Higher wage costs for SMEs in new minimum conditions

SMEs could face a significant increase in employment costs if the proposed list of 10 minimum pay and condition standards, unveiled by Workplace Relations Minister Julia Gillard yesterday, is made law.

The extension of redundancy entitlements to employees in all businesses with more than 15 workers looms as a key change for many SMEs in the 10 national employment standards proposed by Gillard.

While businesses in NSW and those covered by relevant awards already have a duty to pay redundancy entitlements, there is a significant minority of SMEs that currently are exempt from doing so.

Those businesses could now find themselves having to make redundancy payments to employees on a sliding scale of up to 16 weeks wages after nine years service if that employee is made redundant.

CCI Victoria Legal principal Peter Vitale says there could be quite a large number of businesses that find themselves with new obligations under the redundancy standard.

“On an Australia-wide basis there is no doubt you could be talking about a fair few businesses that weren’t previously covered, especially in newer sectors like information technology,” Vitale says.

“The costs can be quite substantial – at the top of the scale they effectively are a third of someone’s salary for the year, so no doubt that will represent an increased burden on businesses that might already be in trouble.”

The new standards will also significantly boost employee rights to parental leave and flexible work practices.

After 12 months employment, both parents in a relationship are entitled to 12 months unpaid leave on the birth of child, or alternatively one parent has a right to 12 months and can request an additional 12 months unpaid leave.

Employers are entitled to refuse the request if they have reasonable grounds for doing so and the standards does not confer a right on employees to appeal a decision they don’t like.

But Vitale says the new standard could provide a platform for employees to lodge claims under existing laws prohibiting discrimination on grounds such as pregnancy, especially because employers will be required to provide written reasons if they refuse a request.

“The circumstances in which you can refuse to implement those kind of arrangements are quite limited, so a lot of the time the focus will be not so much on drafting the reasons but on advising clients about why they need to comply with a request,” Vitale says.

The new standards have initially been released in draft form by the Government to allow for input by business and employee groups, and will not take affect until 2010.

Australian Chamber of Commerce acting chief executive Peter Anderson says he welcomes the opportunity that the comment period provides to iron out any kinks in the standards.

“These proposals are exactly what we expected but that doesn’t mean they won’t cause problems,” Anderson says. “Julia Gillard has given the opportunity for comment and suggestions about fixing them however, and that is constructive.”

Is your business finding flexibility a bit painful? Aunty B has some advice.

The proposed 10 National Employment Standards cover:

1. Maximum weekly hours of work.
2. Right by parents to request flexible working arrangements.
3. Parental leave.
4. Annual leave.
5. Personal/carer’s leave and compassionate leave.
6. Community service leave.
7. Long service leave.
8. Public holidays.
9. Notice of termination and redundancy.
10. Fair Work Information Statement.

What do you think – will new employee rights to redundancy payments and extra parental leave increase your costs? Are they fair or has the pendulum swung too far towards the interests of employees? Join the debate by emailing feedback@smartcompany.com.au.