Sundays are similar to Saturdays for workers: Productivity Commission

The Productivity Commission has recommended paring back Sunday penalty rates in some sectors, more consideration to economic circumstances in setting minimum wages, and a new form of statutory employment contract, in what it describes as “repairs” to Australia’s industrial relations system.

In its review of the workplace relations framework, the commission found that “contrary to perceptions, Australia’s labour market performance and flexibility is relatively good by global standards” but several major deficiencies need to be addressed.

The government ordered the inquiry as a preliminary to drafting the policy it will take to the election.

The commission, which normally adopts a very hard economic rationalist line on issues, has produced a middle-of-the-road set of recommendations. “The key message of this inquiry is that repair, not replacement, should be the policy imperative,” the draft report says.

Nevertheless, whatever reforms the government proposes for its next term will face tough counter-attack from Labor and the unions.

The report says that while penalty rates should be maintained, Sunday rates for cafes, hospitality, entertainment, restaurants and retail should be aligned with Saturday rates.

“Survey evidence shows that the overall social costs of daytime work on Sundays are similar to Saturdays, and consistently lower than evening work,” it says.

There would be losers, but employment and hours worked on Sundays would rise as a result, with lower regulated penalty rates likely to increase opening hours and encourage higher staffing ratios, the commission says.

Given the effect on the income of some workers, the commission proposes a lag before changes, so people can “adjust their lives and working patterns”.

The report says minimum wages are justified but significant increases “pose a risk for employment, especially when set against a weakening labour market”.

It recommends that in making its annual national wage decision, the Fair Work Commission (FWC) should “systematically consider the risks of unexpected variations in economic circumstances on employment and the living standards of the low paid”.

While enterprise bargaining generally works well, it is often badly suited to smaller businesses, the report says. The commission proposes a new form of agreement, an “enterprise contract”, that would fill the gap between enterprise agreements and individual arrangements.

“This would offer many of the advantages of enterprise agreements, without the complexities, making them particularly suitable for smaller businesses.

“Any risks to employees would be assuaged through a comprehensive set of protections, including the right to revert to the award.”

The proposed new statutory agreement would allow employers to vary an award for classes or groups of employees without having to negotiate with each party individually or to make an enterprise agreement.

“No employee ballot would be required for the adoption of an enterprise contract, nor would any employee group be involved in its preparation and agreement unless the employer wished this to be the case.”

The commission says that the “better off overall test” used in assessing bargaining agreements in comparison with awards can lack flexibility. It proposes a no-disadvantage test that would encourage “win-win” options; this should also be used for individual arrangements.

It urges tightening bargaining arrangements for greenfields agreements to limit delays – which would help employers.

While the commission recommends some changes to address flaws in the unfair dismissal regime, it rejects the major criticisms some employers have made. “Perceptions aside, there is little evidence that unfair dismissal laws are a major obstacle to hiring.”

The commission found that migrant workers, especially illegally working migrants, were vulnerable to exploitation and suggested tougher penalties.

In important recommendations on institutional arrangements, the commission criticises the FWC for a “legalistic approach” and says changes should be made to the appointment process for its members. It argues that inconsistencies in findings in unfair dismissals cases arose from having appointees coming from union or employer backgrounds – in other words, the industrial relations club.

It proposes creation of an expert appointments panel, to provide a merit-based shortlist of candidates for appointments.

The commission will now receive submission on its draft report. Submissions must be in by September 18.

Employment Minister Eric Abetz said once the final report was released the government would consider its recommendations. “Those that the government would seek to implement will be taken to the 2016 election to seek the endorsement of the Australian people.”

Opposition Leader Bill Shorten said this was “just another trip back to WorkChoices. No Australian can trust Tony Abbott with their penalty rates”.

“I do fundamentally believe that penalty rates are fair and that if there’s going to be any debate about penalty rates it should be done through the independent umpire and through negotiation,” he said. “Mr Abbott legislating through the back door of a Productivity Commission report to cut penalty rates is just Mr Abbott up to his old sneaky tricks of going after workers' conditions.”

The Australian Chamber of Commerce and Industry welcomed the recommendation on penalty rates but said it was disappointed the commission did not fully address employers’ concerns on unfair dismissal laws and some other issues.

The Australian Industry Group said the draft report laid the groundwork for a community discussion about the shape of Australia’s workplace relations system and the changes needed to remove barriers to productivity improvement, competitiveness and investment.

ACTU Secretary Dave Oliver flagged strong union resistance. “The Abbott government set up the Productivity Commission inquiry as a platform to cut penalty rates and the minimum wage and swing even more power to the employers – today’s report confirms that.”

“This is a pay cut for thousands of Australians who work in restaurants, cafes and shops around the country.”

“Unions will fight any move to cut penalty rates, the minimum wage and rights at work. If the Abbott government wants to make rights at work an election issue – bring it on.”

The Greens said they would make penalty rates a key election issue in the upcoming federal election.

“Any cuts to penalty rates will be a body blow for young people across the country,” Greens employment spokesman Adam Bandt said.

Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond the academic appointment above.