The Council of Small Business Organisations Australia (COSBOA) welcomes the focus on small business in dissenting reports in the Senate inquiry into the latest IR changes.
We are encouraged the real-world impact of proposed changes has been ventilated in reports by the Jacqui Lambie Network, Senator David Pocock and the Coalition.
COSBOA has continuously warned of the damage more complexity and redtape will inflict at a time small business can least afford it. Currently 43 per cent of small businesses are not breaking even, yet the government has pursued a highly complex and comprehensive overhaul of workplace law.
Small businesses do not typically have in-house specialist HR support. The business owner is often the head of operations, head of marketing, head of human resources and more.
As one Canberra small business said:
"We are a mum and dad business, every time more rules a regs are put in place we have to take time away from our lives and family to implement. Big business can just palm it off to an admin person but we have to jump through the hoops ourselves and it’s already a lot. We love our employees so this just takes more time away from them."
In other words, when existing systems and concepts are thrown out the window it may provide a work opportunity for consultants and lawyers, but the net result for small business is greater cost and lost productivity.
COSBOA remains disappointed there was no modelling on the impact of redtape the bill will have on 2.5 million small business in Australia. As we said in our prebudget submission, without better impact statements that properly consider the small business experience, we face tough times ahead.
Some of the assumptions made in this bill – such as that a small business could read, interpret and understand changes and then totally reclassify the status of an employee within 15 minutes – are simply mind boggling.
Concerns raised in dissenting reports cover areas such as casuals, contractors and union right of entry. These concerns must be taken seriously by the government as it seeks to pass its remaining legislation.
Our message has been simple: don’t legislate more uncertainty during uncertain times.
Casual workers
Casual workers are essential to small business, particularly the ability to engage casuals with certainty. No convincing case has been made to change the existing definition into a convoluted 3-page, 15-factor test that needs to be satisfied on an ongoing basis.
“If it ain’t broke don’t fix it”, or as the Joint Learning Network (JLN) stated in their report:
"Its current form, the Fair Work Act 2009 contains a clear, simple and effective definition of casual employment and conversion process….The JLN harbours significant concern for small business as Part 1 of the Bill adds greater red tape to an already heavy administrative load."
The importance of casual workers to small business cannot be overstated. As one independent grocer stated in the inquiry:
"Certainly the casual component of our business is such an important element. As we all know, customers are not regular. There are ebbs and flows in customers as they come through the store. Outside that, even the logistics of getting groceries to any given supermarket isn't regular either. We need that casual component to be able to put that stock away at any given time. That's more evident these days, obviously, since COVID. The whole logistic framework has almost been turned upside down. It's vital that we have that flexibility in our workplace."
COSBOA welcomes the citing of evidence during the inquiry that casuals largely seek to remain casual, and endorses the call for a right to refuse casual conversion on fair and reasonable grounds suggested by Senator Pocock.
COSBOA strongly supports the calls to maintain the existing definition of casual workers and to include a right to refuse casual conversion on fair and reasonable grounds.
Definition of employment
Many small businesses face losing their right to be their own boss if the existing and workable definition of employment is replaced by an open-ended interpretive principle.
There is risk to almost 1.1 million contractors across scaffolders, builders, tilers, concreters and bookkeepers who not only comprise the small business sector but also support it as subcontractors.
COSBOA was pleased to see recognition that confusion will arise for small business from a new interpretive and open-ended definition of employment.
"This criteria is non-exhaustive which creates uncertainty, confusion, and legal risk for employers seeking to engage casual workers and contractors.
The JLN believes that terms of a contract should not be overridden by abstract and imprecise set of indicia that will be used to determine the employment status of a worker."
Much like the unfounded case to change the definition of casuals, changing the definition of employment is best described as a ‘solution in search of a problem’.
COSBOA strongly supports retaining the existing definition which is currently understood and used by over one million individuals and/or business, and has been endorsed by the High Court.
Union right of entry
COSBOA is concerned about the increasing cost to small business from greater entrenchment of union entry rights into their workplaces. With the unfortunate onset of multi-employer bargaining this risk is only becoming more acute.
As the Australian Meat Industry Council noted to the inquiry:
"This Bill provides the Unions more power and even less regulation than employers are enduring. It certainly appears that Closing the Loopholes provides for the union to create their own loopholes to bud on memberships, union revenue and remain largely unchecked during the process. This relaxation seems to place unions take on a regulatory role that would normally be reserved for government bodies/agencies. This will place significant unrest in industry and how we progress as an industry moving forward."
COSBOA strongly shares concerns raised in dissenting reports about how personal and private business information would be handled and protected by union delegates.
As the JLN stated:
"It is the role of Fair Work Ombudsman, to investigate instances of suspected underpayments, rather than providing union representatives with police like powers to enter workplaces."
COSBOA agrees with dissenting reports that the Commission already has the power to give permit holders an exemption certificate in some circumstances, which allows them to enter without notice. These powers should not be enhanced any further.
Right to disconnect
COSBOA believes that good small business policy is not possible without good process. This is one of the reasons why changes passed last year – including the significant widening of so-called ‘wage theft’ measures with potential jail time for employers – were met with strong disappointment and criticism from small business.
Similarly, floated proposals for a ‘right to disconnect’ appear to have been scurried into this process very late in the day.
If Australia is going to have a conversation about legislating a right to disconnect, there must be a proper process and consultation.
For example, has anyone made the reflection that for 2.5 million small businesses in Australia, the concept of an owner-manager to ‘disconnect’ from their own work and the growing laundry list of compliance measures sounds fanciful?
COSBOA supports the calls in dissenting reports that the right to disconnect amendment be publicly released for consultation.
Definition of small business under the Fair Work Act
The concept of what comprises a small business under the Act was raised throughout the inquiry at times, particularly in regard to small business exemptions.
It has been clear for some time that the current classification Fair Work Act of a small business being a business that comprises 15 employees or less is not accurate.
As the inquiry heard, many small businesses employ casuals who may only undertake 1-2 shifts per week meaning many cafes and news agencies are not considered small, despite only comprising 4-5 full-time staff.
COSBOA recommends the government immediately commence a process to review and update the definition of small business under the Fair Work Act, and commence a process of harmonisation of the various definitions that exist at the Commonwealth level.
Conclusion
The Closing Loopholes Bill remains one of the biggest challenges to small businesses in the coming months and has already incurred significant damage in the form of fear and uncertainty.
COSBOA remains disappointed there has not been a focus on small business productivity in our industrial relations system, and the system is being made more complex and unworkable.
However, suggestions to blunt the rough edges must be adopted in full or small business will be left behind.
To summarise, these measures include:
· Retain the existing definition of casuals (user by over 2.7 million casuals)
· Retain the existing definition of employment (used by over 1 million contractors)
· Amend union right of entry provisions to prevent disruptive workplace entry
· Ensure a proper consultation process on any consideration ‘right to disconnect’ provisions
· Commence a process of reviewing how small businesses are defined by different Commonwealth agencies and whether the FW Act is fit for purpose.
With the government’s moving of its commentary towards the cost of living, it is critical that small businesses are not provided with additional, unnecessary costs.
The key to dealing with the cost of living is to improve the cost of doing business in Australia.
As Senator Pocock’s report stated:
“We also need to make it easier to do business in Australia, especially for Australia’s 2.5 million small businesses. This means simplifying regulation, reducing red tape, fostering innovation, prioritising productivity growth, and giving business the best chance to compete …on the world stage….”
With agencies like CreditorWatch predicting the business failure rate will increase from 4 per cent to 6 per cent by the end of 2024, small businesses need policies that provide confidence and certainty rather than complexity and cost.
As COSBOA said back in September 2023: “Small business has many self-proclaimed advocates and acolytes, but careful and considered policy settings are required rather than just goodwill.”
No case could be truer than this bill.
For more information about COSBOA, visit: www.cosboa.org.au
-ENDS-
For media enquiries or interviews, please contact COSBOA on ceo@cosboa.org.au or call (+61) 433 644 097.
Luke Achterstraat
Chief Executive Officer
