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The Great Penalty Rate Debate Continues
The introduction of a new public holiday in Victoria this weekend (Grand Final Eve public holiday on 2 October 2015) and the imminent public holidays in other Australian states and territories have stirred further debate about penalty rates and their role in a modern workplace relations system.
Most Australians are excited about the prospect of a public holiday, and consumers expect that supermarkets, retailers, restaurants and cafés will still be trading on public holidays and weekends. For example, how would Melbournians fare if they weren’t able to get their usual piccolo latte while picking up a last minute outfit down Chapel Street for their Grand Final Day BBQ the next day?
However, public holidays can come at an enormous cost to the national economy and business owners, with little thought given to matters such as who bears the increased cost of wages when public holiday penalty rates are applied.
According to PwC Australia, the new Grand Final Eve public holiday alone may cost the economy as much as $852 million as a result of the closure of businesses that would normally be open on a Friday.
The cost to businesses that remain open is also potentially significant, given that a majority of employees are likely to be entitled to penalties rates of as much as two and half times their regular wages for working on a public holiday.
The Australian Government is under increasing pressure from stakeholders in affected industries (including retail, hospitality and entertainment) to make changes to the current penalty rates system, particularly with respect to new public holidays and Sunday penalty rates.
In August of this year, the Productivity Commission’s draft report into Australia’s workplace relations framework was released. This included, amongst other things, recommendations that:
- employers not be required to pay for leave or any additional penalty rates for any newly designated state and territory public holidays; and
- Sunday penalty rates that are not part of overtime or shift work be set at Saturday rates for the hospitality, entertainment, retail, restaurants and café industries.
Defenders of the penalty rate regime argue that it is necessary to compensate employees working “unsocial” hours and that the increase in revenue for businesses that attaches to public holidays largely offsets any increase in wages.
The position of those who support the removal of penalty rates is that, for many, what was once “unsocial” is now “preferred” as a result of the changing nature of society and work. For example, for many groups, such as university students, working weekends and public holidays often fits in better with their existing commitments.
Further, with increases in technology and globalisation allowing people to work from anywhere at any time and across multiple time zones, the concept of a regular working week with set social and unsocial hours is becoming more and more diluted.
It is also argued that it is far from guaranteed that businesses will experience sufficient increases in trade to offset the penalty rates that are payable. The alleged increase in revenue, unlike the resulting penalty rates, is not a one size fits all approach.
With most workers having the day off on Friday in Melbourne and Monday in other major metropolitan areas (including Sydney), tumbleweeds are predicted to be rolling down the main streets of the CBD. This may not bode well for many café owners and retail outlets and others within affected industries.
It is unlikely that these issues will be resolved in the immediate future and, while the debate continues, penalty rates still apply. It therefore remains critical for employers to understand and comply with their obligations in relation to penalty rates.
PCS can assist you if you have any questions about your business’ obligations in relation to penalty rates or how to comply with them.