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Wednesday, 26 May 2004
Page: 29095


Mr ANDREWS (Minister for Employment and Workplace Relations and Minister Assisting the Prime Minister for the Public Service) (9:40 AM) —I move:

That this bill be now read a second time.

This bill proposes to amend the Workplace Relations Act 1996 to maintain the exemption for small business from redundancy pay by overturning a recent decision of the Australian Industrial Relations Commission (AIRC) to impose redundancy pay obligations on small businesses.

This legislation is necessary because it is the only option available to rectify a flawed decision of the AIRC. Under the current industrial relations system there is no review or appeal process to reconsider the merits of test case decisions made by the full bench of the AIRC. The government strongly believes that it is parliament's responsibility to use its legislative power and authority to shield small businesses from the AIRC decision.

If this bill is not passed, the vast majority of small businesses covered by federal awards will eventually be subject to redundancy payments for their employees in accordance with the AIRC's decision. If this bill is not passed, small businesses that are constitutional corporations and that are covered by state awards will become subject to redundancy payments if the AIRC decision flows to state jurisdictions.

The bill has three effects. First, it will remove redundancy pay for small businesses with fewer than 15 employees from the jurisdiction of the AIRC.

Second, it will cancel the effect of any variations that were made by the AIRC to awards from the time of the decision until the legislation commences. It will not, however, affect any redundancy pay provisions that were in awards prior to the AIRC's decision. It will also not affect any actual entitlement that arises before the legislation commences. The government's objective is not to take away something that employees already have.

And third, the bill will prevent flow-on of the AIRC's decision to small businesses that are constitutional corporations and that are covered by state awards.

The government will also work to protect small businesses that are not constitutional corporations and that are covered by state awards from any flow-on of the AIRC's decision. The government will seek to intervene in any relevant proceedings before state workplace relations tribunals to oppose any flow-on, and will call on state governments to legislate to maintain the exemption of small businesses from redundancy pay.

It is vital that opportunities for continued growth and job creation for the 1.1 million non-agricultural small businesses in Australia be maximised. It is even more essential for the 3.3 million people employed by these businesses. This is nearly half of private sector non-agricultural employment in Australia.

Small businesses are central to employment and economic prosperity in Australia. The small business sector has made a significantly larger contribution to employment growth over the last eight years than big business.

The small business sector is performing very well—it is very much the engine room of the continued growth and strength that our economy is enjoying. And without doubt many small businesses are profitable.

But we can't afford to confuse this profitability with an ability to make redundancy payments. Small businesses tend to be chronically undercapitalised and in general do not have the financial resources to cope with large, unpredicted commitments such as redundancy payments. Small businesses are twice as likely as larger businesses to go out of business in the earlier years of operation. Even after 15 years of operation they are still 1.7 times more likely to cease than larger businesses.

In the government's view, the AIRC's decision seriously underestimates the impact that redundancy pay would have on small businesses. For instance, a typical retail small business with seven employees, each with six years continuous employment, would now face a contingent liability for redundancy pay of nearly $30,000.

An obligation on small businesses to make redundancy payments will result in a cost impost that is unaffordable for many small businesses. The end result will of course be a significant decline in job growth in the small business sector and likely small business insolvencies. Clearly, employees of small businesses will not gain anything from the AIRC decision if they no longer have a job to go to.

The undesirability of removing the small business exemption is widely recognised. None of the four state governments that participated in the Australian Industrial Relations Commission test case supported the removal of the exemption. Indeed, the Queensland and Western Australian Labor governments opposed the removal, while the New South Wales and Victorian governments neither supported nor opposed it.

The Queensland Industrial Relations Commission recently agreed that small businesses are in a more financially constrained and precarious position compared to larger business. The Queensland commission unanimously decided that the exemption for small business from redundancy pay obligations under the Queensland workplace relations system ought to remain in place. The Queensland commission concluded that many small businesses operate in marginal circumstances and their lack of financial resilience had not changed since 1994 when the New South Wales Industrial Commission also reaffirmed the need for the small business exemption.

The Queensland commission also accepted that small businesses would generally have smaller cash reserves to meet redundancy pay requirements and that redundancies occurring would represent a greater proportion of the overall labour costs of the business.

In short, the Queensland commission found that to impose redundancy pay obligations on small businesses had `the very real potential to result in the insolvency of a number of small businesses'.

This government agrees with the conclusions of the Queensland commission. We think it is imperative that the small business sector continue to be supported and encouraged to further grow and create new jobs for our economy and for all Australians. This legislation will lift the additional cost burden imposed by the AIRC's decision from small businesses.

Of course, we are not saying that by introducing this legislation small businesses cannot reach agreement with their employees to make redundancy payments where they can afford it and where it is a priority for employees.

The government has a strong history of encouraging employers and employees to reach agreements on a wide range of issues at the workplace. In our view, this is preferable to imposing an `across the board' obligation on small businesses which cannot afford redundancy pay.

In introducing this bill the government is demonstrating its ongoing commitment to the small business sector and its recognition of the vital and essential role it plays in ensuring Australia has a strong, thriving economy capable of employing all those who want jobs.

I commend the bill to the House and I present the explanatory memorandum to the bill.

Debate (on motion by Mr Rudd) adjourned.