"The fast food and retail industries are by far the largest employers of young people in Australia. A large proportion of Australians get their start in the workforce in these industries. If it were not for the strong support of the major fast food and retail companies for young people, Australia’s current youth unemployment problems would be much worse.
"It is not in anyone's interests for the major fast food and retail businesses to be unfairly attacked based on misinformation. The misinformation raises concerns amongst young people and their parents, impacts upon relations between businesses and their employees, and damages the brands of businesses, which deters investment and employment.
"If businesses in the fast food and retail industries decide that enterprise agreement-making has become too much trouble to bother with, then businesses, their employees and the broader community will be worse off. There is significant risk of this given the sensationalist and inaccurate claims that are currently being widely made about enterprise agreements in the fast food and retail industries.
"It is time for a fact check.
"The approach taken in a number of recent publications is to compare the current Sunday rates in enterprise agreements approved some years ago with today's Sunday rates in awards. They then, on this basis, deem enterprise agreements in the fast food and retail industries to be unfair if the rates in the agreement are lower than those in the award. This approach is misleading, unfair and invalid because:
- Many enterprise agreements in the fast food and retail industries have 'loaded rates' that smooth the rates across the working week, with higher rates paid on weekdays to compensate for the lower rates paid on weekends;
- The enterprise agreements in the fast food and retail industries have been assessed by the independent Fair Work Commission at the time when they were made and the Commission has determined that the employees under the agreement are better off overall than they would be if the relevant award applied.
- The Better Off Overall Test in the Fair Work Act, requires that enterprise agreements result in employees being better off overall at the point in time when the agreement was approved.
- Enterprise agreements in the fast food and retail industries typically include a range of other employee benefits beyond wage rates. Also, beyond the entitlements in enterprise agreements, fast food and retail businesses often provide other employee benefits (e.g. discounts on meals and groceries).
- When the modern award system was introduced in 2010, penalty rates substantially increased for many businesses in the fast food and retail industries, and the higher rates were phased in between 2010 and 2014. Many of the enterprise agreements in the fast food and retail industries were made before 2014. Therefore, the Better Off Overall Test under the Fair Work Act was assessed against the award penalty rates that applied under the phasing arrangements at the point in time when each agreement was approved.
- Many enterprise agreements in the fast food and retail industries have expired, and have not yet been re-negotiated because of all of the uncertainty that exists around the application of the Better Off Overall Test following the decision of a Full Bench of the Fair Work Commission in a case involving Coles. In that case, the Commission decided that the Better Off Overall Test requires that every employee covered by an enterprise agreement must be better off than under the award. Such a test is unworkable for businesses that may have tens of thousands of employees who work a vast array of different shifts, often based on the personal preferences and study commitments of individual employees.
- Some businesses in the fast food and retail industries pay higher rates of pay than the minimum rates set out in their enterprise agreements.
- Enterprise agreements in the fast food and retail industries typically provide more generous wage increases than those reflected in awards. For example, McDonald’s enterprise agreements have delivered real wage increases to employees of between 22% and 30% between 2012 to 2016, whilst the minimum rates in the Fast Food Industry Award increased by approximately 11% over the same period.
"The public debate needs to centre on the real reason why enterprise agreement-making is rapidly grinding to a halt in the fast food and retail industries. That is, because the Better Off Overall Test in the Fair Work Act is now being applied in an unworkable manner by the Fair Work Commission, following the decision in the Coles case. The Act needs to be amended to implement a recent recommendation of the Productivity Commission that the Better Off Overall Test should apply to logical classes of employees, such as those at different classification levels and in different types of employment (e.g. full-time, part-time and casual)," said Mr Willox.
Ai Group submission to the Senate Penalty Rates Inquiry
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