Leo D'Angelo Fisher Columnist

Leo covers management and leadership issues, business trends and corporate strategy. He is a former senior business writer at The Bulletin and a former host of The Business Hour on 3AW.

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Can we afford the weekend?

Published 18 October 2012 04:32, Updated 18 October 2012 04:35

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Frank Penhalluriack is still known as the Sunday trading rebel. It may seem incomprehensible today, but in the early 1980s Penhalluriack was jailed for 19 days for flouting Victoria’s retail trading laws and daring to open his Melbourne hardware store on Sundays.

These days Penhalluriack’s actions would be an oddity. That’s not just because opening on Sundays is commonplace but because the economic pressures of weekend penalty rates on retail and hospitality operations is making them more likely to opt to close on Sundays, rather than to fight for the right to trade. Penalty rates that are supposed to compensate employees for working on weekends are making it too expensive for some to operate over Saturday and Sunday in the current economic conditions.

Penhalluriack, who still owns the hardware store in suburban Caulfield, can see parallels between his fight to have the right to stay open on Sundays and employer calls to abolish or reduce weekend penalty rates.

“The days I want to open and the hours I want to open are matters between me and my customers,” he says. “Employment is a contract between two people and they should be able to determine when they work and what wage scale is realistic. The problem is big government and big unions; when they get involved, individuals don’t count any more.”

Weekend penalty rates are the subject of a Senate committee inquiry and a separate Fair Work Australia review as part of a review of the federal government’s modern award system.

The battle is shaping up to be a defining struggle between employers and the union movement every bit as heated as the retail trading wars of the 1980s. (Reform is not for the impatient: it wasn’t until the mid-90s that states deregulated their trading laws.)

The concept of weekend penalty rates, which has been enshrined in industrial relations law since 1919, is based on a simple premise: Saturdays and (in particular) Sundays are days of rest to spend with family and friends and anyone working on those days should be compensated.

This may have resonated loud and clear for much of the last century but does it hold true in today’s “24/7” society? And even so, does it justify double time for working on a Sunday?

The answer from employers may be predictable but no less emphatic. Canberra bookshop owner and executive director of the Council of Small Business Organisations of Australia (COSBOA)Peter Strong says many businesses can’t afford weekend and public holiday penalty rates.

“For a lot of retailers, cafes and restaurants, it just isn’t worth opening on Sundays any more,” Strong says.

In many cases, penalty rates increased when thousands of state and territory awards were standardised in 2010 as part of the modern award system introduced under the federal government’s Fair Work Act – from time and a half to double time on Sundays, and double time and a half for public holidays. The impact of those increases is now the subject of a review by Fair Work Australia.

Strong says he used to open his bookshop on Sundays even though it was not profitable to do so but when the hourly rate for his casual staff member, a university student, increased from $16 to $30, “that was money out of my pocket”.

Small retailers in big shopping centres, whose leases require them to open every day, do not have the same luxury of closing on Sundays. Many business owners, he says, are forced to work seven days a week because they cannot afford to employ staff on double time.

“It’s not just the about the money,” Strong says. “The health of the small business person who’s working six and seven days a week seems to be forgotten, nor is there consideration about how it’s affecting their family life.”

Strong says “dropping penalty rates … will advantage workers by creating more jobs” but adds that COSBOA supports a “minimum wage” for weekends and public holidays and the retention of “special loadings and overtime” for employees who work more than 38 hours a week.

Weekend penalty rates are a highly charged issue and critics are careful about how they phrase their opposition. Some business owners, irrespective of their personal views, shy away from public comment.

Celebrity chef and Melbourne restaurateur George Calombaris unleashed a storm of protest earlier this year when he complained about high weekend penalty rates for restaurant staff. His intemperate language didn’t help: “It’s not like they [staff] have had to go to uni for 15 years” to justify penalty rates as high as $40 an hour for casual waiters. “The problem is that wages on public holidays and weekends greatly exceed the opportunity for profit.”

Such was the public backlash that when BRW approached several restaurant owners to discuss how weekend penalty rates were affecting their businesses, they declined, with each citing the Calombaris controversy.

The chief executive of Restaurant & Catering Australia , John Hart , does not welcome the silence on weekend penalty rates.

“This is a debate that needs to be had … to ensure that the industrial relations system corresponds with movement in the economy and changes in society,” Hart says.

While modern consumers’ habits are changing – including the expectation that cafes and restaurants will be open on weekends – an “antiquated” system of penalty rates under the Fair Work Act mandates penalties of an additional 25 per cent for working on Saturday and 50 per cent for Sundays.

Hart says this is proving too much for his members. A recent survey found that during the past year 18 per cent of businesses had chosen to close on Sundays and public holidays.

In a sector notorious for its thin margins, Hart is concerned about the viability of those businesses.

“Not opening on a Sunday is a first step [to closing the business],” he says. “If opening on a Sunday means losing money, then chances are they haven’t got the turnover across the week to be viable.”

“Society has changed. In the 1950s and 60s, people went to church on Sundays and enjoyed a day of rest. Now, on a Sunday consumers don’t stay in the kitchen. On a Sunday they go out for lunch and dinner but penalty rates are making it too expensive for restaurants to open.”

In its submission to the Fair Work Australia review, Restaurant & Catering has proposed that weekend penalty rates be replaced by a new model in which employees are paid a 25 per cent loading on the sixth consecutive day of work and 50 per cent for the seventh or subsequent consecutive day – irrespective of where those days fall in the week.

This would exclude students and other casual workers who typically work at weekends. Casuals attract a premium rate of 25 per cent in addition to weekend penalties, so the proposed model would represent a saving for employers and bad news for students in search of extra income.

The director of employment law at the National Retail Association , Bianca Seeto , says weekend penalty rates make it difficult to satisfy consumer demand for all-week trading.

Under the Fair Work Act’s retail industry award, retailers must pay employees a 100 per cent penalty rate; the NRA wants this reduced to 50 per cent. It has also called for the removal of a 25 per cent penalty for working after 6pm on weeknights.

The NRA wants Saturday and Sunday penalty rates for fast-food outlets – which operate under a separate award – to be removed altogether. Seeto notes that before the modern award system, fast-food retailers in south-east Queensland, which operated under a state award, did not incur penalty rates.

Seeto says the imposition of weekend penalty rates on fast-food outlets has hit employers hard. She says most of the member calls she receives are from businesses that are closing and “want to know what steps do I need to take”.

It’s not just small business that’s feeling the pinch of weekend penalty rates.

Department store chain Myer, which along with other big retailers has been relentless in pursuing longer trading hours over the past 20 years, has become an unlikely proponent of reducing trading hours. In September, announcing a 14.3 per cent slump in net profit to $139.3 million for the 2012 financial year, chief executive Bernie Brookes flagged the until recently unthinkable prospect of not opening on Sundays because of the impact of penalty rates.

A Myer spokesman says Brookes’ concern was expressed “in the context of significant cost headwinds expected in 2013” and no decision has been made about Sunday trading.

“We will assess each store on a case by case basis … based on whether it’s the right commercial decision to keep a store open or to reduce hours.”

The director of work reform and productivity at conservative think tank the Institute of Public Affairs , John Lloyd , says the needs of society for round-the-clock trading has to be brought into line with some economic hard truths.

“Modern society expects retailers to be open all weekend, we expect shopping centres to be open on the weekend but at the same time we have penalty rates that are pretty steep and make it difficult for many retailers to stay open,” Lloyd says.

“One of the concerns is that hospitality and retail are often a pathway into employment for young people. If you make employment too expensive, the opportunities are diminished.”

Lloyd – a former senior deputy president of the Australian Industrial Relations Commission – can’t see how the weekend penalty impasse will be bridged under the present industrial relations system. But he’s optimistic.

“Australia has been adaptable over the years when it comes to accommodating trends in employment,” he says.

There’s little sign of that adaptability at the moment.

Given the Fair Work review under way, it seemed unusual when the federal Minister for Employment and Workplace Relations, Bill Shorten , drew a line in the sand on the issue.

“All of us live in a seven-day-a-week, consumer-friendly retail economy, but someone has to stand at the cash register,” he told parliament recently.

“This Labor government believes that adequate compensation for unsociable hours at work is reasonable.”

He went on to affirm “Labor’s determination to support and protect penalty rates and public holidays instead of rolling them back or scrapping them completely as some in our community would have us do.”

The federal Opposition, meanwhile, mindful of not raising the spectre of the Howard government’s Work Choices industrial relations regime, has played a straight bat on weekend penalty rates, with industrial relations shadow minister Eric Abetz saying it’s a matter for the Fair Work Australia review.

In the meantime, a private member’s bill by independent South Australian senator Nick Xenophon, which seeks to exempt small businesses in the restaurant, catering and retail sectors with fewer than 20 full-time employees from paying penalty rates, will ensure that this is an issue that is not going away.

The Australian Council of Trade Unions has responded with a Save our Weekend campaign.

The senate inquiry into penalty rates follows Xenophon’s tabling of the bill.

Nobody has any realistic expectations that the bill will make it through parliament, “but at least it will generate some discussion on the issue, and this is an issue that definitely needs to be discussed,” COSBOA’s Strong says.

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