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Standing Committee on Education and Employment - 13/07/2015 - Small business employment

de BRUIN, Mr Jos, Chief Executive Officer, Master Grocers Australia/Liquor Retailers Australia

[09:49]

CHAIR: Welcome. Although the committee does not require you to give evidence on oath, I remind you that this hearing is a legal proceeding of the parliament and warrants the same respect as proceedings of the House. The giving of false or misleading evidence is a serious matter and may be regarded as a contempt of parliament. The evidence given today will be recorded by Hansard and will attract parliamentary privilege. I invite you to make some brief opening comments before we proceed to questions.

Mr de Bruin : Firstly, thank you for the invitation to attend. As an industry, we take the inquiry very seriously. We are an industry made up of 115,000 employees. We are the independent supermarket and liquor sector of the Australian retail economy. We face many challenges as small-business owners. I can talk about what constitutes a small-business owner a bit later on, but certainly we are very interested to be part of this inquiry with a view to furthering the interests of our members, to help them be better at what they can do and be in this economy.

CHAIR: What we are looking for are examples and ways to get opportunities. You may have heard before about the youth unemployment level. My theory is, basically, that anyone from 25 to 48 who wants a job has one. It is the 18- to 24-year-olds, the over-50s and first-generation non-English-speaking migrants who, it appears to me, are this massive cohort of people who cannot get a start. What I want this committee to do is find out the government impediments to people offering people those opportunities. Where does your organisation see the impediments?

Mr de Bruin : Independent retailers rely on confidence and certainty. There are a lot of areas of red tape and areas that add weight and cost to doing business, whether it is cost in dollars or cost in time. These costs add up over a period of time. The previous witnesses talked about the Fair Work Act, penalty rates, minimum wages and so forth. That is just one aspect of what affects the mood of our retailers with regard to providing employment opportunities.

On the other side of things, youth unemployment is very close to our hearts because we try to employ as many youth as we can. For a lot of people in this room, their first job may have been in a supermarket pushing trolleys or something like that. We take great pride in providing that initial job for schoolkids to help them with the development of life skills. Moreover, it fills a gap for us as well because you will not get adults pushing trolleys around and things like that. We have a lot of trouble finding people to work in our shops. A number of our retailers around the countryside, Queensland included, have people on 457 visas working for them because they cannot find people to work in their shops. These people on 457 visas are absolute crackers—they work and work and work. They take on the responsibility and they take what they do very seriously. They turn up on time every day. They have responsibilities. They lock the shops up. It is just staggering what people like that can do compared with our own workforce that is available to us. In this instance, the example is in Toowoomba, and I am sure there would be many people in Toowoomba looking for work, and yet we have to resort to that.

We spoke a little about the recent adjudication around awarding 20-year-olds with adult wages. We opposed that because we deal with it every day and, basically, 20-year-olds do not take on responsibility and are not reliable. I am generalising here, but our experiences are more negative than positive, and therefore we often say that we cannot pay them an adult wage because they actually do not behave like adults in the majority of instances. On the other spectrum, we have lots and lots of students who are not experienced. They come on board and we train them. There is a lead-up to helping them to be effective and efficient in a shop.

Many of our retailers around the countryside would prefer to employ mature age people, simply because of that big word 'attitude'. They have an attitude. They have customer service. They can relate to people. Unfortunately, many young people do not have that attitude. When you find one, you just want to keep them and you want to grow them. When you do attract them and they are working for you, an issue we have is that we are a stopgap. We are like the stepping stone to the Holy Grail of careers and professions. We want to keep people in our industry, and we are finding it very difficult to attract people to retail. Retail is a profession. It is a career. It is highly rewarding, and it can take people wherever they wish to go. We have lots of trouble attracting people to stay within our industry. It is a great concern because of succession planning. Our retailers are going through what farmers probably went through a decade or two ago, when they were saying to their children: 'You know what, son? Go to uni because you shouldn't be coming back to the farm. There's nothing here, nothing for you—no future.' And that is what a lot of our independent retailers are saying around the country—whether they are small, medium or large or whether they are single-store owners or multistore owners. It is tough. It is pretty tough out there.

So the employment and people side of things is a big part of what we do and how we go about things. It delivers what our role is in the communities. And then you have the other side of things, which is managing the business. One of our directors has a couple of stores in country Victoria in the Western Districts. He says, 'I do compliance, and I do a little bit of retail on the side.' It is tragic when you hear things like that. They are dealing with so many federal and state red tape, cost burden and compliance obligations.

CHAIR: Christian Porter, the Parliamentary Secretary to the Prime Minister, needs to hear from you. His great line at the moment is that in our first year of omnibus repeal days we repealed over 50,000 pages of legislation and regulation and no-one has noticed anything. So there is a lot of work to be done.

Mr de Bruin : I worked closely with Josh Frydenberg prior to Christian.

CHAIR: Josh is not going to read the Hansard of this, but Josh did all the low-hanging fruit, all the easy stuff, and he has left it very hard—

Mr WILLIAMS: You might be surprised, Ewen. Josh reads Hansard.

CHAIR: I think the repeal days we are doing—I am talking about federal legislation—are hugely important, but sooner or later we have to run out of things like where, if a car is doing more than five kilometres per hour, you have to run in front of it with a lantern. We have to attack things that actually matter. You have to attack things that are actually going to end up in an argument. We are trying to bring down the number of awards within which people get paid—for simplification and ease of compliance—but we end up where the quid pro quo is that a 20-year-old with no experience is being paid the same wage as a 30-year-old who has 15 years experience. So there are things that we have to find out, and people from industry have to be ruthless when they come to us and just keep on bashing us with the things that need to be changed, because if we do not change them then we end up, in another five years, coming back to do this exact same inquiry and getting these exact same answers. We write another report which goes to the Minister for Employment and sits on the shelf and does not do anything. Extrapolating on a theory that was proposed by our last witnesses, would you say a skills-based award, as opposed to an age-based award, would be beneficial to your organisation?

Mr de Bruin : In our instance, I think an age-based award is absolutely fine because it does provide flexibility. If someone shines and does well, our members will reward that and they will pay them what they are worth.

CHAIR: Otherwise they go somewhere else.

Mr de Bruin : They could indeed, absolutely. I think the current stepped award system is satisfactory. It does give our members incentive to employ young people and give them a start. We need that gap. There are lots of menial tasks, particularly when it is busy, when we require just menial skills that the juniors can perform and perform well. We give more responsibility to the adults. Adults will not be pushing trolleys, filling baskets or taking groceries out to people's car boots and things like that.

CHAIR: I would.

Mr de Bruin : That is right but we are just generalising here. It is really about what an employer—the incentive around employment and the disincentive to employ.

CHAIR: Where is the bottleneck for you?

Mr de Bruin : I think it is a combination of things. I cannot understand why training incentives were completely withdrawn, at a federal level at least, from retail training. I cannot understand why the states are withdrawing training incentives for retail. South Australia just recently had a very big cut in retail training. We need to provide training for young people coming into our retail sector. Independent supermarkets, particularly, need young people. We need people to come through the system in a career focused manner. Retail training incentives did provide us with a vehicle. We are an industry association—we are not for profit—but we have really suffered at the hands of those cuts, as have the TAFE colleges, which are what I would call highly credible in terms of providing VET training. It annoys me that there has been rorting or whatever you like to call it performed by for-profit organisations that has led to an across-the-board decision to just withdraw retail training incentives full stop—it has stopped. What does that mean? We cannot provide apprenticeships in training. We would like to think we could provide traineeships but now the onus has shifted to the retailer identifying what they need to grow their business—what skills they need, what training they need—and it is for them now, each retailer, to apply for the industry skills funding that is available now. So it has reversed. But tell me a business owner who is working in the business every day, head down and tail up, who is going to sit in front of a computer and understand what training they need to be able to grow their business. I have always seen that as a big role of an industry association: to assist them with that.

CHAIR: Of all the people I have known who have gone into small business, not one has come to me and said the reason they went into small business is that they love filling out forms—not one.

Mr de Bruin : That is true.

Mrs McNAMARA: On the burden of compliance, you have mentioned some of the legislative barriers. Could you expand on those for us? You have payroll tax and WH&S. What is it with the payroll tax and the work health and safety that is causing those barriers?

Mr de Bruin : When you talk about minimum wage, as you did before—that is not what an employer pays. An employer pays the 9½ per cent super, all the on costs, the insurances—so it mounts. You can add another 40 per cent to that wage rate. But on top of that, with that, is the payroll tax. When you have Victoria imposing another public holiday on grand final eve, which is going to cost our industry sector alone an extra $3 million just to open the doors on that day—add the payroll tax to that as well. It is one of those hidden costs and it is a tax on employment. The last government in Victoria reduced payroll tax, which I think was a first, from 4.9 to 4.85 per cent. So Victoria has a low payroll tax compared to other states, but the threshold is very low. With payroll tax across the country there are inconsistencies—for example there is a very high threshold in Queensland with a medium percentage. We see that as a tax on employment, to be honest, and we do not understand it at all—not in this day and age when we want to employ people; we really do.

With the workplace health and safety we do not resile from wanting to do the right thing. We will do everything right that we can. But it is just going over the top. So we have tried to make things easy for our retailers. We have spent hundreds of thousands of dollars on developing an online workplace health and safety system which is pretty much trying to alleviate—taking the risk and the obligation for compliance out of the minds of our store owners. So we have systems, we have reminders for anything from checking on your fire extinguishers—things like that which are obligations that they need to perform. Training—compliance training, all these certificates that staff need to have a hold of: food safety, responsible service of alcohol and so forth. It is a record-keeping tool.

So we have developed this at massive expense, and we are asking our retailers to pay $3,000 a year. The system runs their obligations, if you like. All they have to do is manage it once they have it all input. They need a person to manage that for them. There has been enormous push-back on that. They are working in the business, not on it. They cannot afford to put a person on to run that system to manage their workplace health and safety, or all their obligations, for them. It is like one of these spirals or vortices. We try to say, 'Put the system in, get a person to run it for you, and it'll just take the headaches straight out of your business.' Really all they come back to us with is, 'Well, we can't afford to put someone on; we're time poor.' So what happens is that they fall into the bad habit of trying to comply and do everything right by workplace health and safety, food safety and RSA standards and they just try to manage it the best way they can. I guess my point there is that, if they could afford to take on trainees or juniors, they could then afford to put a system in place and have that system running their workplace health and safety obligations, keeping control, keeping the standards up and managing it on a day-to-day basis.

Mrs McNAMARA: Or, otherwise, WH&S has to be reviewed and not be so cumbersome and over the top.

Mr de Bruin : There is a fair bit of rigour around workplace health and safety; there is no doubt about it. It can be regarded as over the top, but it can also be simplified. It is what it is, but we have this system that helps them to keep it simple and to manage it, and we are having problems trying to get that installed to help them. Bear in mind that our guys are anywhere from a small fellow employing 20 people through to members who would have 250 people in a store. So there is a breadth of involvement in businesses. The small to medium people are heavily involved. They are working in the business. The larger people have people working on their departments, and they have the head space to understand what systems could mean to their stores. They have the resources as well.

CHAIR: I had a friend in construction who did a job in Townsville with a million man-hours, and they were handing out safety awards. They had a million man-hours, and not one hour was lost to accident or injury. They were very proud of that, and I said, 'How did your workers compensation premiums go?' They said, 'They're up by 25 per cent.' So it gets down to the shift in cost by government. We all want safe workplaces, and there is no doubt that workplaces are safer now than they were 50 or 60 years ago. But, by increasing compliance and costs, governments are imposing taxation by stealth in a lot of instances.

Mr de Bruin : Yes.

CHAIR: That is what my businesspeople are saying to me. There is no burden. I have a Holden dealer in Townsville. His lunch room for his mechanics is on the second floor, on a mezzanine, and they have to have braille plates on the wall for his mechanics. I see how the bloke taps his way out and says, 'What do you want me to work on first—your brakes or your steering?' There are braille plates where surgeons scrub up, on the hot and cold water there. If I am about to go under, the last thing I want to see is some bloke tapping his way through. But there is that level there where my businesspeople are just scratching their heads, saying, 'We are being killed here.' As you are saying, it is those hidden costs. When you add them all up, it is another two or three people you could employ in direct sales, because everyone at the back is a cost on the people out the front trying to sell your product, and that is where retailers are trying to get the product out the door—get the metal onto the—

Mr de Bruin : I can give you another example. Just last week, two of our guys emailed in: 'What is going on? Why do I have to do gender reporting?' For gender reporting, you need to be of a certain size. We have quite a few of our members that are of that size, and they have to report on gender. It takes them ages. It takes time. You have to fill things in, and they just cannot believe that they have to do it. We are an industry that probably employs 70 per cent female anyway. It is just another thing to do—another big—

CHAIR: And you would wonder whether they were being read.

Mr de Bruin : I do not want to hijack this by illustrating all the costs, but another cost which is kind of related is merchant fees. We have been working very closely with the RBA on card payment systems. We talked about technology just before. As consumers, we have changed our habits. We have got contactless cards. We have got what is called companion cards—American Express cards that come with whatever card you use. These contactless cards have helped to raise our costs. In the last financial year our merchant costs went up 25 per cent. This year they have gone up another 35 per cent on last year. A medium store, Allambie Heights, has a turnover of maybe $120,000 or $130,000 a week and their merchant fees are now $1,700 to $1,800 a month. That was not a cost two years ago. Those are hidden costs that people do not see and they disallow us from spending that money on employing people.

CHAIR: That is a part-time job—$1,700 a month is a part-time retailer.

Mr de Bruin : It is. The RBA are highly aware of it now; they understand it. But I do not know what the solution is.

Mr WILLIAMS: You mentioned the trouble you have in finding people to work in shops. Is that nationwide? Is it limited to specific areas in metropolitan or regional? What is the coverage there in terms of the difficulty in finding young people to work?

Mr de Bruin : As a generalisation, it is difficult all over. In WA we had the mining boom and, three or four years ago, you could not find anyone to work in a supermarket in Perth. It was really tough. In fact, you could not find a teacher to teach; they were all working in the mines because they could earn twice their wage. Even then, we could not find teenagers to come and work in our supermarkets when we needed then to come in. I am not sure what the answer is. The 457 example earlier is really an indictment; that should not happen. We want to employ young people; it is our lifeblood as well. In pretty much every local community area, we support anything to do with youth. Whether it is the Reach Foundation in Victoria or New South Wales, Telethon Seven in WA or Little Heroes in SA, we are really community focused on youth. We really do like to attract them to our stores to work.

Mr WILLIAMS: You said retailers prefer to employ mature-age people.

Mr de Bruin : That is true.

Mr WILLIAMS: Does that extend to the over-50s?

Mr de Bruin : Yes.

Mr WILLIAMS: They are a demographic that is finding a challenge to get into the workforce. Bunnings and Masters do like what they bring in terms of skills. Are your members finding that they bring a lot of value to the table?

Mr de Bruin : They want reliability, experience and maturity. They want people to turn up on time, be able to engage with customers and do the job. The other thing is initiative. You have got to have a certain amount of initiative in the workplace. Fro example, if there are some trolleys hanging around just outside, initiative means you go and grab them and stack them back inside. Generally speaking, an adult will see that from a mile off and just go and do it. But the kids just do not see it. Again, that is another example of adult wages versus junior rates. As they get a bit older, you pay them a little more on the basis that their maturity improves and their experience improves. But it does not always happen that way.

Mrs McNAMARA: I am seeing synergies!

Mr de Bruin : Yes. As I said before, we are heavily involved with our sentiments towards youth. What the previous people talked about resonates with us big time. We see it as a huge opportunity for Australia to engage our youth. It is a big problem. In the meantime our guys need incentive, they need certainty and they need confidence. At the moment, they are being ravaged by competition, unfair competition and lots of rigour around compliance—Sunday penalty rates. One thing leads to another, and they all add up to the cost of doing business, which is just prohibitive.

CHAIR: My parents had a corner store in the seventies. We opened at five in the morning and shut at 8.30 at night seven days a week 363 days a year and we did half days Christmas Day and Good Friday—and we took more money on those half days than we did at any other time. We were a true convenience store, but that was in the days when Coles opened at nine and finished at five and opened for a half day on Saturday. We have changed the way we live our lives. People can now do their shopping on a Sunday afternoon. People can go into Woolworths and Coles at 8.30 on a school night, in the evening. There is massive investment in shopping centres and they want maximum retail. I see that when it comes to penalty rates, especially in retail, food and hospitality, they are pretty much a job destroyer as opposed to a job creator. I have seen lots of people just shut. Do you have anything to say on that?

Mr de Bruin : It is a destroyer; there is no doubt about it. Can you imagine anybody shopping for groceries or liquor on a Saturday or Sunday or of an evening and being told, 'We've got a surcharge on your credit card and purchase with us'? Can you imagine a supermarket doing that? There was one supermarket group that got away with it for a while because they did not tell consumers about it. But someone found out about it and, since then, they have reduced that rate by half. But there is no other supermarket group in Australia that would dare put a surcharge on it. You can go to cafes, bistros and restaurants on a Sunday or a public holiday and many of them will put a 10 per cent surcharge on, and that is to cover their penalty rates. We cannot do that, so we have to absorb that cost somewhere along the line and that just squeezes margins further and further.

So what you will find in your corner shop is that you as the store owner will work those days. So your quality of life, your health and your social wellbeing will over time be at risk, because you are not going to pay someone double time. You are not going to pay a casual $50 an hour to come in and work—and the casual we are talking about is the young person we talked about before. Generally, full-timers do not want to work on weekends and public holidays, so you then attract the casual people—the people we think all want to work—and you have to pay $50 an hour for an unskilled person, who might turn up if they have not had a hard night the night before. They are the sorts of things that we confront.

CHAIR: A local publican was telling that, as Australia Day fell on a Sunday, it was $60 an hour to stand at the drive-through bottle-o, and he said, 'What are you going to do?' and I said, 'I will send you my CV, and I will do the whole day!' I do not want to move this to hospitality, but this is a massive cost to business. I have always asked why it is that a university student—and I do not want to go into sweeping generalisations—who works on a Sunday worth twice as much as the mum with three kids who wants to work during school hours. Why is the person who is working on Wednesday worth half as much as the person who is doing exactly the same thing on a Sunday? Those are the things that knock business around. My small businesses—the IGAs, corner stores and, liquor retailers—are all saying that they have to work it or they just shut it up.

Mr de Bruin : Our model is very service driven. If we go to South Australia, there is the Drakes group. He started with one store and three lanes and I think there are 38 stores over there now. He is an absolute icon of the South Australian industry.

Mr WILLIAMS: In Queensland as well.

Mr de Bruin : And he has his 26 stores up there as well—massive investment there. The full focus is on customer service, and we do not want to compromise that. You will find very few of these self-serve checkouts in any of our stores. We focus on customer service. When you look at penalty rates on a Sunday, you see the big guys with their self-serve checkouts and you will find three or four people working around the store, and the self-serve checkouts are absolutely booming and chock-a-block because customers do not have a choice. But go to any one of our members and you will find people who are going to be there helping to serve you through the checkouts. That is where the employment is.

Mrs McNAMARA: What is also disappointing is that a lot of small retailers close and cop the Westfield fine rather than open.

Mr de Bruin : Yes, that is a bit unfair, isn't it?

Mrs McNAMARA: It is.

Mr de Bruin : Yes, we have a lot to do with the large shopping centres, and they tend to be problematic. Queensland is particularly notorious for the way they carry on up there. We have the deregulation of trading hours. Trading hours are issues in WA, Queensland and, to a lesser degree, South Australia. If trading hours are able to be deregulated, as Professor Ian Harper recommended, what we see is that it just hands over more market power to Coles and Woolworths, and it will affect small businesses in those states, which then pushes down on employment and on that particular business model being robust within the community. The hub of the communities is what our guys are normally.

I have mentioned other things which stop us from being competitive. In Queensland and South Australia, we are not able to get a liquor licence, yet we can have a liquor licence in New South Wales or Victoria. Liquor is a department of the business that we have, and for some reason we just cannot break that nexus. Whether it is because certain interest groups within those states have some enormous power over the state governments I do not know, but it certainly prohibits us from being as competitive as we would like to be. Again, when we see our competitors able to do that and we cannot, it is just one of those things that mean we cannot grow and we cannot engender the confidence and certainty we need to go forward.

Mr WILLIAMS: I will just challenge that. Yes, Woolworths and Coles have their BWS and Dan Murphy's and so forth, but they are not located in the Woolworths or Coles. So what is your point about competitive disadvantage in that respect?

Mr de Bruin : Maybe not so much in South Australia, but if you go to Queensland the rule is, 'Buy a hotel, get a big Dan Murphy's of first choice on the hotel site,' and then you are allowed to have three detached bottle shops within a 10-kay radius. Do you know where those detached bottle shops are? Next to their Coles and Woolworths supermarkets. So, when you pick up the Coles or Woolworths catalogue, it has the groceries, and then you go to the back page and there is your liquor. That is total, complete manipulation of state laws, in my view. That could happen to a lesser degree in South Australia, depending upon where the supermarket is located compared with the liquor store. So there is complete manipulation going on out there, which puts us on an unfair playing field. I do take your point, but it is manipulated.

As I said, there are lots of things going on in our world. We would love to employ more people and see our sector grow, but we see that there are a number of impediments that get in our way.

CHAIR: So, from an organisational point of view, you are sitting there saying that it is compliance and the cost of compliance that, from an organisational perspective or an individual retailer's or grocer's perspective, we have to try to work on. You are okay with the way the wages are set and all that sort of stuff, with limitations around penalty rates and public holiday rates.

Mr de Bruin : The general retail industry award is good. The 2½ per cent increase in the minimum wage was a bit more than we would have liked and it certainly puts added pressure on our guys. I think we recommended, after all the surveys that we did, a 1.2 per cent increase when the unions, I think, wanted a 4.7 per cent increase. The middle ground is 2½. Over the last three or four years, we have had exponential growth—an extra six or seven per cent in wage increases. As each year creeps up, it does add some enormous costs as prices are being kept down and margins are kept very contracted. Wages are an issue—not so much the wages but the penalty rates. We will be advocating for penalty rates to be reduced on Sundays.

Five years ago, South Australia, New South Wales and Queensland had time and a half on Sunday. The previous government decided to reduce all the awards and harmonise the states through those awards. Instead of reducing Victorian and Western Australian penalty rates from double time to time and a half, they lifted three big states, Queensland, New South Wales and South Australia, to double time on Sunday. So not only do we have those wage increases but we have had Sunday penalty rates increase in three states in the last five years—and that is wrong.

CHAIR: That one slipped straight past me, I am afraid. I think we have got to where we want to go with this. If we can reduce the cost of compliance and the cost to business, there will be more opportunity to get people out the front. I think that is your central message.

Mr de Bruin : Definitely.

CHAIR: If we can clear out the back office, the front office will perform better. That is the same with anything. Your back office has to be right before your front office can fly.

Mr de Bruin : It is about creating incentive. Small and medium businesses need incentives. The incentive is to try and make some money; if they are making money, they are putting it back in their businesses but also spending it in their local communities. The money stays in the community and what goes around comes around. Locally, we will employ accountants, plumbers, cleaners, the guys who do the deliveries and the freight people. It all happens locally. That is the key—it is the hub. Those businesses are the hub of the communities. Unfortunately, in Townsville we lost a couple of big retailers. As the big guys moved in, we just could not—

CHAIR: There are more big guys than there are corner stores.

Mr de Bruin : The Walters group, which was hugely successful and a big part of the community, no longer exists.

CHAIR: That comes down to what you were saying earlier. The Walterses are lovely people, but they were heading towards retirement and they saw their group fold. Now they are saying, 'Don't come into this game; it's just too hard.' Like you say, they are lovely people.

Mr de Bruin : At the height, they employed 600 or 700 people.

CHAIR: It is a massive get-out at the beginning of every month, isn't it, when you find out you have no sales at the beginning of the month. Thank you very much for coming in. If the committee has further questions, the secretary will write to you.

Proceedings suspended from 10:26 to 10:57