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Samantha writes on exports, Islamic finance and the business of doing business across borders. Before moving into journalism she worked in executive recruitment and public policy.

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Fair work not fair

Published 03 May 2012 05:01, Updated 10 May 2012 04:15

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Large companies such as Qantas and Patrick Stevedores may have grabbed the headlines with industrial action under the Fair Work Act but on a day-to-day basis, it’s the battalion of small businesses that really feel the slog under the regime.

One of these plucky small business soldiers is Gina Field of Penrith-based security services outfit Nepean Regional Security.

Field set up the security outfit in 1998 after working as a security guard herself for more than a decade. Her experience as a female working in an industry dominated by burly males taught her that mature and courteous security staff were often better able to diffuse a confrontational situation than large, imposing men. It was on this strategy that she founded her business.

She worked 18-hour days without a break for two years to build up a customer base. More than a decade on, she counts Communities NSW and the Department of Sport and Recreation among her major clients.

But 2012 signals major change for her team of 20 thanks to the Fair Work regime. Her staff’s four-day on, four-day off, 50 hours a week – which was agreed with employees in 2007 – will now be unlawful under amendments to the security services industry award. Maximum shift lengths will have to be cut and she will be liable for overtime.

Add to this the wage burdens she is facing from a combination of upwards pressure on salaries and the award her staff is under and Field really isn’t sure how the rest of this year will pan out. “This is going to the questionable year for me,” she says. “I don’t know what I’m going to do.”

Employers have three major complaints about the Fair Work regime – these centre on award modernisation, the difficulty of achieving flexible working arrangements and the compliance burden for dismissals. Underlying all of these complaints is a fundamental issue about the cost of compliance and excessive red tape.

In 2008 when award modernisation was announced, it was to be a way to roll the myriad state-based awards into a system of 130 national awards. The aim was to harmonise employment conditions across the state.

However, to safeguard the status quo the government demanded that any changes should not make workers worse off or require employers to face higher costs. The practical impact, according to employers, has been vastly different.

It has “taken the highest cost structure, the least flexible arrangement and coded them into a modern award”, says NSW Business Chamber chief executive Stephen Cartwright.

The National Retail Association’s submission to Fair Work Australia’s 2010-2011 annual wage review found that for fast food outlets, retail takeaways, cafes and restaurants in Queensland, modern awards would increase the labour costs for casual employees by 25 per cent on Saturdays and 50 per cent on Sundays.

Nepean’s Field says that when she saw the new wage rates under the award for this year “the colour just drained from my face”. She says Sunday rates for her employees will spike by 70 per cent and that some of the contracts she has will be unprofitable.

“If we keep going this way, I’m going to have lay off staff and hand some of the contracts back,” she says.

In addition, the regime has made flexible working – a necessity in any modern workplace – more difficult to implement.

The Terang and District Co-op, a community retailer based in Victoria, found this out when it tried to employ local school students to work for one or two hours after school. It came up against the Fair Work Act, however, which dictates that a minimum shift length must be three hours. Despite the best efforts of the students, the co-op and the National Retail Association, an agreement between the students and the co-op was not able to gain approval from Fair Work Australia and the students were denied the right to work for the two-hour shifts.

“It’s called inbuilt inflexibility,” says ACCI manager of workplace relations and legal policy Daniel Mammone. “[The act’s provisions] don’t reflect the contemporary nature of a workplace, or working outside the traditional nine to five model.”

Another bugbear for employers is the excessive amount of red tape when laying off staff.

“Compliance has been a lot harder,” the director of Wollongong-based boat manufacturer Pro A Group, Simon Gelfius, says.

Gelfius is critical of the system after being forced to settle an unfair dismissal claim in 2011 when falling demand forced the company to cut back staff numbers.

He says it should have been clear cut. “We just didn’t have the volumes to sustain the head count and the role just wasn’t there for them to do any more.”

In practice, letting go of the employee was anything but straightforward. Despite doing everything “by the book” and following the regulations of the Small Business Fair Dismissal code, the redundant employee was found to have a case when it was alleged that one document outlining the retrenchment included the word “termination”.

It may have been a technicality rather than a breach of process but it was enough to persuade the company that settling with the employee would be in its best interests.

“It was a $25,000 exercise all up,” Gelfius says. “Going by the amount of time and money we spent, it would’ve been better keeping the employee on for half a year longer.”

However, the real brunt of the Fair Work regime is not in any one area but in the excessive complexity and the high compliance burden it imposes.

Small businesses has a perpetual gripe that the regime fails to consider the staff constraints of a small- to medium-sized business and the rarity of a dedicated human resources manager sufficiently equipped in time and resources to deal with the red tape.

Middletons workplace relations partner Gerard Phillips says that although he’s been in the workplace relations industry for 25 years and has a masters degree in the subject: “I still find it impenetrable – I’d hate to think how the punters handle it.”

This attitude is echoed by Council of Small Business of Australia executive director Peter Strong.

“The reality is that a small-business person is expected to be an expert on law, taxation and everything else. It’s just not practical,” he says.

Travel service provider Global Journeys founder Stuart Berens was not prepared for the complexity of the system when he opened the company’s first Australian subsidiary.

Taking on new staff in New Zealand had been as easy as “downloading a contract off the internet and both signing it”.

By contrast, in Australia it took the team more than a week to figure out which award employees would fall under.

Berens’ travel service provider operates via internet and phone. The absence of a shopfront meant employees were ineligible for the
existing travel service provider award, meaning that they had to be placed under a clerical award instead.

“We worked it out in the end and the Fair Work hotline assistants helped us a lot, but the whole situation was a lot more complex than we ever imagined,” he says.

Strong says compliance with the regime is its most costly element.

He points to figures released by Fair Work Australia in February showing that more than 26 per cent of small businesses were found to be non-compliant with the wage provisions of the act.

The statement accompanying the release announced that many of the infringements had been committed inadvertently, rather than the result of deliberate attempts to flout wage obligations.

“If you’ve got a non-compliance rate of 26 per cent, that’s the act failing, not the businesses,” it said.