I'm not so sure SmallBizAU is into reduction of penalty rates

There is a general assumption that small businesses around Australia would love to see a reduction in penalty rates. The assumption behind this assumption is that, if you reduce the penalty rates, the savings are added to the bottom line. But this assumption needs to be tested. My guess is that if you did a proper analysis you might find that success in small business is a much more complicated story than this suggests.

Penalty rates are offered to employees who are required to perform when the rest of their mates or their family are sleeping, or resting, or having time out, or having fun, or going off on a well earned holiday. They are offered as an inducement, but they serve other fuctions as well. They are a long standing tradition that identify these hours as 'anti-social', and recognise that, if you do things "out of hours", there are big social, physical and mental prices to pay and these extra payments called 'penalty rates' can to some extent be utilised to compensate for this extra effort. Those who stand up and say they "need to be gotten rid of", and paint the picture of an employee using penalty rates to "rort the system", just are unfamiliar with the realities of 'out of hours' work, or more likely, have never done any themselves, and have probably never done any real thinking on the subject.

So, if you reduce or get rid of penalty rates altogether, it may have an impact on the business. If penalty rates are small or are no longer there, there is no longer any inducement. It may be difficult to get someone to perform, at all. If you have a long standing team, used to receiving penalty rates, they may not want to continue to put in the effort, and you might be called on to do some recruiting to replace long term commitments. Those that need to work these 'out of hours' may be doing so to obtain extra rates to achieve some personal objectives. Or they may be doing it to get work that they can only get because noone else is prepared to work these 'anti-social' hours. If the penalty rates fall, or are no longer there, it might be a real grind to have to turn up when everyone else is sleeping or out having fun. A pissed off employee may not have the same energy as the one who has their extra effort recognised and remunerated. Extra supervision may be needed.

So it seems to me that, while there may be real reasons for big business to be pushing this "reduce penalty rates" bandwagon, for small business there is a real danger that reduction in penalty rates can have unforseen consequences (UFCs). The scenario painted above shows focus moving away from the product of the business to HR (increased costs of recruitment, training, and supervision). This is an impact on the bottom line. And other UFCs could see a reduction in the top line, if, for example, those "forced to be there" have less energy available for increased effort for the business; "just putting in time".

So before we support the campaign for these changes we should do a bit of serious thinking about how it could impact on our business.

Extra paper work? See http://www.smartcompany.com.au/legal/politics/48666-small-business-doesn...