Rising Tide – Will cutting penalty rates really help small business?

A recent decision handed down by the Fair Work Commission of Australia (FWC) to reduce penalty rates for hospitality and retail workers has been a hot topic of debate, and has left a lot of people asking whether cutting penalty rates will really help small business.

According to FWC, penalty rates have hindered businesses by making it too expensive to turn a profit on the days where they are required to pay penalty rates. They claim that ultimately this change will mean more jobs for Australians, because businesses will now be able to afford to give workers more shifts.

The announcement has led to a lot of confusion, and with little to no information on when these changes will take place, many retail and hospitality workers have been left scratching their heads.

We spoke with manager of Jane Cooper Clothing Marli Stacey to find out more about whether cutting penalty rates will really help small businesses to thrive.

Jane Cooper has been trading for more than 40 years, and over time has earned a reputation for being one of the top independent fast fashion retailers in southeast Melbourne.

In Frankston, the home of the flagship store, Jane Cooper has become known as a local icon and is the go-to clothing retailer for many young women from surrounding suburbs.

“My dad, Peter Stacey, opened the very first store here in Frankston in the early ‘70s, under another name. The store has been Jane Cooper now for more than 20 years and at the moment we have another Jane Cooper shop front located on the Mornington Peninsula,” says Marli.

“We’ve been here in Bayside Shopping Centre since it first opened in 1988, and previous to that when it was just street shops we were out here in Frankston too. As a mum of a two year old, the two stores is more than enough for me right now – I don’t know how my dad did it when he had about 15 stores!”

Between the two stores, Jane Cooper currently employs 13 sales assistants who average around the age of 18 years old. Many Jane Cooper employees are studying at high school or university while working in the store on a part time or casual basis.

Currently, Jane Cooper pays their staff penalty rates on weekends and on public holidays. As Jane Cooper is yet to receive any form notice outlining details of the change in their obligation to pay penalty rates, it has not yet been possible to determine whether or not the store will cut or continue to pay penalties.

“It all seems very up-in-the-air at the moment, and I think the Fair Work rulings seem likely to be contested,” says Marli.

“It’s absolutely an important thing to consider, because wage costs are one of the very few, if not one of the only costs that you can control in a small business.”

“Things like your rents, your overheads, and all that sort of stuff is quite set – you can’t change it. Whereas wages, you can control it to a degree. If you know you’re going to go through a quiet period you drop back on your rostering, and if you know you’re going to busier obviously you put more people on,” explains Marli.

But whether cutting penalty rates will really make a difference to the bottom line and impact the profitability of small Victorian businesses still remains unclear.

“Whether or not it would make a huge difference to the profit at the end of the day, it’s very hard to say. Our business is quite small, and would those little extra cuts really help? Probably not much in the short term,” says Marli.

For more information on penalty rates, visit the Fair Work Commission website.

To speak to one of our financial planners on the future of your small business, give us a call on 1300 880 325 to set up an appointment.