Sunday, August 21, 2011

Demands for flexibility hide a failure to adapt

Recently there has been a call from members of the Liberal Party and their supporters to repeal certain parts of Labor's Fair Work Act to enhance what they like to call "flexibility". One of the major points that has been raised is that penalty rates are a major imposition on the labour flexibility of the flagging retail sector.

The retail sector has complained that inflexibility in the Fair Work Act means that they are often unable to open at the times that they desire because penalty rates make it unfeasible.

However, it is obvious that the retail sector, with the encouragement of the Liberal Party's Work Choices champions,  is merely engaging in a campaign to lobby government to allow them to cut wages because if  penalty rates actually were the problem, then the retail sector would make more use of means already at its disposal to alter penalty rates and hours of work.

Section 144 of the Fair Work Act requires that any modern award must contain a flexibility term which allows employers and employees to agree to changing certain terms of employment under the award.

In the General Retail Industry Award 2010 [PDF] (an instrument that is likely to cover a large number of retail employees) the flexibility clause states:

"7.1 Notwithstanding any other provision of this award, an employer and an individual employee may agree to vary the application of certain terms of this award to meet the genuine individual needs of the employer and the individual employee. The terms the employer and the individual employee may agree to vary the application of are those concerning:
(a) arrangements for when work is performed;
(b) overtime rates;
(c) penalty rates;
(d) allowances; and
(e) leave loading
As long as the employee is "better off overall" (s7.3(b)), for example by including a higher base rate of pay, an employer can enter into an individual flexibility arrangement with that employee.

So it is untrue that the Fair Work regime is inflexible with regard to penalty rates and, like their complaints about the GST payable on overseas purchases, it appears that the retail industry is once again failing to understand the conditions under which their own industry works.

The retail sector is busily trying to blame everything but its own inability to adapt to a changing environment. It consistently fails to recognise that its main advantage against online shopping is that of the "shopping experience" of which customer service is a major part.

However, the industry's response is that paying their staff less is the best way for the retail sector to regain their lost competitive edge. Undoubtedly, reducing pay will encourage their already low-paid staff to provide customers with the sort of service that stops them running off to online stores.

The industry's simple knee-jerk response to the changes bought about by online retail has been to demand government concessions and extra "flexibility" to cut workers' wages and conditions to fix the retail dilemma. These demands show just how incapable the retail industry is of seeing that its own failure to understand and adapt to the changing market are the real reasons for its problems.

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