Background

Productivity Commission has recently released its draft report into the Australian workplace relations framework, mainly recommending to abolish Sunday penalty rates and introduce a new industrial agreement labelled as Enterprise Contract. Many in the trade and union movements dubbed this report as a delivery of “Work Choice part two” and that it will create a two-tier penalty rate system for millions of Sunday workers which would be equivalent to an “economic apartheid.” 

Australian workplace relations framework comprises of a complex array of industrial laws, regulations and institutions which regulate employers and employees. In July 2015, around 11.8 million people worked in more than 2 million workplaces across Australia. Of these people, around 70 percent were covered directly by the Fair Work Act 2009. The rest is covered by state public sector systems including Western Australia Award and independent contractors.

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Despite significant issues and an assortment of peculiarities, Australia’s workplace relations system is not dysfunctional and hence, it just needs repair but not replacement. Australian labour market performance and its flexibility are relatively good by global standards. Strike activity is low, wages are responsive to economic downturns and there are multiple forms of employment arrangements that offer employees and employers flexible options for working relationships.

Sunday Penalty Rates

Productivity Commission recommended Sunday penalty rates for cafes, hospitality, entertainment, restaurants and retailing should be aligned with Saturday rates. This recommendation has been the most contentious and created a stir in the community. As a comparison, New Zealand no longer has regulated penalty rates but employers pay penalty rates to many industries.

Sunday penalty rates are usually around 200% of base rates of pay. This is at odds as evening shift penalty rates can be as low as 10% which is an important time for social activities and night shift loadings are as low as 15% which demonstratively represent more health risk and sacrifice of convenience. The Commission cites survey evidence showing overall social costs of daytime work on Sundays are similar to Saturdays.

Traditionally, Australian community did not accept weekend work and was not essential for the efficient operation of the economy. In the past few decades, this has changed and community now demands services 7 days a week, especially in industries where high penalty rates are prevalent. Many social and economic factors contributed to this change including increased female workforce participation, reduction in religious observance, changing social norms about hopping times, softening of trading hour restrictions and the emergence of 24/7 international online commerce.

The report predicts that if penalty rates are abolished, employment and hours worked on Sundays will rise. Lower regulated penalty rates would likely to increase the opening hours of businesses and encourage higher staffing ratios leading to greater job opportunities for all Australians. This proposal will reduce incomes of people who work Sundays only. The Productivity Commission is proposing a lag time before this change occurs allowing people to adjust their lives and working patterns.

Enterprise Contracts

Productivity Commission is floating an idea of a new type of statutory arrangement called “Enterprise Contract” to fill the gap between enterprise agreements and individual arrangements. This would allow employers to vary an award for entire classes of employees such as entry level pharmacy assistance or for a group of particular employees, without having to negotiate with each party individually or to form an enterprise agreement.

It is suggested that it would offer many of the advantages of enterprise agreements without the complexities and would particularly be suitable for smaller businesses. This proposal affords a right to revert to the existing award if the relevant employees wish to do so.

For possible implementation, Productivity Commission has suggested a methodology to establish this enterprise contract, a regime for compliance and enforcement and finally evaluation and reporting of this new type of statutory contract in Australian workplaces.

Employment Conditions of Migrant Workers

Permanent and temporary migrant workers face higher risks of exploitation in Australian workplace. This is due to several reasons including limited English language skills or lack of awareness of their rights in the workplace relations framework.

Productivity Commission has recommended to provide additional resources to the Fair Work Ombudsman to strengthen education, information sharing and compliance activities on 457 visa and all employment related visa classes. In addition, it has proposed a two-part penalty regime on employers: a punishment for breaching the Migration Act 1958 to employ migrants without having a proper visa and a fine equal to at least whatever the worker was underpaid over the duration of their employment to deter underpayment to migrant employees.

Dr Abul Jalaluddin is an Islamic Finance expert, Director of MCCA, taxation advisor and a regular columnist of AMUST. He is based in Sydney.