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COMMUNITY AFFAIRS LEGISLATION COMMITTEE
14/05/2010
Paid Parental Leave Bill 2010; Exposure draft of legislation implementing the government's announced paid parental leave scheme

CHAIR —Thank you for your patience, Mr Zimmerman. You have information about the protection of witnesses and evidence. We have your submission, thank you very much. Would you like to make an opening statement?

Mr Zimmerman —Yes I would.

CHAIR —Thank you.

Mr Zimmerman —Retail growth has been patchy for 18 months and any month to month growth has been insignificant and usually followed by a month of decline in sales. The December sales trade, which should have been the best of time for retailers, showed a decline in growth at negative 0.6 per cent. This was followed by soft growth in January, declining growth in February and uninspiring March trade. Signs of rising consumer confidence are not translating into retail transactions with many retailers forced into a perpetual sales mode for most of the past 12 months. It is really not business as usual at the moment and there certainly does not seem to be any sign of a stabilised recovery while the RBA continues to take money away from consumers with a bombardment of interest rate rises.

During this time of difficult trade, small retailers who operate without any in-house human resources or employment relations specialists are grappling to understand their obligations under the biggest overhaul of industrial relations laws and awards for more than 50 years. The new Fair Work Act has already come into play. Parts of the new retail award are already in action and the five-year transition of the new award wage bill increases begin from 1 July this year followed by the threat of workplace inspections from the Fair Work Ombudsman. These changes are major and a major impact on the way retailers manage their employees’ life cycle from hiring to firing and every step along the way. While they struggle to understand their new employer obligations and update employment contracts, letters, policies and procedures, retailers are now faced with the administrative burden of handling parental leave employee payments on behalf of the government.

Retailers, particularly small retailers, are the cornerstone of local communities and are often family run businesses themselves. There are many examples of retailers nurturing the concepts of family and community by offering part-time and casual work to mothers getting back into the workforce and to school students who want to secure their first job. Retailers will support the concept of paid parental leave that provides parents and family certainty and security as long as it is designed in a way that eliminates any cost to employers.

As the representative body for over 5,000 national and independently owned retailers across the country, the Australian Retailers Association believes that the paymaster function of the government’s Paid Parental Leave scheme adds another layer of unnecessary complexity and cost to small business employers who are already struggling with new employer obligations and soft trading conditions.

There is no evidence to suggest that employees will psychologically view the scheme in any way other should their paid parental leave payments come directly from the government and not their employer. It is the ARA’s belief that the employer paymaster function should be eradicated from the government’s Paid Parental Leave scheme, with payments coming directly from Centrelink to the employee, as is the case for the first six months of the scheme. Thank you.

Senator FURNER —Thank you, Mr Zimmerman. Can I, firstly, get some understanding of the jurisdiction of your membership. Is it the likes of Woolworths, Coles and IGA, or is it another group?

Mr Zimmerman —Woolworths, Coles and those larger retailers belong to a group called the Australian National Retailers Association, or ANRA. We then pick up from their down. In other words, we have the larger chains, the companies like Country Road, but we also have an incredibly large number of very small retailers where, in many cases, mum and dad operate the store and they have one or two employees.

Senator FURNER —So would you have an affiliation with the Retailers Association of Queensland?

Mr Zimmerman —No, we do not. They probably have a constituency similar to ours. One could say that they are in competition with us in many ways.

Senator FURNER —In your submission you make reference to examples of women in retail. You make the point that in the past 12 months there have only been seven per cent on paid leave. Is that paid parental leave that you are referring to in that part of your submission?

Mr Zimmerman —Yes, I believe it is paid parental leave.

Senator FURNER —Can you give some examples of what sorts of provisions would prevail in those cases.

Mr Zimmerman —Yes. Myer introduced six weeks paid maternity leave for all permanent employees with a minimum service of 18 months full-time employment. Aldi have 14 weeks at half pay after 12 months service, but not for casuals. Esprit offers eight weeks maternity leave and four weeks sick leave at full pay after 12 months service. They are the examples I would use.

Senator FURNER —They are mostly the larger employers.

Mr Zimmerman —Yes. It is the larger employer organisations. The small employer organisations, the people with two, three, four, five or six shops, would not be in that position.

Senator FURNER —However, you make the point in your submission that less than 50 per cent of those respondents have taken up unpaid parental leave.

Mr Zimmerman —Yes, over the last few months.

Senator FURNER —Out of those who are providing paid leave, naturally the employer would administrate the expenses and the payment of that leave during their time off.

Mr Zimmerman —Yes, they would be.

Senator FURNER —In your opinion, has that raised any issues since those provisions have been in operation?

Mr Zimmerman —No, it has not, but you have to remember that those sorts of retailers have huge HR and legal resources—the whole box and dice. It does also give those retailers a competitive advantage against smaller retail organisations. I hark back to the small retailer. He is unable to administer these things as easily as a large retailer can. You also have to look at the cost involved to a small retailer who is forced to make a huge number of sales because he has to compete with larger organisations who have major buying power.

Senator FURNER —How do you foresee the ‘keeping in touch’ days operating? They are the 10 days per—

Mr Zimmerman —We support that totally for a number of reasons. We believe it gives a sense of security to both parties. From an employer’s point of view he knows he has an employee out there who is able to come into the organisation to keep in touch—’How are things going?’ ‘Okay, we’ll see you in another six weeks’ or whatever it may be. From the employee’s point of view it gives them a nice, fuzzy feeling that the employer is interested and want to get them back once the 18 weeks is over.

Senator FURNER —For example, a shop assistant works in the cosmetics area. What would they be doing when they come in on their keeping-in-touch day?

Mr Zimmerman —I think that for most employees it would be more a situation of talking to their employer. I do not know that there would be much work. It may be discussing what has happened, what new products are there and things like that. I do not think it would be hands-on work. It is really about keeping that nice, fuzzy feeling of knowing you have a position to come back to and that your employer is interested in what you are doing.

Senator FURNER —Are you familiar with the opposition’s position on paid parental leave?

Mr Zimmerman —I understand what they are looking for, which is to tax the major employers. If that is the part you are referring to, I am au fait with that.

Senator FURNER —You are okay with it—

Mr Zimmerman —I am au fait with it; I am not okay with it. I do not support it, but I am au fait with what they are asking for.

Senator FURNER —So what are you members like Myer and the larger chains saying to you in respect of this?

Mr Zimmerman —I would like to take that on notice to talk to them about it before I answer for them. I think it is a bit unfair to ask me to answer for them.

Senator FURNER —Thank you.

Senator ADAMS —To continue on that theme, unlike the government’s scheme this proposal would not impose a new regulatory burden on small business, as you were worried about, because the scheme is going to be paid and administered by the federal government through the Family Assistance Office—

Mr Zimmerman —Yes, and we support that.

Senator ADAMS —You support that?

Mr Zimmerman —Yes. Our recommendation is that we believe that the government should administer the scheme. It should not be up to individual employers to administer the scheme. Our preferred position was always that it should be a no-paymaster function.

Senator ADAMS —That is part of the coalition’s guidelines for this. The other thing the coalition is looking at is that the scheme would provide employees of smaller businesses with a benefit that is funded by larger businesses so it would not cost them. It is about trying to protect small business and their employees. Would you comment on that?

Mr Zimmerman —Yes. I would say that we do not support one sector of industry supporting another sector of industry but we do support in total the idea that there should be no paymaster and that the government should be the runner of the scheme.

Senator ADAMS —So you are not happy about small businesses being protected by funds coming from the larger businesses even though your argument was that you do not want any imposition on small business.

Mr Zimmerman —The imposition should not be on any business.

Senator ADAMS —I would like to go back to the consultation process that you explained on page 5 of your submission. You say that your organisation was part of the consultation to start with but were never contacted again about further consultation. You are:

… concerned that the Government has not taken on board the genuine concerns of business, particularly small to medium sized retailers, with respect to the ‘paymaster’ function.

Could you come back to that again?

Mr Zimmerman —Firstly, I will say that I took over here as the executive director on 7 July 2009. Over that period of time up until we had to put the submission in a couple weeks ago, there had been no communication or consultation with the ARA whatsoever other than what happened previous to my employment with the ARA. We have some concerns. Although we were part of the original process, after that we dropped off the radar. We did not get any more consultation through the ARA. We were never contacted about any further consultation. We see ourselves as a peak body. I understand we got a letter advising us that we would be involved in further consultation. That has never occurred. We believe that we are the largest organisation underpinning the small and medium retailers of Australia, and we have had no opportunity to put in any more input until we put this submission in in the last couple of weeks. It is of great concern to us that our voice was not heard earlier in the consultation process.

Senator ADAMS —Thank you very much.

CHAIR —Did your organisation raise the issue of the impost on business in your previous discussions with government?

Mr Zimmerman —In the May 2008 discussions, yes. I was not there, but I believe that we did raise them. I have a copy of the 2008 one if you want me to have a look through it quickly.

CHAIR —No, that is fine. It is just that the Productivity Commission raised at length the discussions they had had with businesses at various levels. I do not know what happened—we will be asking the department about the consultation process—but I feel certain that the issues were taken into account. Whether in fact the outcome is going to please everyone—we do not know what it is going to be yet—I can assure you that the issues of the involvement of business have been taken into account.

Because I have not worked in your industry I want to follow up a little on the way that small businesses operate their payrolls. I know that the large ones have HR and payroll sections, but how do the small businesses of which you speak operate their requirements to pay the employees that they currently have and to respond to the taxation and other requirements that they currently have as businesses?

Mr Zimmerman —I will firstly answer that by saying there is probably more than one way small retailers would do their pays. In the first instance you will get an employer with a couple of shops. I can speak fairly authoritatively on this because I have been in retail for 30 years myself. Those sorts of retail organisations would probably have either a MYOB pay system or something else similar to that. There are many varied operations. They will have payroll systems that need tweaking, adjusting or upgrading, whatever that will be, if this PPL goes through. The next type of retail employer you would have would probably be a one- or two-store retailer again. When I spoke about the previous lot I would have been talking about retailers with two, three or four shops. If you have a very small retailer they might have Mum and Dad in the shop. They may have a couple of employees; they may have a part timer and one full timer. They are single operators. They could do their pays by getting their accountant to do it. That will put an administrative cost on them because they would have to get their accountant to follow through and make all the changes. In the last place—and I cannot give you any figures on this—there would still be some employers around who would use either a Zion manual pay system or something similar. It would all be hand done.

CHAIR —There will always be someone who has their book and their pen. I am trying to visualise what people are required to do now under the various state and federal legislative requirements. If there were any staff members of any kind, what would this do to the payroll function with the scheme we have before us, which is all we can work on?

The way I see it, and please pull me up if I am wrong, the requirement would be for the employer who has an employee who is thinking about or chooses to take up the scheme, because it is a choice, would have to tell the employer they wanted to do it. The employer then would have to contact the agency and get the employer certificate, so that would be one task they had not done before. Once they get certified as an employer, they would have to give their bank account details and the government agency would calculate the money that would be required because the employee would fill out the form, as would the employer. Then the government agency would make a commitment to providing the appropriate funding at the pay date and then the employer would have to take responsibility for ensuring that that transaction was made at the various pay days. Is that how you see it?

Mr Zimmerman —Yes, that is how I see it.

CHAIR —So basically the added requirement of this system would be obtaining the certification as the employer, the discussion with the employee about how the process would work and coming to an agreement on that, and then acquitting the money on a fortnightly basis.

Mr Zimmerman —Or weekly basis.

CHAIR —Whatever the agreement is, but it would be the acquittal of the funding that comes in. That would be the series of tasks that would be an added impost.

Mr Zimmerman —Yes, but then beyond that you are going to have a whole lot of administrative changes to put those into operation.

CHAIR —I am really interested: can you let me know from your perspective what all of that administrative change would be.

Mr Zimmerman —You will need to have either your payroll system upgraded or you would need to make changes within the payroll system. Every payroll system is going to be different. For a start, superannuation is not calculated on the PPL payment. A payroll system would automatically work out what your superannuation is, so you would have to exclude that.

CHAIR —So there would be another step to make that differentiation. That is one more step in the process.

Mr Zimmerman —My understanding is that workers compensation is not included, so therefore when you do your annual returns for workers compensation, certainly across the eastern states—I cannot speak specifically for all states, but certainly the eastern states—when you do that workers compensation calculation, you have to add into that what your superannuation is. You are going to have to make sure that in the first place you have excluded the superannuation before you put your workers compensation, so you are going to have an extra check step there to make sure that has been included. At the end of the year you have a whole host of things to do for the tax department and you are going to have to make sure that those things are included in your returns to the tax department when you run your final pay system.

CHAIR —So it would be the action that is required to set up another way of operating for the particular employee on parental leave?

Mr Zimmerman —Yes.

CHAIR —So it would be the necessary changes people would have to make in their mainly, as you would agree, automated systems, but in some cases personally driven. They would have to say that this employee now, for the period of their entitlement, be it whatever it is, would be treated differently.

Mr Zimmerman —Yes.

CHAIR —And then at the end of the year, when they are doing all their calculations, they would have to have another line that says how many people they had on paid parental leave.

Mr Zimmerman —That is correct.

CHAIR —So have I missed anything? I just want to make sure that we have an understanding of all of the administrative complexities.

Mr Zimmerman —I would like to raise one other thing with you. Let us assume for the moment we have an employee who applies for 18 weeks PPL. The employer starts receiving the money and, from my understanding, it is received in around three amounts. Let us say that all the money is received and, 14 weeks after, the employee is in the office on one of the 10 allowable visits. The employer is sitting there saying: ‘We’re stretched. Mary’s off sick and we’ve got problems.’ At the moment, this good, qualified staff member’s husband is not getting a lot of work from his organisation. She says to her employer: ‘I can come back to work as of Monday because my partner currently does not have a lot of work to do.’ That employer is going to have to make sure that they advise the correct government body that the employee has returned to work early. There are going to be a whole lot of letters and information going between the employer and the government to ensure that the employer has met all the agreements under the PPL and another employer is going to have another administrative nightmare trying to sort out the last four weeks or so of the 18 weeks PPL. I put that to you as a situation that could occur.

CHAIR —Thank you, Mr Zimmerman, we appreciate that. That is the kind of detail we need. I assure you that I will take that case study up with the department and try and get some answers as to how that could work. That is really what we are seeking. There have been lots of statements about the impost, and people have different views about it, but it is important to know exactly what the impost is. I appreciate your evidence.

Mr Zimmerman —If that happens—and I can see it happening—then you would have an administrative nightmare, quite frankly.

CHAIR —We will sort that out for you, Mr Zimmerman. Is there anything else you would like to put on record?

Mr Zimmerman —No. I think we have covered off everything that I would like to cover off. I would like to reiterate, if I may, that I think it would be a much simpler system. I do not believe that you would find there was an issue from an employee’s perspective if this were paid directly by the government. We believe there would be no psychological upset if the government paid this directly. It certainly would save an incredible nightmare from an administrative point of view, particularly for medium and small employers.

CHAIR —Thank you, and that is your response to the issue of linking the payment into the workplace as opposed to being paid as a quasi-welfare payment?

Mr Zimmerman —Yes.

CHAIR —Thank you very much.

Mr Zimmerman —Thank you.

Proceedings suspended from 1.02 pm to 2 pm