WorkChoice issues resurface… We’re all news tarts… Fairfax drops the ball – again… We neglect offshore investment… No national OH&S… Roger May walks… Rate rise danger to insolvencies

• WorkChoice issues resurface
• We’re all news tarts
• Fairfax drops the ball – again
• We neglect offshore investment
• No national OH&S
• Labor takes up mantle on trade practices
• Roger May walks
• Rate rise danger to insolvencies
• August is networking month for Victorian business owners
• Economy roundup
• Quote of the day

The real issue behind the actor and the 18 year old

Business owners beware – as the uproar between the Government and the unions over WorkChoices once again surfaced this morning, it has highlighted two staffing issues that hold traps for business owners employing young people and hiring sub-contractors.

The cause was due to an actor, Damien Richardson, in one of its “myth busting” WorkChoices advertisements facing claims he underpaid a former 18-year-old worker at his old painting business – claims he denied.

He says the 18 year old was a sub-contractor, not an employee, and was paid as well as he could have been given that he failed to provide an ABN and adequate invoices for work done.

However the Government has withdrawn the ad and the Workplace Ombudsman will investigate the former employee’s claims.

But there are lessons for all business owners.

VECCI workplace relations lawyer Peter Vitale offers the following simple tips to employers:

• A person under the age of 18 can only be employed with the consent of a parent or guardian. And don’t assume that because an employee is a minor that you can pay them less – junior rates area applicable under some awards, but not all.
• A person below the age of 18 must be taken on in a conventional employer-employee relationship – they cannot be hired as a subcontractor.
• Many businesses take young people on in a training position, whether or not as a formal apprentice. Vitale cautions that more often you can’t legally pay trainees reduced training wages unless they have a registered training agreement that has been lodged with the relevant state authority, even if you feel the training they receive forms part of their total compensation package.
• Once a person turns 18, they are subject to the normal laws of employment, just like everyone else. Keep in mind, however, that it may still be a good idea to keep parents in the loop – if any problems arise, it is more likely than not they will be the ones you will have to deal with.
• Young people will generally be more vulnerable than older employees, so you may need to take an extra step to ensure discrimination or bullying doesn’t take place. Doing so could protect them from an unpleasant experience, and your business from potential claim.

And when it comes to sub-contractors:

• Just because you call someone a sub-contractor doesn’t mean they are one. There are a grab bag of factors that go to whether a person is an employee or a subcontractor including the degree of control exercised over the person’s work by the hirer, whether the person can be properly characterised as conducting their own business, do they pay their own expenses for things like insurance and workers comp, do they own their own equipment and are they able to delegate the work to their own sub-contractors or employees.
• Tread carefully when hiring young people as subcontractors, even if they are over 18. They will often come with less bargaining power because of their lack of experience – a factor that will tend to suggest to a court that they are an employee, not a sub-contractor.
• Sub-contracting isn’t a way to pay workers less. If it appears to a court that a person’s status has been changed from an employee to sub-contractor just to reduce their rate of pay, it may rule it is a sham arrangement.
• You can be prosecuted, and subjected to penalties, for hiring someone as a sub-contractor when they are really an employee. The Workplace Ombudsman has recently prosecuted several employers on this ground.

If you want to hire a young person or trainee using more flexible arrangements, consider using a group training company. Group training companies act as the employer for apprentices and trainees who are then hired out to employers for short periods of time.

News tarts cause publisher headache

Online is causing such a cataclysmic shift to the world of news that media companies and publishers are scrambling to understand and adjust to the new expectations of consumers.

Now a new McKinsey study has bad news – content consumers are promiscuous. An online survey of 2100 US consumers find they divide their time between as many as 12-16 news brands a week. Moreover many reported using these brands daily, or in the case of internet news sites, many times a day.

The reason given for this is chilling to the publisher who wants to build a loyal following: consumers switch because “every news event has two sides”, “to get all the facts” and “to form my own opinion”. Content consumers are also looking for specific types of news skewed to their interests or local news.

TV and the internet were described as useful (45% and 26% respectively) when compared with newspapers, radio and magazines. (18%, 10%, 1%.) The respondents also expressed a preference for sources of news offering convenience, comprehensiveness or timeliness rather than quality.

“Specifically they were far more likely to consider a news source useful because ‘it is the easiest way to get news, covers the most topics, or makes it easier to get news whenever I want it rather than because it has accurate content or the deepest analysis’. In fact only 17% say they go to a particular platform because ‘I can get a reporter I like’ and it has content not available anywhere else,” the report says.

The findings have significant implications for media companies, McKinsey concludes. A multi-source aggregator could meet the desire for volume and variety in online news. A national news organiser could represent a version of major events and select and provide links to related stories and blogs from competitors. National news sites could link with local sites. And media companies will have significant opportunity to develop niche news products.

Amanda Gome

Fairfax spreads urban myth as fact

Can you believe it? Last week The Age misconstrued data from the Australian Bureau of Statistics and reported that 60% of start-ups go bankrupt under the alarming headline: “Self employed leads to bankruptcies”.

Now The Australian Financial Review has repeated the mistake stating on page 7 today that 60% of businesses that started in 2003 with turnover between $50,000 and $200,000 went bankrupt within three years.

But as SmartCompany reported last week, the figures come from an ABS report called “Counts of Australian businesses, including Entries and Exits”. It says that companies with no employees exit at a greater rate than do companies with employees. But that doesn’t mean the exiting companies are “bankrupt”.

Companies exit for all sorts of reasons, including selling, merging or simply shutting down a company to focus on another. While a small percentage may go into liquidation, deed of arrangement, or voluntary administration, the vast majority do not. A spokesperson for the ABS says that there is no follow-up data on what happens to companies that exit, but they certainly do not go “bankrupt”.

Amanda Gome

Australian businesses are not investing abroad

Australian businesses are finding it too hard and costly to invest abroad, says a study by the International Business Wales, the economic development body for Wales.

The study found that more than five in 10 Australian SMEs had no aspirations to invest overseas. The study, which looked at 102 companies, found three in 10 SMEs now investing abroad do so to export.

Three in 10 have a fully owned subsidiary in a foreign country and more than half (52%) believe gaining access to local markets would be the main drivers for them to consider even investing overseas followed by tax and financial incentives.

National OH&S hopes dashed

A confidential inquiry has urged the New South Wales Government to keep the state’s stringent occupational health and safety laws, a move that could dash business hopes for a consistent national OH&S regime.

The Australian Financial Review reports that the review, by retired Supreme Court judge Paul Stein, recommends NSW keep laws that impose strict liability on employers for workplace safety breaches and give unions a lead role in prosecuting employers.

The other states are unlikely to move their laws into line with the NSW regime, which is widely perceived by business as the harshest in the country.

Mike Preston

Labor takes up mantle on trade practices

Labor will this week introduce a bill into Federal Parliament that it says will provide improved protection to SMEs from big business bullying.

Labor’s proposed laws will add to long awaited amendments to the Trade Practices Act to be introduced into Parliament by the Government this week. Although welcomed by some business groups, lawyers and senators Barnaby Joyce and Steven Fielding have criticised the Government amendments as not making any substantial improvement to predatory pricing and unconscionable conduct provisions in the Trade Practices Act.

Opposition competition policy spokesman Chris Bowen says Labor will this week propose amendments to:

• Strengthen section 46 by dealing with recoupment and the definition of “take advantage.”
• Enable the Federal Magistrates Court to hear s46 and s83 cases so that small business has a low cost jurisdiction in which to raise its concerns.
• Abolish the dollar threshold for cases under S51AC.
• Give the ACCC power to deal with “creeping acquisitions”.
• Strengthening the powers of the ACCC to gather necessary evidence in TPA cases.

Mike Preston

Roger May escapes jail

Roger May has done it again. After pleading guilty to dishonestly using his position as a director, he received a one-year sentence in the County Court yesterday which was wholly suspended – a sentence that will puzzle many of those left in his wake. See former story.

The judge, Tony Howard, heard that May had spent 22 years in the US where he became a highly successful developing telecommunications technology and he was named in the BRW Rich List as one of the top 200 Australians. He says it appeared May resorted to dishonest means in a fit of frustration.

“I consider your prospects of rehabilitation are good,” Justice Howard told May, saying he was otherwise of good character. “And there are prospects open to you to make good in your life and come back successfully in your business endeavors.”

Perhaps Justice Howard should have consulted a series of stories I wrote about Roger May in BRW throughout 2002-2004.

May, the son of a Port Adelaide wharfie, claims he was developing technology for mobile-phone base stations. Instead he left behind a string of creditors in his wake including the tax office, RMIT University, unpaid wages to employees and debts to suppliers and creditors. The Federal Government had also awarded May an $11 million R&D grant of which about $7 million was paid.

His history in the US was also checkered. He was discharged from bankruptcy in the US in 1997 and a business he ran in the US selling sheep skin car seat covers failed. In fact one investor was so furious at May’s activities in the US, he ran a campaign against him on a website.

His inclusion in the BRW Rich List was an embarrassing mistake for the magazine and was based partly on a valuation that May himself had provided to an inexperienced journalist. At the time he said the company was worth $100 million and he owned about $10 million of property.

May told a TV show in 2002 that he had been “singularly successful at having more disasters and failures than anyone I can think of”.

Amanda Gome

Interest rate rise could increase SME insolvencies

The Reserve Bank of Australia is widely expected to raise interest rates when it meets today – stay tuned for the announcement tomorrow morning.

Despite strong economic conditions around the country, an increase in interest rates could see an increase in SME insolvencies. According to The Australian Financial Review, 12,000 businesses entered insolvency in the 2007 financial year, a figure that could have been much higher but for a 50% fall in insolvency rates among business enjoying the booming WA economy.

But Nicholas Martin, a partner with insolvency firm PPB, told the paper that the number of insolvencies would be higher but for the rising property market.

“In many instances the increased equity in the family home and investment properties are being used to secure additional borrowings. This may be masking the level of business stress,” Martin says.

“If an interest rate rise slows down the property market, that could well affect the value of loan security, potentially resulting in credit issues with lenders and ongoing funding arrangements,” he told the paper.

August is networking month for Victorian business owners

Victoria’s largest business event Energise Enterprise 07 is in full swing with a range of workshops, networking sessions, and other special events for small and medium business.

Highlights this weekend include the Time-Saver Market at Federation Square on 12 August where small businesses will showcase innovative products and services aimed at “time poor” consumers. The Small Business Expo is also on at the Melbourne Exhibition Centre this weekend. The Expo will bring together business owners, managers and entrepreneurs actively seeking products, services and education to further business growth.

For more information on Energise Enterprise 07 including podcasts of events, click here.

Economy round-up

Sales growth expectations for the December 2007 quarter are at their highest level in three years, and profits growth expectations the strongest in more than two years, according to the Dun and Bradstreet business expectations survey released today.

Over 40% of executives expect an increase in sales and 37% predict the same trend in profits for the December quarter, while 14% of executives expect to increase capital spending.

Christine Christian, D&B Australasia’s CEO, says although concerns regarding petrol prices, interest rate hikes and the impact of the drought have increased since the previous quarter, Dun & Bradstreet continues to see strong expectations for growth across key economic indicators.

This strong view of the Australian economy is also reflected in today’s ACCI-St George Business expectations survey, which has revealed the strongest business conditions in Australia in over eight years.

SmartCompany quote of the day

“Pressure and stress is the common cold of the psyche”
Andrew Denton