Removal of junior rates adds to the mounting pressures on businesses
Employers across Australia are warning that abolishing junior pay rates will reduce the employment opportunities for young people amid higher labour costs.
The Australian Industry Group (Ai Group), the national employer association, said businesses don't have the endless capacity to absorb the "dramatic cost increases" without consequences.
"The decision will undoubtedly cause many businesses to reconsider the viability of maintaining current trading hours and staffing arrangements," said Ai Group chief executive Innes Willox in a statement.
"Ultimately, the entirely foreseeable likelihood is that there will be fewer employment opportunities for younger workers, or even employment opportunities as a whole, in these sectors."
The Australian Chamber of Commerce and Industry (ACCI) aired a similar warning regarding the Fair Work Commission's decision.
"This is a disappointing decision that will make it even harder for young adults trying to forge a career," said Andrew McKellar, chief executive of the ACCI, in a statement.
McKellar further warned that the changes will make the situation more difficult for small businesses to offer jobs.
"This only makes young people who are wanting to go off, go and get their first job, it makes it less easy for them to compete in the marketplace," he said in an interview on 2GB Afternoons.
"It makes it less easy for the small business that wants to create that job, wants to give a young person a go, bring them on in the restaurant or the cafe or at the pub. Give them the chance to get that first job. It just makes it so much harder for them to meet that cost at a time."
The FWC on Tuesday ruled to phase out junior pay rates in the General Retail Industry Award, the Fast Food Industry Award, and the Pharmacy Industry Award.
This means employers operating under them will be required to pay employees between 18 and 20 years old the same award wage as their adult colleagues.
Decision's timing criticised
Implementation of the changes will be phased by up to four years to give employers time to adjust, but business groups remained critical amid fuel challenges due to the conflict in the Middle East, as well as the looming minimum wage hike.
"Many employers in sectors covered by the decision are already struggling with a difficult trading environment and are likely set to be impacted from flow-on cost impacts of rising fuel prices," Willox said.
"The phasing in of the decision over a period will soften the immediate blow to struggling businesses, but it won't change the seismic change in labour costs that this decision will impose on the sector."
The Australian Retail Council, despite acknowledging the transition period as a practical approach, was also critical of the timing of the ruling.
"The reality is, this decision does add another layer of cost at a time when many retailers are dealing with a cost-of-doing-business crisis," said ARC chief executive officer Chris Rodwell in a statement.
"When wage costs rise faster than productivity in this environment, it compounds the pressure on hiring, investment, and ultimately prices."
Preparing for the changes
Employment Hero, citing employer groups, urged businesses in retail, fast food, and pharmacy to begin workforce audit and cost modelling.
"The immediate priority, advisers say, is identifying every employee aged 18 to 20 on the payroll, mapping their current rates against the phase-in thresholds, and understanding the six-month experience qualifier that determines when individual workers become eligible for higher rates," Employment Hero said on its website.
The preparedness of the company's payroll system will also be important.
"Businesses still managing pay manually or on outdated systems face the highest compliance risk when new award rates take effect, since errors in applying updated rates could expose employers to underpayment claims," it added.
Meanwhile, the ACCI urged the government to monitor the impact of the changes, and ensure that workplace settings support opportunities for young people to enter the labour market.
