Penalty rates are the payments done for work done by employees on weekends and public holidays. An 'overtime' concerns the payment rates for work done in addition to or beyond ordinary working hours on any day of the working week. The concepts of overtime and the penalty rates are derived from the principle that employees are entitled to premium rates above their normal rates per hour when they are required to offer an extended continuous working hours or are called upon to work on days and times that are considered to be outside the ordinary working hours.
Penalty rates implies that the employer pays a penalty for subjecting the employees to conditions that could be working to their disadvantage, that is the employees are compensated for the damage caused by being required to work outside the ordinary working hours.
In the Australian economy, the idea of penalty rates has significantly changed over time within the labor market. Initially, the Australian economy was characterized by males who were full-time industrial workers with very little casual and part-time jobs. Furthermore, jobs with flexible working hours were few. Over the past three decades, several changes have been noticed in the Australian economy, changes in policies, industrial, technological improvements and increased involvement in the economic globalization among other changes have caused major shifts in the demand for labor. For instance the growth of part-time working schedule has led to jobs growth, casual employment had also increased to over 20% by 2010 (Productivity Commission, 2015).
The main question to ask oneself is whether the penalty rates are relevant to the modern Australian economy? The motive behind penalty rates payments is encapsulated in the decisions of the Commonwealth Court of Conciliation and Arbitration, and there are six working days within a week and one free day (Sunday).Any departure from the normal working time should be paid a double rate. Penalty rates for extra work outside the normal span of working hours are meant to compensate any inconveniences resulting from working unsociable hours. Since most employees are less interested in working during weekends, workplaces have always endorsed the penalty rates of higher payments per hour during these days so as to motivate and keep the working force to ensure productivity during these days. Employers argue that the penalty rates discourage business from engaging more workers due to the high costs involved and this in effect creates unemployment.
According to the Australian Prime Minister Tony Abbott many hotels restaurants and other businesses like bottle shops have stopped opening on weekends and during public holidays due to the high penalty rates involved and he believes that these inhibits jobs. While looking at penalty rates, their impacts on the cash economy within Australia needs to be closely examined, that is reviewing the minimum wages as well as the penalty rates as being part of the workplace relations review process.
The penalty rates greatly impact on employees in the various sectors like hospitality, construction, details, cleaning, and home maintenance among others where most workers regularly avail themselves to the various workplaces during weekends. The employer’s attitudes should also be on check especially in cases where there is the exploitation of the cash economy.
According to the Australian employers, the high penalty rates payable on Sundays and public holidays makes them unable to either hire staff or expand their businesses. Despite the reports by the Australian Fair Work commissions that there is no direct evidence that reducing penalty rates would increase the employer's potential of hiring more workforce, the employers insists that the double-timed rates makes business avoid giving the employees extended working hours. The arguments that the business owners are coming up with to get rid of the penalty rates is that the added pressure on the cost that eventually lowers the profits in the competitive marketplace have negative impacts on employment levels. This would be a joint call by both the employer groups, business owners and part of the government to reduce penalty rates in order to improve productivity and increase profitability of the various businesses so as to ensure their sustainability (Wooden, 2012).
Even as business owners claim that no employer forces their employees to report to work on weekends and holidays, it is significant to note that factors such as the high cost of living, the inequality and capitalism forces people to sacrifice their weekends in order to make ends meet. From the employees point of view therefore it can be morally argued that with no better incentives, workers would not work during the 'bad hours' unless the management force them, they would, therefore, search for jobs elsewhere. The truth, therefore, is drawn on the significance of the penalty rates as it being a compensation for the family unfriendly working hours, moreover the cost of highly skilled labor that is productive and efficient is more than just the minimum (Green, Toner & Agarwal, 2012).
The whole debate surrounding penalty rates can be looked at from two points of view, businesses would not be willing to pay them because of their high costs while the employees want them since they are the recompense for the unfriendly working hours and both parties argument holds when considering either the employer and his cost of production and to remain competitive in the business and the employee and his sacrificial efforts to work during the unfriendly hours at the expense of their social lives (Harley, 2014). From a precarious point of outlook, it is argued that removing the penalty rates would take the economy back to the 1950s when no business was opened beyond 12 noon on Saturday. In New Zealand, for instance, where some of the businesses and industries have no penalty rates, employees restrict themselves to the standard 40-hours of work from Monday to Friday and no employee is willing to work on either weekends and on public holidays. The underlying fact here is that scraping off the penalty rates exposes one's business to become completely unable to trade effectively at critical times when there is peak revenue density like in the evenings and on weekends (Hannan, 2014).
There is an argument that the removal of the penalty rates would enhance flexibility in the various sectors that are struggling especially in the small retail and hospitality industries as this would significantly reduce their expenditure and improve their financial base.
The argument is however faced with a serious challenge that the small businesses are already struggling to retain staff that are attracted by the incentives being offered by the bigger companies. If the small businesses would further remove the penalty rates, then the employees would be given yet another tempting reason to end their terms with these small companies.
The recruitment costs would subsequently increase to a level likely to exceed what used to be initially paid as the penalty rates, with these staff turnover. Looking at the hospitality sector, for example, in 1996 about 5.3% of the workforce was employed, 5.8% was employed in 2013 and in 2007 it employed about 5.6% of the entire workforce.
This data shows that despite the impact of the penalty rates hospitality industry has continued growing and proportionally to the entire workforce. On the other hand the average weekly incomes of the hospitality employees are the lowest in the entire Australian workforce despite the penalty rates, in other words, with the low wages the employees would barely take nothing home in any case the penalty rates would be scrapped off. It is fascinating to consider that the workers willing to work on weekends do so out of necessity rather than choice, the after-hours workers should, therefore, be fairly compensated for that sacrifice.
Removing penalty rates and lowering minimum wages would consequently hit hardest the poor and the working students, a group that is already very vulnerable. For instance, the cost of living for university students in Australia are the third highest in the world with more than 60% of the students living below poverty line (Irvine, 2012).
Penalty rates within the Australian economy are to a great extent a driving force as it has served the major role of the employee's motivation. Businesses that would remain competitive within the Australian economy are compelled to offer better incentives for the employees so as to keep the workforce even during the peak hours.
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