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Thursday, 24 June 2004
Page: 31661


Mr McARTHUR (1:22 PM) —I am delighted to join the member for Flinders and the member for Pearce in supporting the Workplace Relations Amendment (Protecting Small Business Employment) Bill 2004 before the House. The redundancy payment argument is fundamentally about the payment now for a future responsibility. Historically, weak managements have bent to union demands on the basis that some future payment would not interfere with the quarterly report of the company. In the case of small business obviously this incurs a debt that is unknown in the future and not related to this year's or this quarter's profits. The redundancy payment adds yet another overhead to the wages bills of small companies, small operations and small business. Long service leave has to be paid at the termination of employment, as does holiday pay and of course the nine per cent for superannuation. These overhead costs and components of wage determinations are very much part of small business, and small businesses are committed to paying them.

What really upsets this side of the parliament and people in small business is the imposition of redundancy payments. Under the Hawke government, of course, when unemployment was running at 11 per cent, the possibility of redundancy—the uncertainty of jobs—made the redundancy argument all the more important. Currently, under the very good economic management of the Howard government, obviously redundancy is much less of a possibility because unemployment is running at under six per cent and people have confidence that they will maintain their jobs.

Small business has been horrified by the decision by the Australian Industrial Relations Commission to remove their exemption from the obligation to make redundancy payments. Redundancy payments would be quite horrific, in my view: for one year to less than two years service there would be four weeks severance pay; two years to less than three years, six weeks severance pay; three years to less than four years, seven weeks; and four years and over—which is really the key argument—would be eight weeks severance pay. So if you have been working in a job for four years then you will get eight weeks severance pay, let alone the other entitlements.


Mr Sidebottom —That's shocking, isn't it, Stewie?


Mr McARTHUR —The member for Braddon would understand that; he has been in small business and he has a lot of small businesses in Braddon—



The DEPUTY SPEAKER (Hon. I.R. Causley)—The member for Braddon must want to go early.


Mr McARTHUR —and he will not be looking after them after the next election, because he will be gone. In Corangamite there are about 5,000 small businesses, and they are very unhappy with this current decision. Let us look at some actual examples of what this decision would do to small business. If you had three staff working in a small business, each on approximately $517 per week with three years service, the redundancy liability would be $10,000. If you had one employee at $644 a week with seven years service, the redundancy liability would be in the order of $5,000. Added to this at termination, of course, would be the cost of annual leave, long service leave and the accumulated superannuation. This represents a cost burden to small business, the contingent liability, which adds a very high percentage to their wages bill.

The AIRC decision has been opposed by the Australian Chamber of Commerce and Industry and other business groups. The Australian Industry Group, a representative body of businesses in Australia, had this to say:

There are approximately 1 million businesses in Australia with less than 15 employees, who employ around 3 million Australians or more than 40 per cent of the private sector.

The member for Braddon and others ought to be very aware of that. Small businesses are the big employers, as we have said on a number of occasions, and if they have this imposed upon them they will have less capacity to find jobs for Australians. The Australian Chamber of Commerce and Industry reacted negatively to the AIRC decision. They said it was `a massive kick in the guts for Australian employers'. They also said:

Employers and small businesses will be penalised for doing what commercial commonsense demands—restructuring their business to keep them efficient and competitive.

At the announcement of this decision, they also went on to say:

Today is a bleak day for the small business sector and the thousands of Australians who rely on it for their jobs.

As members are aware, this bill seeks to overturn the AIRC decision. It is worth looking at some of the other examples of the cost of redundancy to business. In the Ansett collapse—as members of this House would be fully aware—millions of dollars worth of staff entitlements were owed to their employees. These generous arrangements were negotiated in more prosperous times, because of the undue influence of unions within that organisation. They made it very difficult for Ansett to restructure their operation. It was obvious that Qantas and Ansett needed to rearrange their operations to withstand international competition and remain profitable. Of course, they were not able to do that, particularly in the case of Ansett—and inevitably it went broke.

As Robert Gottliebsen, a very respected commentator in the Australian, said, `Inherent weakness in many Australian organisations is a result of their lenient bargaining with unions. This leniency has resulted in redundancy provisions that have forced companies such as Ansett to their knees. These organisations have been unable to reduce their staff to viable levels. Effectively, huge liabilities on the balance sheet, including worker entitlements, made Ansett, once an Australian icon, a “no-go zone” for many prospective buyers.' So there you have it. Robert Gottliebsen is making it quite clear that these entitlements were negotiated by management, particularly in the case of Ansett, in the hope that their quarterly and annual reporting would look better, but those massive liabilities remained on the balance sheet.

I would particularly like to draw the attention of the House to the redundancy provisions in the US steel industry. The US steel industry maintained a high tariff barrier to stop the importation of steel from Australia and throughout the world. As I understand it, so great was the build-up by the unions—there is a very strongly unionised work force in the US steel industry—that the US steel industry were unable to readjust their work force to make sure that they became efficient. Many of those steel firms had huge or excessive legacy costs that were incorporated in their balance sheets and liabilities for exit of their workers. Some of these worker entitlements went into billions of dollars, so the steel industry could not reduce their staff numbers to make their industries more viable. The industry had to produce more to cover their overhead costs and, of course, they had to put up the tariff barriers.

I do put on the record that the Hawke government, to its credit, did adjust the employment arrangements in BHP Steel under the Button-Hawke steel plan. Certainly here in Australia BHP Steel—Blue Scope as it is now known—was able to make the necessary adjustments with some government help so that it became internationally competitive. If that action had not been taken, then Australian steel, I think, would have suffered a similar outcome to the one that the US steel industry is now facing.

The retail motor vehicle industry employs a number of people in small businesses. There are shortages of skilled labour because of the cost of that labour and the overheads. As I have said before, those costs are superannuation, workers compensation and, of course, their wage rates. The removal of the small business exemption in this area would make sure that, in the retail motor vehicle industry, the capacity to hire new staff would be reduced, they would not take on business risk or business expansion and they would not become more innovative because of the fear of this accumulating redundancy debt in the future.

The March quarterly survey conducted by the Victorian Automobile Chamber of Commerce said that 43 per cent of associated businesses found increased labour costs limited their performance. One VACC member commented that the new Industrial Relations Commission ruling regarding severance pay for small businesses would destroy small business, especially in the smash repair sector. Many VACC members said that the small retail motor outfits do not have the luxury to offer staff redeployment as do some larger companies, which can often absorb redundant staff in other parts of the business.

It is interesting that, in Western Australia, Mr Peter Fitzpatrick, CEO of the Motor Trade Association of Western Australia, commented that small businesses simply do not have adequate resources to foresee how their environment will unfold. While bigger businesses can access industry consultants to assist with business modelling and planning, small businesses are unable to develop such models due to cost barriers. Small businesses are not as resilient as larger companies and often are required to downsize at short notice due to sudden changes in conditions or in response to loss of work due to a withdrawal by a major client. Mr Fitzpatrick says that the IRC decision flies in the face, as he puts it, of the Queensland industrial relations decision six months ago which ruled that redundancy pay could result in insolvency for small businesses.

Queenslanders and Western Australians understand that, in small business, if you accumulate these huge redundancy commitments, you are very restricted in the reality of your business. In the farming community, members of which are always small businesses—many of them employ only three or four personnel—they are very concerned. Mr Duncan Fraser of the National Farmers Federation had this to say:

Like many Australians small businesses, farmers face exceptional difficulties in sustaining their business. An increase in costs, including the need to take into account potential liabilities such as redundancy, will have a significant negative impact on the viability of small business.

It is interesting that the state industrial relations tribunals—those that are left—have highlighted the vulnerable position of small businesses, particularly in relation to redundancy payments. No state government has supported the removal of this business provision. So we on this side of the House have some trouble understanding why the Australian Industrial Relations Commission decided to make this very unfortunate decision. The Western Australian government, which is a Labor government, is not in favour of the removal of the exemption for employers who have businesses employing fewer than 15. It supports that and so does the New South Wales government. The New South Wales government said:

The proposal ... is inconsistent with the New South Wales standard ... Furthermore, it is inconsistent with major awards under which redundancy provisions are only applicable to employers who employ 15 or more persons ...

So we have a situation, and I strongly support the government's position, where the decision of the IRC has flown in the face of all of the evidence. The evidence is that this increased cost for small business has a contingent liability which is unknown and it creates a capital cost at the end of employment so that employees will be less likely to be taken on by small business because of the impact of final redundancy payments.

I personally have always been concerned that redundancy payments were the work of weak managements and strong unions. In times of buoyant economic activity—as I have said, under the Howard government—possibly people can find other jobs with unemployment at a lower level. Under the Labor government, with 11 per cent unemployment levels, obviously when people lost their jobs it was much more difficult to find another job. So redundancy is an argument, I think, that is not important in the Australian context.



Mr McARTHUR —We need to have a dynamic economy and small businesses need to have the ability to make changes—to put people on and off as their conditions change. Even the member for Braddon would understand that. If you have that capacity, people can seek a job elsewhere without the great fear that the redundancy payment would wipe businesses out, as it has done with the US steel industry, as it nearly did with the steel industry in Australia and as it has done with a number of the textile and other industries. The member for Braddon is very aware of that. He knows that the redundancies in the textile industry are fairly extravagant. That has been an impediment upon their readjustment in the workplace. I strongly commend the legislation and I commend the philosophical thrust that the minister has put before the parliament. It would be my earnest desire that the legislation passes both houses.