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From 1 July, businesses operating in the restaurant, hospitality, pharmacy, fast-food and retail industries will see a drop in penalty rates following the Fair Work Commission decision last year.
This year will be the second year of the penalty rate changes mainly by removing the variance between Sunday and Saturday penalty rates. The first round of penalty rate cuts occurred in 2017, which saw Sunday and public holiday work rates slashed by 5 per cent.The full rollout of penalty rate reductions is expected to be completed in 2020.
According to Australia’s largest workplace relations firm Employsure, representing close to 20,000 small and medium sized businesses, the reduction in penalty rates are welcomed and needed to reflect the 24/7 economy. Senior Employment Relations Adviser from Employsure Andrew Spiteri said, “Sunday hours are no more ‘unsociable’ than Saturday, which will progressively shift in line.”
“An overwhelming number of employers we have consulted with have reported they would increase employment and increase operating hours on Sundays and public holidays if penalty rates were reduced,” he said. A view that was also reflected in Australian Industry group surveys which was a key body of evidence used by the Fair Work Commission in reaching its decision.
Andrew says the gradual reduction in penalty rates has helped many small businesses remain trading on Sundays or public holidays, offer more jobs, and increase overall hours worked: “The small reduction will have a big impact on small businesses in industries operating on thin margins.”
For many business owners operating with the relevant Awards, the penalty rate changes are well received. The benefits for small and medium sized businesses:
- It will allow employers to hire more staff
- More hospitality venues will be able to operate on Sundays
- It will provide a better experience for customers with more staff and availability of entertainment and hospitality venues
- Businesses would make more money from the increased opening hours and increased staff levels
- More money available to re-invest into the business
While employers in the restaurant, hospitality, pharmacy, fast-food and retail industries receive some relief in the form of reduced penalty rates, also kicking in from 1 July is the increased National Minimum Wage by 3.5 percent. “Millions of employers, across all industries will need to come up with an extra $24.30 per week per employee, paid at the expense of their bottom line,” he said.
According to Andrew, to afford the increases to minimum wage, many small businesses have to adjust their business models: “Some businesses simply need to reduce their profit targets and take their extra payroll costs from their profits. Businesses that already operate on tight profit margins need to find money in other places.”
Having witnessed many small businesses frustrated by the increasing wages Andrew says: “Small business employers feel the pinch during the peak season and increasing consumer demand for longer operating hours. We speak to thousands of small business owners daily who still struggle to keep the pace with increasing wage rates.”
Staying compliant with complex legislation can be a challenge, but getting informed about employee wage entitlements is essential for employers. Download the free e-guide for employers with an overview of Australia’s Modern Award system.
Andrew encourages employers to start getting prepared for the 1 July changes: “It’s so important to be across these changes and check if the new reduced penalty rates in addition to the increased minimum wage applies to your business. Get the right advice to avoid paying too much or too little.”
For advice when implementing penalty rate changes, or adjusting to the new minimum wage, contact the Employsure Advice line on 1300 651 415.
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