Sunday, August 17, 2014

Penalty rates: Fair pay or job killer?


Fair compensation or job killer? The government has penalty rates in its sights, with one minister claiming it has become impossible to dine at his favourite restaurant on New Year’s Eve.  An impost on your weekend latte and economic handbreak or fair compensation for unsociable hours? Peter Martin blows the froth off a hot topic.

Why do we even have penalty rates?

To penalise employers for making their staff work unsociable hours.

"The norm remains for evenings, weekends and public holidays to be the time when friends, families and social groupings, however constructed, are able to get together,” the Industrial Relations Commission explained in a landmark ruling.

Penalising employers makes work at unsociable hours less likely and compensates staff who have to work at times when their family and friends are not.

Who sets penalty rates?

Fair Work Australia when it approves awards, or employers and employees they make enterprise agreements.

How big are the penalties?

In the restaurant industry they are typically an extra 12 per cent for working after normal business hours, an extra 25 per cent for working Saturday, an extra 50 per cent for working Sunday, and two and a half times the normal salary for working on public holidays.

Health professionals typically get an extra 50 per cent for working on the weekend. Retail workers typically get 25 per cent for Saturdays, double for Sundays and two and a half times for public holidays.

Can employers afford them?

Celebrity chef George Calombaris is one of many restaurateurs who say penalty rates are making their businesses uneconomic, but the restaurant industry keeps growing. Over the past five years spending at restaurants and cafes has climbed at twice the rate of spending in supermarkets.

Employment in the restaurant industry climbed 9 per cent during five years in which overall employment climbed 7.5 per cent.

And restaurants make money. When the Bureau of Statistics examined the accommodation and food service industry it found gross operating profits amounted to 11 per cent of total sales, almost twice that of retail industry (6 per cent) and a good deal more than the construction (8 per cent) and manufacturing (7 per cent).

The industry is twice as profitable as it was 15 years ago.

But aren’t restaurants closing down?

All the time. But new ones are opening in their place. The Bureau says in any one year roughly 15 per cent of accommodation and food service businesses close down and another 15 per cent open. We are spending far more at restaurants than we used to. More than enough are opening.

Aren’t some no longer trading on Sundays?

Several. George Calombaris owns one. His Press Club restaurant in Flinders Street closes on Sunday. But most are open.

Could they charge more to compensate?

Many do, imposing a Sunday surcharge of 10 to 20 per cent. A few years back the Australian Competition and Consumer Commission declared the practice illegal unless the restaurants printed separate weekend menus. Last year Parliament legislated to remove the requirement, but restaurants still need to prominently display the size of the surcharge on their menus.

Would more open if penalty rates went?

Absolutely, unless the standard rates of pay climbed to compensate for the loss of penalties. The base rate for a food and beverage attendant is $17.35 ($26.03 on Sundays). It is entirely possible employers would be pressured to raise the base rate to compensate.

Would meals be cheaper if penalty rates went?

Again, that would depend on whether base rates went up to compensate. Weekend surcharges would certainly go.

Aren’t penalty rates anachronistic? Sunday is no longer a day of rest.

The most recent time use survey showed that in 2006 we only spent 1 hour per weekend socialising, down from 3 hours per weekend in the early 1990s. We spend twice as much time shopping on the weekends as we used to.

The Commission’s view that weekends are the time we “get together” has less force than it used to.

On the other hand, the rise of two-income families makes finding time to get together even more important than it was. Without penalties, couples would be split as one partner worked one set of days and the other a different set of days meaning they rarely got time off together.

Why all the fuss about restaurants? Aren’t penalties everywhere?

They are. Nurses, shop attendants, all sorts of workers get penalty pay if they are forced to work overnight or on the weekend. And almost all workers get penalty pay if they are forced to work on public holidays. The whole idea of public holidays is that the public holidays together. Restaurants and cafes are getting most of the publicity because most are small businesses and because wages constitute a big proportion of their costs.

But if they disappear in restaurants they will probably disappear elsewhere.

Is the move against penalties part of a broader industrial relations agenda?

Probably. Many of the politicians and businesspeople who have spoken out against penalties also dislike central wage fixing. Penalties may be more of a battleground rather than an endpoint.

In The Age and Sydney Morning Herald