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Penalty rate decision by Fair Work Commission: Professor weighs in

The Fair Work Commission will shortly hand down its determination on a submission from employers for variations to clauses relating to penalty rates in a number of wards under the Modern Awards Review.

Professor Ray Markey, IR expert and head of the Centre of Workforce Futures at Macquarie University, was part of the review process on the impending decision and has undertaken considerable research into the effects of altering penalty rates, particularly in the hospitality sector.

Professor Ray Markey is director of the Centre for Workforce Futures at Macquarie University

He shared the following thoughts with accomnews

Employers seek reductions in the Sunday penalty rate to the same level as Saturday, from 200 percent to 150 percent of normal wage rates. Employers in retail and hospitality sectors have been the strongest proponents of these changes. They argue that if Sunday rates are reduced they will be able to afford to stay open for longer which will create further employment. Their other main argument is that modern Australia is a 24/7 society, where the importance of weekends for time off work has declined significantly. If true, this means that the main rationale for penalty rates, that they are compensation for working unsociable hours, has been undermined. These arguments have been supported by the Productivity Commission and the federal government.

The ACTU has provided evidence to counter these arguments before the Commission. During the recent federal election campaign, the Labor Opposition promised to make a submission to the Commission in support of penalty rates being maintained. However, it has promised to abide by the Commission’s decision, rather than intervening with legislation to protect penalty rates, as desired by some unions. The Labor Party argued that legislative intervention would set a precedent for other interventions, potentially by the Liberal/National Parties, which have also promised to abide by the Commission’s decision.

The impact of the decision by the Fair Work Commission will be predominantly in the following areas, in the words of Professor Markey:

  1. Income of weekend workers

These workers tend to be low paid, with over 50 per cent earning less than $30,000 per annum. Over a third of those who work weekends only, and over half who work Sundays only, report relying on penalty rates to meet household expenses.

While about a quarter of weekend workers are aged 18-24 and the largest group are single without children, these are not a majority because many weekend workers are couples, with and without children, or sole parents.

The Productivity Commission acknowledged that these workers will receive lower pay overall if Sunday rates are reduced, because they are unlikely to gain sufficient additional hours to make up loss of pay. If Sunday rates are reduced to those applying on a Saturday, Sunday workers on a 3-hour shift would need to work an extra hour to earn the same as previously; on a four hour shift they would need to work an extra hour and 20 minutes to earn the same as previously. It is unclear that such a substantial increase in hours would be available, even for workers to break even; many cafes or restaurants, for example, do not stay open beyond 3-4 hours at meal time because of lack of demand at other hours.

  1. Employment

The evidence for greater employment as restaurants and retail stores increase trading hours is virtually non-existent. Most of the arguments are based on economic theory, or hypothesis, rather than empirical data. The Productivity Commission essentially conceded this, but considered that economic theory should carry weight in decision-making. It argued that the onus of proof should be accordingly reversed, so that opponents of reducing penalty rates should need to demonstrate that it would not increase employment.

  1. 24/7 society

Working ‘unsocial’ hours at the weekend is still not the experience of a majority of workers: almost a third work weekends regularly, but in retail and hospitality only about 10-13 per cent of workers have weekend hours. Weekend workers also forgo time spent with friends and family. A number of studies show that this time is difficult to make up during the week because others follow a more standard schedule.


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