No strong evidence in favour of reducing Sunday rates: industry expert

The Fair Work Commission’s (FWC) decision on penalty rates has been delayed until later this year. The commission was expected to rule on whether Sunday penalty rates should be reduced to match Saturday rates last month, but the decision was put off to allow for an additional hearing at the end of September.

The issue is split politically, with a number of employers and industry groups backing the Productivity Commission’s proposal to cut Sunday rates, while the Labor Party and many unions have opposed any such move.

During the election campaign Prime Minister Malcolm Turnbull ruled out any changes to penalty rates in the current term of parliament, however he had previously suggested the reductions were inevitable. Also during this year’s federal campaign, The Greens called for penalty rates to be legislated.

In anticipation of the FWC’s impending decision, Hospitality spoke with Professor Ray Markey, director of the Centre for Workforce Futures and professor of employment relations at Macquarie University.

The Productivity Commission’s proposal is largely based on the argument that, while penalty rates have a legitimate role in compensating employees for working unsociable hours, Sunday rates in the hospitality and retail industries are unnecessary.

Despite industry bodies arguing Sundays are no longer worthy of penalty rates, Markey said that weekend work is still unsocial for the majority of people.

“I know the Productivity Commission and employers argue that we’re a 24/7 economy now, but the vast majority of people don’t work on the weekend. About a third do on a regular basis – that’s still a minority and research shows that the people who do work those hours find it hard to make up during the week,” he said.

“The Australian Bureau of Statistics (ABS) has done time use surveys in the past, although the most recent was released eight years ago. They show that although people don’t go to church as much anymore they still use Sundays to socialise with family and friends. Leisure time, whatever it’s used for, is important.”

The Australian Work and Life Index [AWALI] supports the case for increased rates on Sunday – over and above Saturday rates – saying that regularly working Sundays is associated with higher work-life interference, whether combined with regular Saturday work or not. The survey also concluded that most Australian workers do not work on weekends or nights and that the ‘24/7 economy’ has therefore not resulted in a 24/7 working life for most.

Markey added this could mean that cutting penalty rates will not help productivity; conversely, the move could lead to a less willing workforce and a shortage of weekend workers.

“The AWALI survey asked if people would work on the weekends if penalty rates were cut. The majority said they only worked Sundays because the wages were good and half of them wouldn’t continue to work if penalty rates were cut,” said Markey.

“If they do reduce Sunday penalty rates to be in line with Saturday rates, I think it will have a big impact on low income employees who use those penalty rates to make ends meet. Even if employment increases, they’re unlikely to make up the lost wages through extra hours and I’m not convinced more hours will become available.”

Cutting penalty rates might result in profitability, but it doesn’t necessarily follow that productivity will increase, said Markey.

“A decrease in penalty rates will improve the bottom line for business owners, but, while labour costs are significant, they aren’t the sole cost of operating.”

Ultimately, Markey is concerned there is not enough evidence to support the argument that cuts to penalty rates will actually result in increased productivity.

“There’s just not enough data. The evidence used by the Productivity Commission isn’t empirical data, it’s economic theory and modelling.”