Malcolm Turnbull to recommend penalty rates cuts be phased in, as Eric Abetz says changes should be grandfathered

The federal government is expected to recommend changes to Sunday and public holiday penalty rates be phased in over a number of years, despite one member of the Coalition calling for the lower rates to only apply to new workers.

Senator Eric Abetz today called for the Fair Work Commission’s decision on penalty rates to be “grandfathered” so that current employees don’t see a drop in their pay packets.

While Abetz said he supports the Fair Work Commission’s decision because it will “support small businesses to create more jobs”, he said changes to penalty rates in the retail and hospitality sectors must be implemented “in a fair manner for current workers”.

“This approach would ensure that ‘no worker is worse off’ while allowing new opportunities for the unemployed and especially for young unemployed people,” Abetz wrote in an opinion article for Fairfax.

“It would mean no existing worker would have their income or household budget adversely affected while supporting small business and assisting the unemployed.

“Grandfathering would be entirely consistent with the government’s approach on superannuation and other policy approaches to ensure no retrospective impacts.”

Prime Minister Malcolm Turnbull said on Thursday the government will likely recommend the Fair Work Commission phase in the lower penalty rates, as it supports offsetting reductions in the take-home pay of workers “as far as possible”.

This could mean that cuts to penalty rates are offset by annual increases in the minimum wage. Last year the Fair Work Commission increased the minimum wage by 2.4%.

“The employee’s overall pay packet increases and offsets the phased-in reduction in penalty rates,” he said of the proposal.

“We’ve very supportive of the Commission managing this transition in a way that ensures that take-home pay is as far as possible maintained, which is the objective of modern awards.”

Abetz’s comments on grandfathering the rates come as the debate over wages continues to consume the federal Parliament, and his proposal has gained some support from members of the small business community.

Peter Strong, chief executive of the Council of Small Business of Australia (COSBOA), told SmartCompany this morning he agrees with Abetz as the implementation of any changes to penalty rates needs to be “about fairness”.

“The great majority of small businesses that have got workers on the higher rates, they will keep them on the higher rates,” he says.

“They are most likely long-term workers and there’s a good reason why they’re there.”

Strong expects the changes could be implemented within 12 to 24 months and says COSBOA intends to work with the Fair Work Ombudsman to ensure workers are not sacked in order for employers to be able to offer lower rates of pay to new employees.

“In the industries that are affected, the small businesses owners are working next to their employees,” he says.

“It’s about a bunch of human beings working together.”

The Fair Work Commission is seeking submissions on how to implement its decision to cut Sunday penalty rates for a number of awards, while changes to public holiday penalty rates are expected to come into effect on July 1, 2017.

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