McKell Institute - The Impact of the Fair Work Commission ... · significant social, economic and environmental reforms. For more information phone (02) 9113 0944 or visit Background

1

TheImpactoftheFairWorkCommission’sFebruary23SundayPenaltyRatesDecision

February25,2017

2

AbouttheMcKellInstituteTheMcKellInstituteisanindependent,not-for-profit,publicpolicyinstitutededicatedtodevelopingpracticalpolicyideasandcontributingtopublicdebate.TheMcKellInstitutetakesitsnamefromNewSouthWales’wartimePremierandGovernor–GeneralofAustralia,WilliamMcKell.

WilliamMcKellmadeapowerfulcontributiontobothNewSouthWalesandAustraliansocietythroughsignificantsocial,economicandenvironmentalreforms.

Formoreinformationphone(02)91130944orvisitwww.mckellinstitute.org.au

BackgroundThisreporthasbeenfundeddirectlybyTheMcKellInstituteandhasnotbeencommissionedbyanyofoursponsorsorsupporters.Theauthorsofthispaperhaveutilisedarangeofpubliclyavailableinformationandourownanalysisincompilingthispaper.

AuthorEdwardCavanoughisthemanagerofpolicyatTheMcKellInstitute.

[email protected]

NoteTheopinionsinthispaperarethoseoftheauthorsanddonotnecessarilyrepresenttheviewsoftheMcKell Institute’smembers,affiliates, individualboardmembersor researchcommitteemembers.Anyremainingerrorsoromissionsaretheresponsibilityoftheauthors.

3

TableofContents

Overview..................................................................................................................................4

KeyFindings.............................................................................................................................5

Part1 - TheImpactoftheChangestoIndividualWorkers......................................................6

OverviewoftheReductioninPay......................................................................................................6

ModelingtheImpactonAffectedWorkers.......................................................................................9

Part2–TheBroaderImpactofReducingSundayPenaltyRates...........................................13

References..............................................................................................................................18

4

OverviewOn23February2017,theFairWorkCommission(FWC)ruledtoreducetheratesofSunday

pay forworkers inprimarily in thehospitality, retail and fast foodsectors. Theproposed

reductions,whichifenactedwilltakeeffectfromJuly2017,outlinemajorchangestofour

industryawardscoveringretail,hospitality,fastfoodandpharmacyworkers(Figure1.1).The

McKellInstitutehaspreviouslyconductedmajorresearchintotheimpactofpenaltyrateson

Australia’seconomy,andhasfoundthatnotonlyarepenaltyratespivotaltothelivelihood

ofindividuals,butalsoAustralia’seconomymorebroadly.Thisreportanalysestheimpactof

thedecisionbytheFairWorkCommissiontoreduceSundaypenaltyrates.Itdoesnotanalyse

theimpactonpharmacyworkers,butinsteadfocusesontheretail,fastfoodandhospitality

sectors.

Thisreportbeginsbyoutliningthekeyfindings.Around680,000Australiansareestimatedto

beworkingonawardsthatmaybeimpactedbytheproposedchanges,withthemajorityof

theseworkersbeingfemale.Italsofindsthattheproposedchangeswillfurtherincentivisea

casualisation of theworkforce. This report then outlines the impacts of the reduction of

Sundaypenaltyratesfortheaffectedawards.Formany,thechangesaredramatic:fulltime

orparttimeretailworkerswhoworkafull8-hourshift,forexample,willloseatleast$72.90

perweek.Annually, thisequates toa$3499 loss. Thereport thencompares these losses

againsthypotheticalannualincomestoascertaintheimpactonlowerincomeworkers.Fora

studentworker,oraparttimeworkerwhoearns$30,000peryear,thechangescouldresult

inalossofupto11percentoftheirannualincome,iftheyareaparttimeretailemployee.

Finally,thisreportestimatesthetotalamountofAustralianworkerssubjecttotheproposed

changes.Throughthisanalysis, it isestimatedthat681,378workersacrossthehospitality,

retailandfastfoodsectorsarenotcoveredbyEnterpriseBargainingAgreements(EBAs),and

willbesubjecttotheproposedchangestotheirrespectiveawards.Additionally,thisreport

notesthat55percentoftheseworkersarefemale,andthattheproposedSundayratechange

willfurtherexacerbatetheexistinggenderwagegap.

5

KeyFindings

• Upto681,378Australiansarecurrentlyworkingunderawardsthataresubjecttothe

proposedchangesacrosstheretail,hospitalityandfastfoodsectors.

• Almost1in2retailworkersarenotonEBAs,andwillthereforebeimpactedbythe

proposedchanges.

• 55percentofthoseimpactedbytheproposedchangesarefemale,and45percent

male.

• Fulltimeandparttimeretailemployeeswhoworkan8-hourSundayshift,andare

subjecttotheproposedchangesundertheiraward,arethemostseverelyimpacted

bythechanges,andstandtoloseatleast$72.90perfullSundayshift.

• Theproposedchangesmostseverelyimpactthosewhoearnthelowestincomes,

particularlystudentsandotherworkerswhorelyonweekendwork.

• Theproposedchangesincentivizeafurthercasualisationoftheworkforce,withfull

timeandparttimeretailandhospitalityworkersbeingthemostdisadvantagedby

thechanges.

6

Part1 - TheImpactoftheChangestoIndividualWorkers

Award Fullandparttime Casual

Retail 200%downto150% 200%downto175%

Hospitality 175%downto150% NochangeFast-food 150%downto125% 175%to150%

Pharmacy* 200%downto150% 200%to175%

Figure1.1–ProposedSundaypenaltyratereductionsasreleasedbytheFairWorkCommission,February23,2016.OverviewoftheReductioninPayThereductioninSundaypayforworkersreliantonSundayshiftsissignificant.Figures1.2to

1.4usetheminimumhourlyadultwageundereachawardasabasefiguretocalculatethe

reduction in Sunday remuneration for both full time employees (FTEs) and part time

employees(PTEs),aswellascasualworkers.Itmustbenotedthatthemostadverselyaffected

employeesunderthehospitalityandretailawardsareFTEsandPTEs.

Fulltimeandparttimehospitalityworkerswhoworkfull8hourshiftsonSundayswillseea

reductionof$33.19ontheirSundaypay,whilecasualworkersunderthesameawardwillsee

noreduction.Forretailworkers,itisalsofulltimeandparttimeemployeeswhowillbemost

adverselyimpactedbytheproposedchanges.Forafulltimeorparttimeretailworkerwho

worksan8hourshiftonaSunday,theywillloseaminimumof$72.90undertheproposed

changes,withcasualworkersunderthesameawarddoingthesameshiftlosing$45.56.

Forfastfoodworkers,thecircumstancesarereversed,withfulltimeandparttimeworkers

settohavetheirSundayearningsreducedby$36.45,withcasualworkers inthefastfood

industrysettolose$45.56throughoutan8hourSundayshift.

7

ItmustbenotedthatthereductionsinSundaypayasoutlineinfigures1.2,1.3and1.4only

applytothoseremuneratedaspertherelativeawards,andnottothosewhohaveseparately

negotiatedEBAs inplaceatwith theiremployer.However, as this reportoutlines, almost

700,000workersarepaidaspertheaffectedindustryawards,andarethereforeimpactedby

theFWCdecisiononFebruary23.

HOSPITALITYAWARD

Fulltime&Parttimeemployees

HourlyWage 8hourlypay ReductioninSundayPayWeekday 17.7 132.75 Sunday 30.975 232.3125 SundayasofJuly2017 26.55 199.125 $33.19

CasualEmployees HourlyWage 8hourlypay ReductioninSundayPayWeekday 22.125 165.9375 Sunday 38.71875 290.390625 SundayasofJuly2017 38.71875 290.390625 $0Figure1.2–ReductioninMinimumSundayHospitalityRates

8

RETAILAWARD

Fulltime&Parttimeemployees HourlyWage 8hourlypay ReductioninSundayPayWeekday 19.44 145.8 Sunday 38.88 291.6 SundayasofJuly2017 29.16 218.7 $72.90

CasualEmployees HourlyWage 8hourlypay ReductioninSundayPayWeekday 24.3 182.25 Sunday 48.6 364.5 SundayasofJuly2017 42.525 318.9375 $45.56Figure1.3–ReductioninMinimumSundayRetailRates

FASTFOODAWARD

Fulltime&Parttimeemployees HourlyWage 8hourlypay ReductioninSundayPayWeekday $19.44 145.8 Sunday $29.16 218.7 SundayasofJuly2017 $24.30 182.25 $36.45

CasualEmployees HourlyWage 8hourlypay ReductioninSundayPayWeekday $24.30 182.25 Sunday $36.45 273.375 SundayasofJuly2017 $30.38 227.8125 $45.56Figure1.4–ReductioninMinimumSundayFastFoodRates

9

ModelingtheImpactonAffectedWorkers IndeliberationsovertheremunerationoflowincomeearnersinAustralia,itisvitalthatthe

contextofthelivesofmanyoftheseworkersisunderstoodandconsidered.Manyworkers

affectedbytheproposedFWCdecisiononFebruary23arefulltimeworkerswhosecareeris

intheretail,hospitalityorfastfoodindustries.

However,theretail,hospitalityandfastfoodindustriesalsoemployalargenumberofpart

timeandcasualworkers–manyofwhomaretertiarystudentsornewparentsreturningto

the workforce after breaks. For these workers, their weekend shifts often constitute a

disproportionatepercentageoftheirweeklyandannualincomes.Manyfulltimestudents,in

particular, onlywork onweekends,with the reduction in Sunday rates acutely impacting

them.

ThefollowinganalysismodelstheimpactoftheproposedSundayratechangesonworkers

undereachawardsubjecttochangebytheFWCdecisiononFebruary23,excludingpharmacy

workers.Itisassumedinthefollowingmodelsthatworkersarebeingpaidtheminimumadult

hourlywageunder the relevant award, andwork48 Sundaysper year. The Sunday shifts

modeledare8hours,minusa0.5hourbreak.

Thisanalysismodelstheimpactonworkersinfivedifferentscenariosaccountingforeach

affectedaward:

• Scenario1:Fulltimehospitalityworkerwhoworks48Sundaysperyear.

• Scenario2:Fulltimeretailworkerwhoworks48Sundaysperyear

• Scenario3:Casualretailworkerwhoworks48Sundaysperyear

• Scenario4:Fulltimefastfoodworkerwhoworks48Sundaysperyear

• Scenario5:Casualfastfoodworkerwhoworks48Sundaysperyear

10

Scenario1:FTE/PTEHospitalityworkerwhoworks48Sundaysperyear.

Hospitality-FTE/PTE

CurrentSundayPay $232.31AnnualSundayPay $11,150.88SundayPayFromJuly $199.12AnnualSundayPayfromJuly $9,557.76AnnualReductionfromChanges $1,593.12

Hospitality-FTE/PTE

HypotheticalAnnualIncome %ofAnnualIncomeLost$30,000 5.31$40,000 3.98$50,000 3.18

$55,000.00 2.89 Scenario2:Fulltimeretailworkerwhoworks48Sundaysperyear

Retail-FTE/PTE


11

Retail-FTE/PTE

HypotheticalAnnualIncome %ofAnnualIncomeLost

$30,000 11.66$40,000 8.74$50,000 6.99

$55,000.00 6.36 Scenario3:Casualretailworkerwhoworks48Sundaysperyear

Retail–Casual


Retail–Casual


$55,000.00 3.976 Scenario4:Fulltimefastfoodworkerwhoworks48Sundaysperyear

FastFood-FTE/PTE


12

FastFood-FTE/PTE

HypotheticalAnnualIncome %ofAnnualIncomeLost

$30,000 5.832$40,000 4.374$50,000 3.499

$55,000.00 3.181 Scenario5:Casualfastfoodworkerwhoworks48Sundaysperyear

FastFood–Casual


FastFood–Casual


$55,000.00 3.976 TheProposedChangesMostAdverselyAffecttheLowestIncomesEarners

EachscenariodemonstratesthatforthoseworkerswhorelyheavilyonSundayshiftsfortheir

weekly andannual income, theywill bemost adversely affected.While the scenarios are

hypothetical,theyreflectworkforcetrends.Manyworkersintheretail,hospitalityandfast

food sectors rely onweekendwork to supplement their incomewhile undertaking other

pursuits,suchastertiaryeducation.Thesescenariosreflectthatreality.

13

Part2–TheBroaderImpactofReducingSundayPenaltyRates TheProposedPenaltyRateChangesWillImpactUpto681,000workers ThereductioninSundaypenaltyrateswillimpacthundredsofthousandsofworkersacross

Australia.Whilemanyworkersintheretail,hospitalityandfastfoodindustriesareworking

underEnterpriseBargainingAgreements–andwillnotbeimmediatelyaffectedtheFebruary

23decision–hundredsofthousandsofAustraliansworkingintheseindustriesdoworkasper

theaward.

Retail

Total 681,384

Figure3.1–Totalretailtradeemployees.Source:WGEA

HospitalityRestaurants 290,142HotelsandResorts 68,358Pubs,Bars&Nightclubs 85,363Cafes&Coffeeshops 71,957

Total 515,820 Figure3.2–Totalhospitalityemployees.Source:IbisWorld

FastFood

Total 153,332 Figure3.3–Totalfastfoodemployees.Source:IbisWorld

14

This report estimates the breakdown of workers on awards and EBAs by assessing well

publicisedEBAnegotiationsbetweenmajoremployersintheretail,fastfoodandhospitality

sectors.

It isestimatedthatofallretailtradeworkers,approximately55percentofemployees,or

approximately376,410employeesarecoveredbyEBAs.Thisleavesapproximately304,974

workers–oralmost1 in2retailworkers -workingonawards thatwillaresubject to the

proposedchanges.

Hospitality workers rarely tend to be covered EBAs, with the vast majority of cafes,

restaurants, hotels, pubs and nightclubs in Australia owned by individuals and not large

chains, national or multinational corporations. It is therefore assumed that a substantial

majority of hospitality workers are working as per the award. This report makes a

conservative estimate that 75 per cent of hospitality workers, or approximately 361,074

workers,areworkingunderawards,andwillbeaffectedbytheproposedSundaypenaltyrate

changes.

ThevastmajorityofAustralianfastfoodworkersarecoveredbyEBAs.Thisreportestimates

thatonly10percentoffastfoodworkers–or15,330workers-areworkingunderawards,

withtheremainingfastfoodworkerscoveredbyEBAs.

Thisreportthereforeequatesthat, intotal,approximately681,384Australianworkersare

likelytobeadverselyimpacted,tovaryingdegrees,bytheFairWorkCommission’sdecision

toreduceSundaypenaltyrates.Itisdifficulttoascertainwhoamongtheseworkerscurrently

workSundayshifts.Therefore,the681,384estimatedfigureofpotentiallyeffectedworkers

relates to workers who may or may not work Sundays according to their individual

circumstances,butwouldbeaffectedbythedecisioniftheydoworkonSundays.

15

EstimatedTotalImpactedbySundayPenaltyRateDecisionRetail 304,974Hospitality 361,074FastFood 15,330PotentiallyAffectedWorkers 681,378

Figure3.4-EstimatedTotalImpactedbySundayPenaltyRateDecision EstimatedTotalImpactedbySundayPenaltyRateDecision FemaleRetail 304,974 177,800Hospitality 361,074 185,230FastFood 15,330 7864.29Total 681,378 370,894TotalFemale 370,874 54.43(%)

Figure3.5-EstimatedTotalImpactedbySundayPenaltyRateDecisionwithspecificimpactonthefemaleworkforce. TheReductioninSundayRatesWillDisproportionatelyImpacttheFemaleWorkforce Those impactedby the February 23 FWCdecision aredisproportionately femaleworkers.

Eachofthethreeprimaryindustriesaffected–retail,hospitalityandfastfood–arehighly

feminisedindustries,whichmeanstheyarepopulatedwithmorefemaleworkersthanmale

workers. This is particularly evident in retail, inwhich58.4per centof theworkforce are

female.1TheWorkplaceGenderEqualityAgencyestimatesthatamong‘accommodationand

foodservice’workers,which is thecategory thatcovershospitalityand fast foodworkers

affectedbytheFebruary23penaltyratedecision,51.3percentoftheworkforcearefemale,

compared to 48.8 who aremale2. Thus, 54.68 per cent of the workers impacted by the

proposedSundaypenaltyratechangeswillbefemaleworkers.

1 http://data.wgea.gov.au/industries/76 2 WGEA, 2016.

16

BroaderSocialandEconomicTrendsShouldBeFactoredintoFWCDeliberations The reduction inSunday rates is additionallyunwarrantedconsidering thebroader trends

occurringwithintheAustralianeconomyandsociety,particularlyforlowincomeearners.The

McKell Institute’s 2016 report Choosing Opportunity identified many of the challenges

associatedwithbeingalow-incomeearnerinAustralia,suchasowningahome,andbeing

abletoaffordbasicgoodsandservices.Achiefcauseoftheseburdensforlowincomeearners

isthenear-stagnantwagegrowthAustraliahasexperienceinrecentyears,withwagegrowth

in2015-16wasaslowas1.8percent3.Lowwagegrowthexacerbatesmanyofthechallenges

facingtheAustraliancommunity,andthedecisiontoreducethepayofsomeofAustralia’s

lowestpaidworkersonly increases theexistingdifficultiesof low-incomeworkersalready

impactedbyendemiclowwagegrowth.

TheProposedChangesWillLeadtoaGreaterCasualisationoftheWorkforceandIncreaseJobInsecurity ItisalarmingthatthemostadverseimpactsoftheproposedSundayratechangeswilloccur

toFTEsandPTEsintheretailindustry(whoarenotcurrentlycoveredbyseparateEBAs).FTEs

andPTEsinretailworkingaspertheawardratewillexperienceareductionofatleast$72.90

onafull8hourSundayshift,comparedtocasualworkersonthatsameaward,whowillsee

their pay reduced by $45.56. This is a significant difference, and further discourages

employees frompursuingmore secure full timeor part timework, pushing them instead

towardscasualworkingarrangementsthatarelesssecure,butofferhigherremuneration.

Formanyworkers,casualworkcanbeanattractiveandflexibleoption.Butforothers,casual

workmeans less job security, less annual work breaks, and amore tenuous relationship

betweenthemandtheiremployer.Thesefactorsresultinenhancedjobinsecurity,whichcan

lead to financial stress and poor health outcomes. The McKell Institute’s 2016 report,

3 Australian Bureau of Statistics, 2016.

17

Choosing Opportunity, found that workplace stress costs the Australian economy

approximately$10billionperyear–with23.2percentofworkplacestressrelatedtofinancial

stress. By reducing workplace stress, Choosing Opportunity found that the Australian

economy could benefit by around $1.9 billion annually. By disproportionately reducing

penaltyratesforfulltimeandparttimeworkers,manyemployeeswillfeelcoercedintocasual

work,thereforeincreasingjobinsecuritywhichisakeydeterminantofworkplacestress.This

report suggests that the proposed FWC changes to Sunday penalty rates have failed to

adequatelyconsiderthisexternalitywhenarrivingattheirdecisiononFebruary23.

TheChangesMayImpactFutureEBANegotiations Theproposedchangesoutlined intheFebruary23decisionbytheFWCscheduledtotake

effectfromJuly2017willonlyimpactworkerscurrentlypaidaspertheawardthatcovers

theirworkplace.Manyworkers–particularlyinretail-willcontinuetobepaidaspertheEBA

negotiated between their employer and employee representative. However, while the

proposed Sunday rate changesmay not immediately impact those on EBAs, it signals an

economy-widedevaluationofSundaypenaltyrates,andmayservetoundermineemployer

outcomesinfutureEBAnegotiations.ThisreportnotesmediareportsonFebruary252017,

suggestingmajor supermarket chains are considering renegotiating EBAs to factor in the

changes that have beenproposedby the FWC4. This refutes the notion thatworkers not

immediatelyimpactedbytheFWCdecisionarenotindirectlyimpactedinthelongterm.The

decisioncreatesuncertaintyoverallaffectedindustryworkers’futurewages,exacerbating

financialstressforemployeesinthelow-earningindustriesimpacted.

4 Sydney Morning Herald, February 25, 2017. ‘'Big retailers to seize on penalty rate changes to push through new deals with workers'.

18

ReferencesAustralianBureauofStatistics,2016.‘6291.0.55.003-LabourForce,Australia,Detailed,Quarterly,Nov2016’,Accessedonline24February2017:http://www.abs.gov.au/ausstats/[email protected]/mf/6291.0.55.003AustralianBureauofStatistics,2016.‘Decemberkeyfigures’,AccessedonlineFebruary242017:http://www.abs.gov.au/ausstats/[email protected]/mf/6345.0/FairWorkCommission,2017.‘SummaryofDecision–FourYearlyReviewofPenaltyRates’,Accessedonline24February2017:https://www.fwc.gov.au/documents/sites/awardsmodernfouryr/2017fwcfb1001-summary.pdfIbisWorldAustralianIndustryReports,Accessedonline24February2017.https://www.ibisworld.com.au/TheMcKellInstitute,2016.‘ChoosingOpportunity’.Accessedonline24February2017 http://mckellinstitute.org.au/wp-content/uploads/2016/09/mckell-fairer-aus.pdfSydneyMorningHerald,February25,2017.‘'Bigretailerstoseizeonpenaltyratechangestopushthroughnewdealswithworkers'.AccessedonlineFebruary252017:http://www.smh.com.au/business/workplace-relations/big-retailers-to-seize-on-penalty-rates-change-to-push-through-new-deals-with-workers-20170224-gukqfl.htmlWorkplaceGenderEqualityAgency,2017.'Foodandbeverageservicessummaryfor2016',Accessedonline24February2016:data.wgea.gov.au/industries/95WorkplaceGenderEqualityAgency,2016.'Retailtradesummaryfor2016',Accessedonline24February2017:data.wgea.gov.au/industries/76

McKell Institute - The Impact of the Fair Work Commission ... · significant social, economic and environmental reforms. For more information phone (02) 9113 0944 or visit Background

Documents