Are Penalty Rates Costing Your Business?

Are penalty rates hampering your business growth? The Productivity Commission’s review into Australia’s workplace relations framework seems to have been dominated by this issue. Over Easter, businesses in the hospitality sector ran a campaign against penalty rates saying they made it unaffordable to stay open on public holidays. The Small Business Minister Bruce Billson also got in to the act saying it was sad and disappointing that businesses close over Easter because of the cost of labour. There are suggestions that this campaign may have backfired on some businesses, with the community accepting the long held practice of paying penalty rates to staff for holiday and weekend work. So where did this debate spring from? Interestingly, when asked, small businesses tend to nominate reducing red tape and simplifying the tax system as the keys to ensuring business growth. Workplace laws are always mentioned but in my experience, the focus tends to be on unfair dismissal protections for small business, not penalty rates. Of course, Australian labour is expensive by world standards, particularly in our region. In a submission to the Productivity Commission review, the Office of the Australian Small Business Commissioner used New Zealand as a comparison, where penalty rates were optional on weekends and were only one and half times the base hourly rate on public holidays. The Australian Small Business Commissioner went further to say that Australia is in a situation where business turnover and employment opportunities are reduced due to penalty rates. But Alexandra Cain, writing in the Sydney Morning Herald, suggests penalty rates were not the major reason behind business Easter closures, instead suggesting that business owners simply wanted some time off too. And where small businesses stayed open, for example in tourist areas, most likely did so with an expectation they would be some of the best trading days of the year. And yes, they pay penalty rates but most restaurants and cafes also charge customers a holiday surcharge to offset the costs. In South Australia a deal negotiated by the Shop Distributive and Allied Employees’ Association and Business SA would see the hourly base rate increase in exchange for the abolition of Saturday penalty rates while Sunday rates would be halved. But retailers have said the deal will simply drive up costs for employers. It will be interesting to see where the scales tip.