers and students too. The weekend is the most convenient time for many students to engage in part-time work and more working hours means greater pay. Reducing the Sunday penalty rates means that more staff can be recruited and more working hours can be given to existing staff. This is especially important for states like South Australia where the number of 15-24 year-olds looking to work has shot up to nearly a shocking 20 per cent. Despite unsubstantiated assertions by the unions that penalty rate changes would not actually affect employment, the FwC disagreed and have noted evidence to the contrary in the past too such as when they adjusted restaurant workers’ penalty rates in 2014.

The idea that penalty rates are necessary for businesses to find workers on weekends also seems to be an unfair shake of the sauce bottle in light of statements by economists like the University of Canberra’s Phil Lewis who estimated that Sunday penalty rates have reduced demand for labour by 75-100 per cent – a staggering figure.

Policymakers often have to balance competing interests. But contrary to the unions, this isn’t simply about pitting business interests against worker interests. This is about pitting the interests of current workers who would earn slightly less for the same hours of work (although for many this would be a shortfall recoverable with the offer of more working hours after the changes), against underemployed workers and unemployed workers who will benefit from more hours and shifts. And there is of course the obvious win for consumers when parma and schooners at the pub become a little easier on the coin purse.

The FwC’s decision won’t be implemented straight away. This is to give workers whose weekly earnings would be immediately affected enough time to plan and budget for the changes. The family and leisure time sacrificed by those working weekends will continue to be recognised as weekend workers would still earn 150 per cent of what they get for weekday hours. Moreover, our workers will continue to enjoy some of the highest real wage standards in the developed world with the change leaving Finland as the only developed nation offering a 200 per cent mandatory pay rate for Sunday hours.

Penalty rates should ideally be left to voluntary negotiations between employers and workers of individual industries bargaining either individually or collectively as a union if they so choose. This would not only offer a balance between freedom of contract and any perceived imbalance in bargaining power, but would also recognise that  a static penalty rate figure of 150 per cent doesn’t make sense as different industries connote different costs, demands and flexibility for workers and their employers.

Satyajeet Marar is a Research Associate with the Australian Taxpayers’ Alliance.

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