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The Sunday penalty rate debacle: the factual bigger story

When the Fair Work System came into force on 1 July 2009, Sunday penalty rates were set at 200% for retail (and different rates for hospitality and other awards). This was an increase for Queensland, NSW and the ACT, who had previously been paying 150%. The great majority of workers in Australia were on 150% but the unions argue that everyone has always been on 200% — they haven’t.

Then in the background there were Collective Agreements (CAs), sometimes called Enterprise Based Agreements, that had been negotiated by the retail union, the SDA, with the large retailers and fast food businesses. This included, for example, Woolworths, Coles, McDonalds, Red Rooster, Bunnings, Big W, K Mart, Target, David Jones, Myer, BiLo, and many others. This affected most Sunday workers.

In these CAs, the SDA agreed that the big businesses could, on Sundays, pay lower than award penalty rates in return for paying higher hourly rates. This meant that people who predominately worked during the week (Mon to Fri) received a rate higher than the comparative award pay whilst individuals who worked on Sundays received less when compared to the applicable award pay.

But some of these CAs were even more ethically challenged. In a Queensland Agreement between Coles and the SDA, some 60% of workers were worse off than they would have been if they were covered by the applicable award conditions. So, we ended up with a two tier workplace system that favoured big business and union members who worked during the week and disadvantaged small business and workers who worked weekends.

During the modern award review process, various industry associations argued to get parity with big business while at the same time dealing with misinformation coming from the SDA. Eventually, in 2017, the Fair Work Commission (FWC) with a unanimous full bench decision made a determination that Sunday Penalty rates would be set at 150% for all businesses in retail. The unions disagreed with the unanimous decision and made representations at the Federal Court, stating that the FWC had made errors in its decision. Again, the Federal Court (a unanimous full bench) upheld the decision of FWC. Similar changes were approved for hospitality and other awards. This made sense given the deals between big business and unions during their enterprise agreement making the process.

After a great uproar from unions (hypocrites at best), the FWC then decided that the changes would be gradually introduced. This meant that in retail, for example, the rate for Sundays would drop from 200% to 195% from 1 July 2017 to 30 June 2018, then down to 180% from 1 July 2018 to 30 June 2019, and so forth. Over this time there were also general increases in wages which were above CPI. In 2017 the increase in pay was 3.3% (CPI 2.1%) and in 2018 3.5% (CPI 1.9%).

So, as we can see, there has been no real change in Sunday penalty rates — they actually went up by 28 cents from June 2017 to July 2017 and only decreased by $1.74 (or 4.4%) the following year (see workings below). The next drop will take the Sunday rate down to 170%, which may have a bigger impact. But, of course, if Labor wins, that will all be meaningless. Now with an election coming there is a chance for lots of rhetoric from the unions and not much of it is factual.

The fact is that Sunday penalty rates were reduced for big business and their employees in 2009. It is only small business that paid the award rates. The penalty rates have not been significantly reduced so far due to the phased in approach. Some of the bigger businesses are now renegotiating their CAs which may impact Sunday rates again, but who can trust the SDA? If Labor restores the rates (which will go from 180% back up to 200%), it will only be small business that is affected.

The fact is that it is employees who don’t have a job or have fewer hours on Sundays who are disadvantaged. It is also small business employers who have to work longer hours or not open on a Sunday.

The deals done by the SDA have been so very wrong that The Greens called for a Royal Commission.

The information spread by the unions is very wrong as highlighted by The Conversation Fact Check.

Workings and comments on the change in base pay and the change in penalty rates

We see that in the first year Sunday rates actually went up $0.28 cents an hour. The penalty rate was reduced from double the base rate to 1.95 times the base rate (a decrease of 0.03%), while the level of the basic wage upon which the penalty rate was determined was increased by 3.3%. So, there was no decrease in costs for small business people. There was an increase. No new reason to open the business on a Sunday or to employ people.

In the second year, the penalty rate was reduced from 1.95 times the base rate to 1.80 times the base rate (a decrease of 0.08%), while the level of the basic wage upon which the penalty rate was determined was increased by 3.5%. Real penalty rates on Sunday dropped $1.74 an hour, or 4.4%. So, again, no real reason to open the business on a Sunday or to employ people. This would be a similar story for cafes and restaurants.

The fact is that Sunday rates for big businesses remain much lower than for small and that the rate for small business has not changed in any real sense. The claim that Sunday penalty rates have been removed is remarkably disingenuous.

Of course, stats are statistics and there are many ways of looking at them. Another way is to compare what a Sunday worker would have been earning if the level had remained at 2 times the base rate. The issue with that scenario is that workers in big business were never paid that — they were actually paid 1.5 times the base rate. So, the argument is somewhat moot. Also, if the rate dropped, then more people would get work in small businesses. Isn’t that a good thing?

As we can see from the above, workplace relations is incredibly and unnecessarily complicated — let's make it easier for employers and employees.

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