SMEs still waiting on penalty rate detail as Fair Work floats the idea of “loaded rates” instead

Businesses are still waiting to learn if Australia’s penalty rate laws will be altered, with the president of the Fair Work Commission last week floating a flat “loaded” hourly rate in place of penalties as yet another option for paying staff.

Justice Iain Ross told an audience at the AFR Retail Summit last week that a higher base rate of pay could be an attractive alternative to penalty rates for many small businesses looking for more flexibility.

But there are still several decisions to be made about penalty rates, with the Fair Work Commission not expected to hand down its decision on whether to reduce Sunday penalty rates until the end of 2016 at the earliest.

Council of Small Business Australia chief executive Peter Strong told SmartCompany the idea of loaded rates had merit for businesses that operate during irregular hours and those that have staff with shifts that cross between one award rate and another.

“What’s really good is that [Justice Ross] is proposing something different that what we’ve got,” Strong says.

The specifics of the proposal aren’t clear, with Ross telling attendees at the Summit the FWC will look to revisit the issue after the Sunday penalty rates decision has been finalised. A loaded rate arrangement would involve businesses crunching the numbers and working out the specifics of staffing costs, says Strong.

“The first thing to do is look at the situation – if you’ve got shifts that start at 4:00 in the afternoon and end at midnight, you should be able to work out what it’s costing you,” he says.

Then, it would be down to deciding whether a flat rate would actually work for the staff and the business. “The other thing is that you’d actually have to be unhappy with your current situation,” he says.

The potential introduction of a loading has been met with enthusiasm by retailers, who have long campaigned for more straightforward payroll processes.

The Australian Retailers Association said in a statement the ability to decide on a loading would be a win for the small business community.

However, Alan McDonald, managing director of law firm McDonald Murholme, told SmartCompany small businesses could face problems attracting staff in a situation where they had negotiated flat rates but bigger businesses had not.

“Employees generally don’t have much say in their pay rates – what they do is refuse to work for rates that are too low,” McDonald says.

“We have a real problem encouraging people to work, and this doesn’t help – it doesn’t encourage an incentive to work.”

Strong believes smaller operators could benefit from the time saved on payroll, particularly in sectors where staff are on different award wages or have penalty rates apply for only part of the time that they are at work.

“When a person sorts out their time sheet, you don’t have to sit there and work out when one shift starts and another. It’s so easy to make mistakes with overtime,” he says.

The penalty rate debate has been fierce over the past two weeks, with the Victorian Grand Final eve public holiday falling last Friday and New South Wales, South Australia and the Australian Capital Territory observing Labour Day today.

The Victorian Employers’ Chamber of Commerce and Industry (VECCI) released a survey last month that highlighted the potential cost of public holiday trading to Victorian businesses in the lead up the second year with the Grand Final eve holiday.

VECCI has also campaigned for Sunday penalty rates to be brought into line with Saturday rates, citing the pressure on business as limiting the number of available jobs overall.

McDonald believes that small businesses are facing bigger problems when it comes to taxation.

“Your big issue for small business is still the GFC and keeping up – they’re still suffering with high tax rates and this [penalty rates] is a bandaid solution,” he says.

Strong says that any proposal on loaded rates would likely only be taken up by businesses that would find it useful.

“It’s an option, and it would be for those who work irregular hours,” he says.

In September the Fair Work Commission delayed its decision on penalty rates until at earliest December 2016. This will be a response to the Productivity Commission’s 2015 recommendation that Sunday rates be brought into line with Saturday rates. The Fair Work Commission has been advised to give one year’s notice to the community before any changes take effect.