Unions Lose Penalty Cut Appeal, Retailers To Receive 12% Boost
Following today’s ruling, cuts to Sunday and public holiday penalty rates can proceed – retail employees are set to see Sunday rates drop from 200% of the standard hourly rate to 150% (for full and part-time employees, plus casual employees in non-hospitality roles).
The Australian Federal Court deemed the Fair Work Commission met its legal obligations, when it handed down its ruling in February, to cut penalty rates for full-time and part-time workers.
Research from Morgan Stanley released earlier this year estimates the penalty rate cuts could result in a 4% -12% improvement in retailers’ fiscal 2018 earnings (before interest and tax).
Morgan Stanley analysts, Thomas Kierath and Monique Rooney, state that the decision remains a positive ruling for retailers, as labour is the second highest expense.
The analysts also affirm that the reduction in Sunday labour costs will have an immediate positive improvement:
“Clearly, some retailers will look to increase Sunday hours following the Fair Work Commission’s decision, but viewed on a static basis the impact could be significant for retailers in our coverage”
“Most retail industries suffer from declining selling prices, which means achieving like-for-like sales growth ahead of underlying wages growth (2.6 percent) is difficult. While retailers have sought to reduce labour in stores by more efficient rostering and self-check-outs it is the largest operating expense they incur and rises each year”.
Australian Retailers Association Executive Director, Russell Zimmerman, has offered his support of the decision:
“With the entrance of many international players into the Australian market, and the continual increases in energy and rental prices, the ARA look forward to the next penalty rates reduction on 1 July 2018″
“This second penalty rates reduction phase will lessen the strain on Australian retailers, put the unemployed back into the workforce, and increase trading hours across the country”
The cuts will roll out over a four-year period, under transitional arrangements to reduce penalty rates.
Small Business and Family Enterprise Ombudsman, Kate Carnell, has welcomed the court’s ruling:
“Small business operators will be relieved at this decision, which levels the playing field in competition against big business”.
The case was presented to the courts by United Voice and the Shop, Distributive and Allied Employees Association, who argued that the commission’s decision was “legally unreasonable“.
The ruling has received backlash from supporters of the appeal.
ACTU secretary, Sally McManus, has urged Prime Minister Malcolm Turnbull to block the penalty rate cuts, accusing the Australian government of failing to actively support working people, amidst declining wage growth:
“Australia needs a pay rise. Working people’s wages are flatlining and their work is becoming more insecure. The government has a responsibility to act”.
Opposition leader, Bill Shorten, has described the recent court ruling “disappointing”.
In a notable decision earlier this year, consumer electronics JB Hi-Fi announced it would not pass on the penalty rate cuts to existing staff after “careful consideration”.
Chief Executive, Richard Murray, confirmed the decision, affirming people-centric values:
“As a customer-facing organisation, our people are our most important asset — they represent our brand every day and we believe are one of our key competitive advantages”
“As a leadership team we gave careful consideration to the potential impact of the Fair Work decision on the group and our people, and decided the best outcome for our existing team members was to maintain their current pay and conditions”.