Reduced Penalty Rates

  • Category:
    Business
  • Document type:
    Essay
  • Level:
    Undergraduate
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    3
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    1566

7REDUCED PENALTY RATES

Reduced Penalty Rates

Reduced Penalty Rates

Economic, social, demographic, political and technological changes have led to the so called 24/7 economy and the concept of working longer hours (Boxall and Purcell, 2011). Advances in technology have contributed to greater connectivity to work as well as greater work flexibility since workplace is no longer a distinct physical location (Whiteford, 2014). Over the years, it has been reported that there is a decrease in the number working hours. However, even with the decrease in the working hours, the mix has changed. This means that there is a growth in non-started work such as part-time and casual work in many companies. The modifications that have resulted from labour market regulation have led to a greater labour flexibility among the employees and enhanced productivity (Sheldon and Thornthwaite, 2015). There are many benefits that are brought about by greater flexibility. In general, it might appear that reduced penalty rates and other forms of flexibility allow greater productivity. Unfortunately, it is not as simple as it sounds. This paper will discuss the results of reduced penalty rates with reference to two employee associations.

Penalty rate payments is a framework that acts as a deterrent against companies using long working hours and as a compensation scheme for employees working outside normal hours (Wilsh, 2015). There has been the need to reduce penalty rates over the last decades owing to the claims that higher penalty rates may threaten the viability of industry and may result to decreased services. Recently, there has been the pressure of reducing penalty rates especially for employees working on Sundays with the argument stemming from the notion that Sunday is a day of rest (Craig and Brown, 2015). However, this argument has been challenged by what is termed as unsociable working hours and the need for greater employee flexibility of working hours. According to this argument, standard working hours have changed and are do not fit the traditional pattern. Work practices have changed and 24/7 working arrangements are very common among many organisations and working on Sundays is no different to working longer hours (Markey, 2015). Therefore, working on Sundays or any other day of the week and working longer hours is not considered a disadvantage and does not present a justification for higher pay through the penalty rates payment.

Nevertheless, research studies do not entirely support this argument. Research suggests that weekends especially Sundays are considered a day to connect and spend time with the family (Walsh, 2015). According to a research done by AWALI, working on Sunday contributes significantly to greater work-life interference. Working on Sundays may lead to poorer work-life balance and health impairments (Sheldon and Thornthwaite, 2015). Since working arrangements have changed significantly to 24/7 working pattern, employees may choose to relinquish their free time. Fair Work Commission has rejected the argument from employer association that dis-amenity for working on Sundays is no different from working on Saturdays (Fair Work Commission, 2014). The Fair Work Commission argues that penalty rates often are used as supplements for base wage rates and thereby are fundamental elements of the wages of those who receive them. The employees who receive penalty rates are often those who receive low wages and are dependent upon their wages to sustain them. They often top the penalty rates to their wages to a reasonable amount that is able to sustain them better (Knox, 2009). According to the Fair Work Commission, there are many arguments supporting the notion of reducing the penalty rates in order to develop additional work opportunities for the employees who do not work unsocial hours (Fair Work Commission, 2014). Nevertheless, paying the employees lower penalty rates will be disadvantageous to the employees and may require them to work extra hours in order to receive the same income.

The fair Work Commission has established that there are a significant amount of employees who depend on the penalty rates and would not agree to work extra hours without a pay premium (Fair Work Commission, 2014). Therefore, the reduction or even the elimination of the penalty rates may affect this group of employees (Australian Council of Trade Unions, 2014). The reduced penalty rates will result to lower disposable income and reduction of local expenditure. The Restaurant and Catering Association argue that the extra hours working time given to the employees in order to earn something in return should be reduced. The association is pushing for a standardized penalty rates for employees working on Sundays and Saturdays (Desloires and Dunckley, 2015). The Restaurant and Catering Association has argued that it understands the legislation requires for it to be a penalty rate but is advocates for a reduced amount of the rate. The association establishes that working on Sundays and Saturdays tend to hinder the social life of the employees since they end up working extra time foregoing the social needs of their families and the community (Desloires and Dunckley, 2015).

According to the Restaurant and Catering Association, about one-third of restaurants do not open or operate on weekends especially on Sundays as a result of high wages paid to the employees for the extra work (Desloires and Dunckley, 2015). Payment of huge amount of wages on extra work on Sundays provided a huge cost burden for organisations. The chief executive of Restaurant and Catering Association John Hart argues that the reduction of penalty rates to up to 50% will allow small restaurants hire more employees and improve services offered to the customers (Desloires and Dunckley, 2015). Cutting down on the penalty rates according to the association will increase companies’ profitability as well as the country’s level of productivity. Many other employer associations are also campaigning for penalty rates reduction.

For instance, Pharmacy Guide of Australia is also campaigning for the reduction of penalty rates to unspecified amounts (Desloires and Dunckley, 2015). The association argues that the changing consumer arrangements require some changes in the working patterns. Many customers prefer to do their purchases on weekends and thus employees need to work extra hours to cater for these customers (Boxall and Purcell, 2011). However, paying high penalty rates causes cost hindrances to companies. Many companies are struggling to keep their prices down, especially in the present of competitors (Desloires and Dunckley, 2015). However, paying premium penalty rates is eating into industry profits and revenues. Therefore, the Pharmacy Guide of Australia is hoping for the changes in penalty rate in order to improve the viability of the industry sector (Desloires and Dunckley, 2015). However, according to the research study carried out by AWALI, very few employees will accept to work extra hours or even on weekends if the penalty rates are reduced or abolished.

In conclusion, the working patterns have changed which has been attributed to the technological, political and economic changes. There are many benefits that results from greater work flexibility such as greater productivity. However, many studies have shown that working on weekends results to increased work-life interference. In addition, majority of the employees who receive penalty rates would not reduce to work extra hours if the penalty rates were reduced or abolished. Many employer associations have campaigned on the need to reduce penalty rates. For instance, the Restaurant and Catering Association argue that many restaurants are closed on weekends as a result of the premium penalty rates which affect profitability and capital circulation. Another employer association group that is supporting the need for the reduction of penalty rates is the Pharmacy Guide of Australia. This association argues that there is a need to reduce penalty rates since it leads to costs hindrances to companies. However, the Fair Work Commission argues that penalty rates often are used as supplements for base wage rates and assist the low paid employees to sustain themselves and their families.

References

Australian Council of Trade Unions 2014, ‘Employer push to cut penalty rates before Christmas’, Media release, 23 December, http://www.actu.org.au/Images/Dynamic/attachments/8410/acturelease-141223-xmas%20penalty%20rates.pdf [PDF], date accessed 6 February 2015.

Boxall, P. and Purcell, J 2011, Strategy and Human Resource Management, Third Edition, Chapter 1. ‘The Goals of Human Resource Management’, pp. 1 – 36, Basingstoke and New York: Palgrave Macmillan

Craig, L and Brown, J 2015, ‘Nonstandard work and nonwork activities, time alone and with others: Can weekend workers make up lost time?’, Journal of Industrial Relations, vol. 57, no. 1, pp. 3–23.

Desloires, V and Dunckley, N 2015, ‘Employers step up efforts to get rid of penalty rates’, Sydney Morning Herald, Retrieved from http://search.proquest.com.ezproxy.uws.edu.au/anznews/docview/1641402602/8E1DE46003374D59PQ/3?accountid=36155

Fair Work Commission 2014, Fair Work Act 2009, s.604 — Appeal of decisions, Restaurant and Catering Association of Victoria (C2013/6610). Appeal against decision [2013] FWC 7840 of Deputy President Gooley at Melbourne on 10 October 2013 in matter number AM2012/180 and others. Sydney: Commonwealth Government Printer. Retrieved from http://decisions.fwc.gov.au

Knox, A. 2009, ‘Better the devil you know? An analysis of employers’ bargaining preferences in the Australian hotel industry’, Journal of Industrial Relations, vol. 51, no. 1, pp. 25-44.

Markey, R 2015, ‘Myths about penalty rates and those who rely on them’, The Conversation, Retrieved from, https://theconversation.com/myths-about-penalty-rates-and-those-who-rely-on-them-49947

Sheldon, P and Thornthwaite, L 2015, ‘Employer and employer association matters in 2014’, Journal of Industrial Relations, vol. 57, no. 3, pp. 383 — 400.

Walsh, L. (2015), ‘A day of rest: the costs of removing penalty rates’, The Conversation, Retrieved from http://theconversation.com/a-day-of-rest-the-costs-of-removing-penalty-rates-36911

Whiteford, P 2014, ‘Income and wealth inequality: how is Australia faring?’, The Conversation, Retrieved from https://theconversation.com/income-and-wealth-inequality-how-is-australia-faring-23483