Your call: The case FOR cutting penalty rates

When you run a small business in the service sector, the decision to open on Sundays generally means weighing up the cost of wages against additional revenue. For Dean Salakas, a cut in penalty rates could be enough to tip the scales in favour of longer opening hours and satisfied customers.

Dean Salakas is co-owner and ‘Chief Party Dude’ at The Party People, the largest retail party supplies outlet in Australia. He has two Sydney stores, but only opens the largest store on Sundays.

He admits he questions the viability of opening Sundays due to the higher labour costs, even though his customers want the store open.

With this in mind, Salakis intends taking advantage of lower Sunday penalty rates. He’ll consider extending Sunday trading hours at his flagship store from 10-3 to 10-5 and opening Sundays at his other store, especially at times of peak demand, such as Halloween and Christmas. He also plans to pass on lower Sunday delivery costs to customers.


  RELATED: Your call: The case AGAINST   
  cutting penalty rates.  


Who will be affected?

As part of its four yearly review, the Fair Work Commission recently ruled that public holiday penalty rates for retail, hospitality, fast food and pharmacy workers will be cut from 1 July 2017.

Since the announcement, the trade union movement and the business community haven’t yet settled on how quickly the changes should be implemented. However, it was recently announced that cuts to Sunday rates will be phased in gradually and not take full effect until 2019 and 2020.

Cuts to Sunday rates will be phased in gradually and not take full effect until 2019 and 2020.

The decision to cut rates will reduce Sunday pay for these workers by varying amounts, depending on the industry and whether they are full-time, part-time or casual.

Meanwhile, there has been growing pressure on retailers to open Sundays, which was traditionally seen as a day of rest. But these days, particularly retailers in major cities, are having to respond to increasing demands to offer consumers the convenience of their stores being open on a Sunday. 

Sunday penalty rate changes

HOSPITALITY AWARD

 

Full-time and part-time employees:

175% to 150%

(no change for casuals)

 

FAST FOOD AWARD (level 1 employees only)

 

Full-time and part-time employees

150% to 125%

Casuals

175% to 150%

RETAIL AWARD

 

Full-time and part-time employees

200% to 150%

Casuals

200% to 175%

PHARMACY AWARD (7am to 9pm only)

 

Full-time and part-time employees

200% to 150%

Casuals

225% to 175%

Source: Fair Work Commission

 

The reduction in penalty rates could also have spin-off effects for your business insurances.

What about insurance?

Annual premiums for workers’ compensation insurance are determined by your total wages bill. This means any cut to wage rates should result in a drop in your workers’ compensation premiums.

If lower penalty rates allow you to hire more staff and increase turnover, you may need to make adjustments to your public liability insurance. This is because if you have more customers coming through your doors, you may have to pay more to help protect you and your business from financial risk if you’re found liable for third party injury.

If you’re planning to cut penalty rates or extend trading hours, it’s a good idea to contact your Steadfast insurance broker to discuss your insurance cover. They will also be able to walk you through how these government changes affect your existing policy, and help you determine whether a revised or even new policy would be better suited to your business.

Will there be a backlash?

Some small business owners who would like to take the opportunity to lower their wages bill may be concerned about negative feedback from their staff and/or customers. Others are sticking to their current rates in the hope that it will set them apart from other employers and attract and retain top talent.

Salakas employs more than 40 staff, including at least five casuals on Sundays, but doesn’t think there’ll be any major backlash. He plans to sit down with staff and manage each one on a case by case basis. Customers will benefit from lower costs which will be passed through to them, he says.

“I’d like to think we’re a good place to work. People work Sundays because the rates are good and they’ll still be good”, he says.

 

     
   

RELATED:

Thinking about leaving penalty rates as is?
Read the other side of the argument here - Your call: The case AGAINST cutting penalty rates.

   
     
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