Published on Jan 4, 2016

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The Productivity Commission’s Workplace Relations Framework has been released and includes a raft of recommendations ranging from a review of apprenticeship agreements to encouraging migrant workers to report exploitation.

However, the issue that has gained most traction in the media is the recommendation for downward adjustment of Sunday penalty rates in line with Saturday rates for the hospitality, entertainment, retail, restaurant and café (HERRC) industries.

The Commission pointed to a number of factors to support the recommendation:

  • The potential to increase employment opportunities.
  • The potential for wage-related cost savings can be delivered to consumers in the form of lower prices.
  • The growing demand for consumer services over weekends.
  • The prevalence of weekend-only workers in the HERRC industries.
  • Changing social and economic trends including declining religious observance and expanded trade hours requiring more weekend workers.

The business community has largely supported the recommendation. The Australian Retailers Association Executive Director Russell Zimmerman said: “The recommendation that Sunday penalty rates for retailers should be aligned with Saturday rates is an important step in the recognition that rates are not currently viable for retailers.”

What does it mean for workers?

Retail and hospitality workers do the types of jobs most likely affected by the Productivity Commission’s recommendation to adjust Sunday penalty rates in line with Saturday. They also fall into the cohort most likely to react to penalty rate adjustments.

Research from the University of South Australia’s Centre for Work + Life found a clear relationship between the payment of penalty rates and the likelihood of employees to work unsocial hours, although it should be noted the response differed across workers from different industries, demographics and income brackets.

The Centre’s Evenings, nights and weekends: Working unsocial hours and penalty rates report found those more likely to work unsocial hours in the absence of penalty rates included:

  • 18-24 year olds
  • single people with no children
  • people from households with annual incomes of $90,000 or more
  • casual workers
  • administrative and support services and rental/hiring and real estate industry workers

Those less likely to work unsocial hours in the absence of penalty rates included:

  • people from households with annual incomes of $30,000 or less
  • permanent, ongoing or fixed-term contract workers
  • construction and manufacturing industry workers
  • employees who did not rely upon penalty rates for household expenses

Most retail and hospitality workers sit at the lower end of the wage scale. The Australian Bureau of Statistics reports that full time non-managerial employees paid at the adult rate in retail earn an average of $1,069.30 and those in accommodation and food services bring in $1,024.40 each week. The average across all industries is $1,509.30.

However, many retail and hospitality workers do not work full time, and accordingly the average weekly total cash earning in retail is $676.40 and accommodation and food services is $561.60. The average across all industries is $1,182.40.

The debate is still open

Considering the significant amount of energy devoted to debating the topic it is still difficult to find current, empirical evidence to show changes to penalty rates or wage structures have any significant positive or negative effect on the economy or employment rates.

Evidence does exist to show the reduction or removal of penalty rates leads to an increase in the average number of hours worked by individual employees, likely in an attempt to recoup lost income.

Some key questions remain:

  • Will the potential benefits outlined in the Commission’s report translate to realised benefits for the economy and employment?
  • Is it fair to workers to implement the change?
  • Is it unfair to businesses not to implement the change?
  • Is the recommendation likely to gain traction in a post-WorkChoices environment?

Do you support a Sunday penalty rate adjustment? Why, or why not? Let us know in the comments.