PENALTY-RATE WAR IS A FIGHT FOR SURVIVAL

Written on the 13 September 2012

PENALTY-RATE WAR IS A FIGHT FOR SURVIVAL

FAIR Work Australia’s (FWA) recent decision to lift penalty rates will sink struggling retailers into deeper unprofitability, according to Crusty Devil Bakehouse owner Tom Potter (pictured).

The freedom of employers to hire or fire workers, pay them what the corporate budget allows and charge customers reasonable rates is under attack.

FWA’s decision in June to lift the minimum weekly wage by 2.9 per cent to $15.96 an hour ($606.40 a week) and uphold double-time pay for Sundays is killing businesses.

Contrary to what the Federal Government thinks, penalty rate hikes have, in some ways, decreased tax revenue.

Some small-to-medium enterprises (SME) battling to keep their doors open are trapped in a vicious cycle where they risk regulatory reprisal by paying staff illegally.

Businesses that adhere to the law are also in limbo, facing a choice of employing fewer people or not opening shop altogether on Sundays.

There is a lack of incentives for employees to work additional jobs. Many teenagers want to earn extra money, but cannot find a way of doing so without being bamboozled with income tax after exceeding their normal thresholds.

When I was doing my apprenticeship at the Sunicrust Goodman Fielder bakery in Wodonga, I would work five days-a-week and then do a second job as a pub chef. Payment was either cash-in-hand or taxed at a much lower rate. This encouraged people to work outside of regular business hours.

There should be a flat tax-rate for people wanting to work between 40 to 80 hours a week. This would simultaneously wipe-out some 100,000 jobs in the tax and accounting industry.

The minority Federal Labor government’s insistence on preventing businesses from charging more on public holidays is somewhat communist or socialist in nature, in my view. However, our political leaders need to be reminded that we do not live in a communist country.

In our free and lucky society, if customers do not like the price, they simply stop coming through the door. This is enough of an incentive for business to remain competitive.

There should be a level playing-field for all with easy access to government rebates for employing apprentices.

When it is not possible to fill jobs with local talent, employers should be able to import foreign labour at a lower cost. This would provide a great incentive to sponsor overseas talent. Businesses could pay them less and let them send the money back to their respective countries of origin.

On the same token, there should be greater incentives for manufacturing locally. Coles, for instance, imports about 70 per cent of its inhouse bread mix from Ireland and bakes it locally due to the cost savings.

However, the supermarket group would find buying local bread mix more attractive, if the government followed a French example of imposing a 30 per cent duty tax on imported products and a lesser levy on locally made goods.

The carbon tax will have far-reaching effects on business bottom-lines. It will increase the cost of electricity, fuel and transport to say the least.

The soaring cost of rent is also an immediate concern for retailers. There will be a reckoning at shopping centres as fresh-food operators move out due to rental unaffordability and rising competition from supermarkets.

Some shopping centres are losing every second tenant and are under renewed pressure to restructure their businesses for more guaranteed cash-flow.

In the basement of the Myer Centre in the Brisbane CBD, a shop pays $170,000 annually to lease a 50sqm site. There is no way it can produce enough of a profit to sustain it, so the owner is pulling out of the lease.

Crusty Devil was offered a 93sqm lease at a northern Brisbane shopping centre for $65,000 a year. However, there was a Coles nearby with a bakery and selling at prices our business could never compete against.

Retail strip sites are better alternatives as they offer more reasonable rent rates that fall within Crusty Devil’s target range of about 5 per cent of revenue.

In conclusion, I believe there needs to be two tiers of labour and industrial relations: one for big business and another for SMEs.


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