Retail, hospitality SMEs face wage upheaval under Labor

Many SMEs in the retail and hospitality sectors have embraced the opportunity to make big cuts in wages and conditions under WorkChoices, leaving them exposed to a spike in labour costs if IR laws change under a future Labor government.

Retail and hospitality businesses overwhelmingly used collective agreements to cut out award conditions that had previously been protected, particularly in relation to penalty rates, annual leave loading and paid breaks, according to a study of 339 agreements signed in the sector in the nine months following the introduction of WorkChoices, by Sydney University’s Workplace Research Centre.

The study found that the 65–75% of agreements that replaced award conditions with a basic range of statutory entitlements were more commonly found in small or medium-sized business and did not involve a union.

By contrast, agreements that involved generally very large businesses in the retail and hospitality sector were more likely to build on previously agreed collective agreements that contained above-award entitlements.

Union involvement and a history of negotiation in big businesses, and a tighter squeeze on margins faced by many SMEs, were likely explanations for the difference in practice between large and small businesses in retail and hospitality, according to report co-author Justine Evesson.

Evesson says a majority of those agreements that cut wages and conditions were based on templates prepared by professional industrial relations consultants, with almost a quarter of agreements based a single template prepared by a particular consultant.

“I suspect it’s not employers desperately wanting to cut conditions, but these agreements are being advertised and touted to them by consultants. When business owners are told, ‘This is what you can do; it’s acceptable and legal and what’s more your competitors are doing it’, it’s not surprising they are taking these steps,” Evesson says.

Agreements used by consultants and lawyers who had no real stake in the sector tended to contrast with those negotiated by business owners or industry group negotiators who were long term participants in the sector.

“Actual stakeholders in the sectors tended to tailor agreements at the workplace level, whereas consultants who come from outside the industry don’t have the same level of engagement and don’t have to live with the consequences of legal standards potentially changing, skills problems or other labor market difficulties,” Evesson says.

She adds that if Labor is elected this year and changes IR laws, these many of these SMEs are going to be faced with a spike in wage costs and big changes to industrial agreements after current agreements expire.

“It would be a big change, and that’s something that’s almost unavoidable when you make radical changes in legislation. Of course, these are just two industries and who knows what’s going on elsewhere, so yes this will create some uncertainty for business for the future,” Evesson says.

Among the “minimalist” collective agreements, retail workers had their pay cut by between 2% and 18% and hospitality workers between 6% and 12%.