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Should Penalty Rates Go?

We know that submissions to change the current practices of Saturday, Sunday and public holiday penalty rates are currently under consideration by the Fair Work Commission.

At a dinner party I attended last Sunday night, a discussion arose on the topic with some support for a complete removal of penalty rates. “After all times have changed and we are a 24/7 society,” was the summary of the argument to remove penalty rates.

I believe penalty rates remain relevant in today’s society.

Penalty rates apply under many Awards and invariably apply to our lowest paid workers. The ‘offset clause’ is now standard, which means that more generously paid individuals rarely get paid penalty rates. In the vast majority of circumstances, penalty rates are applied to safety net Award rates only.

With the gap between low-income earners and high-income earners already widening (ACOSS Report 2015), removing penalty rates reduces the earnings of our lowest paid workers. This is the crux of my opposition to their removal.

However, let’s look at the argument that we are moving towards a 24/7 society and that therefore penalty rates are no longer relevant.

Nurses, firefighters, community care, hospitality and retail staff are the workers who usually get penalty rates. It is true that our society is changing; we expect to be able to have a dinner out on a Sunday night, safe in the knowledge that the wait staff will be professional and should the restaurant go up in flames, emergency services will attend.

But the fact remains that our social life is still largely conducted on a weekend. This is the reason that my cousin’s 50th birthday was not held on Tuesday at 12 noon. So the workers who take on the Saturday, Sunday and public holiday shifts are doing so giving up a degree of society’s leisure time – kids’ Saturday sport, attendance at footy grand finals or Jenny and Tom’s wedding.

I do not accept the argument that a Saturday has the same value as a Tuesday. And in reality, the Fair Work Commission doesn’t either, as I understand they are considering loading the penalty into a slightly higher flat hourly rate.

While I appreciate the administrative attractiveness of making a flat rate Monday to Sunday, I don’t believe it will work to secure weekend workers as, for most people, the weekend is still play time. The café worker will say “if you are not going to offer me a little more for working on weekends, then I’ll stick to Monday to Friday. Thank you.”

This is even more important for people such as students or those that have carer responsibilities. Many of these people are only able to work on weekends. That means the removal of penalty rates is in effect a straight decrease in earnings for them.

And what about nurses, firefighters and other essential service providers who are excluded from the current review? I would suggest that their exclusion is because:

  • It is recognised that they are paid modestly for the important work they do.
  • It is recognised that they should be compensated for working unsocial hours.
  • And it is feared that reducing penalty rates may impact on the availability of skilled essential service workers; less will be prepared to work these unsocial hours.

Even appreciating the very unique and critical value of the essential services professions, the implication that these facts don’t apply more broadly seems strange to me.

I’m not saying penalty rates will always make sense. Many professionals and business owners work seven days a week. In that respect we are 24/7 – but the consultant who chooses to prepare the client’s workshop on a Sunday has more control over when she chooses to do her work and will no doubt charge her client at a rate which is far removed from award minimum rates.

In summary; in light of the current inequality of the spread of income in our society, I do not believe it makes sense to reduce the wages of our lowest paid workers.

October 2016 (First published 4 October 2016)

Vanessa Rowland is an independent HR consultant who works with a large range of Australian SMEs and corporates (www.emergenthr.com.au).

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