A Changing Employment Landscape For Retail Franchises - ARA Article

By Richard Evans, ARA’s Executive Director

This article appeared in Issue 3#4 (May/June 2009) of Business Franchise Australia & New Zealand

ARA Executive Director reflects on recent changes within the employment market, how this is affecting retail franchises and what businesses can do to adapt to this change.

The Australian industrial relations landscape is in a period of significant metamorphosis, prompting retail franchises to reassess their current paradigm to ensure their long-term sustainability. Indeed, much of this change has been shaped by the recent challenges posed by the current economic climate coupled with the impending transformation of our industrial relations legislation.

One of the biggest movements we’re seeing in retail is in current employment structures. ABS Labour Force figures for last February reveal a more resilient market than expected, with 1,800 jobs being created over January. Despite this increase, there has been an increasing decline in full time employment over the past six months and a shift towards part time and casual employment. Over February, there was a negative 0.7 percent change in full time employment, yet in the same period part time employment grew 1.8 percent with a year on year growth of 3.6 percent.

The ARA believes this shift in employment practices stems from retail businesses anticipating a slowdown in sales resulting from consumers going into financial hibernation. Consumers are more cashed up than 12 months ago and despite interest rates being at their lowest since January 1960 and petrol prices decreasing, there has been a downturn in confidence because people fear losing their jobs. The paradox of this of course is that if consumers stop spending they are putting their jobs at risk and it will become a self-fulfilling prophesy.

Coupled with a slowdown in consumer spending are the seismic changes to industrial relations legislation resulting from the Federal Government’s Fair Work Bill and modern retail award.

The introduction of the Fair Work Bill has aroused a lot of controversy, yet there is still a lot of confusion as to what this means for businesses. Results from a snap poll we recently conducted revealed 67 percent of employers were aware the Australian Industrial Relations Commission (AIRC) was being replaced by Fair Work Australia, yet 56.7 percent either didn’t know or were unsure of the increase powers unions would have over employer-employee bargaining arrangements and 62.1 percent didn’t understand the new “fair dismissal code”.

It’s important know how the new laws will affect you, so to clear the air a little, here are some of the ways the new Fair Work Bill will affect small retail business:

Unfair dismissal:

Prior to the Fair Work Bill, businesses with less than 100 employees and casual employees were exempt from unfair dismissal laws. Under the Fair Work Bill, only small businesses will be exempt. Small business will be defined as a business with 15 full time equivalents until 31 December 2010, and 15 employees (head count) thereafter. This means many SME businesses previously not liable under unfair dismissal laws will need to ensure they demonstrate procedural fairness to avoid successful claims in this area.

There is uncertainty regarding the representation rights employers will have in connection with unfair dismissal proceedings. Fair Work Australia (FWA) will have the discretion to allow or refuse representation for either the employer or the employee’s representative. 

We also anticipate the new unfair dismissal provision will in no way reduce instances of financial settlement in lieu of re-instatement of employees.


Employers can be forced to negotiate agreements with unions regardless of whether or not the employer is happy to operate under awards. 

Any agreements drawn up could be subject to the better off overall test (BOOT) – raising the bar on agreement content requirements. The BOOT means choosing an agreement over a relevant award must be more advantageous to the employee. Agreements will also have a more limited shelf-life than is currently the case meaning renegotiation of agreement terms are likely to become more frequent.

Uncertainty surrounding the definition of “low paid” means there is scope for all award-based employees to be considered. Given that FWA can arbitrate and issue bargaining orders for such employees, retailers again may be forced to negotiate agreement terms despite there being no interest from employers.

Union right of entry:

Additional rights for unions to inspect non-member records and documentation beyond employee records raises significant privacy concerns for both non-union employees and retailer businesses alike.  

Businesses that previously had little or no involvement with unions are likely to see an increase in union presence.  

Minimum safety net:

In addition to increased labour costs resulting from award modernisation (see below), the Fair Work Bill also seeks to legislate the new National Employment Standards (NES). The NES provides for 10 minimum employment conditions separate to that contained in modern awards and agreements. This effectively doubles the five minimum conditions currently in place. The NES includes entitlements far more generous to employees than the current safety net provisions, and therefore will result in additional costs to employers.

Modern retail award and its cost to business

The AIRC recently released the modern retail award seeking to simplify and rationalise the existing system. The new modern awards are in response to a direct request by Federal Minister Julia Gillard to modernise the Australian workplace and to do so in a manner which would "not disadvantage either employers or employees in a financial sense”.

Unfortunately, the new retail award’s focus on simplification and rationalisation failed to answer retailers’ calls for a penalty rate structure recognising the modern deregulated retail market. It refuses to acknowledge consumer expectations of trading hours, rostering requirements of employers to meet seasonal demands and the tightening economic environment all Australians and industries are facing.

The ARA’s costings analysis based on a roster for a small retailer with two full time and two casual employees indicates a $22,000 wage bill increase on average across Australia with state costings estimated to be the following:

  • New South Wales: $30,094p/a - 22% increase
  • Victoria: $20,443 p/a - 11% increase
  • Queensland: $27,024 p/a - 19% increase
  • Western Australia: $21,117 p/a - 14% increase
  • South Australia: $27,745 p/a - 20% increase
  • Tasmania: $25,314 p/a - 18% increase
  • Australian Capital Territory: $26,484 p/a - 18% increase
  • Northern Territory: $17,202 p/a - 11% increase

Small retailers work within the confines of inflexible fixed expenses such as occupancy costs, and many are telling us they would need to look at the flexibility within their employment structure to minimise the impact of these increased wage bills.

Retailers create wealth for the economy driven by consumer demand and they need flexibility in their workforce to meet this demand. Proposed new IR laws would force many small retailers to return to a casualisation of the workforce. Of the members we surveyed, 82 percent indicated they would restructure their workplace to cope with any corresponding increases in wages and entitlements. 26 percent of respondents said they said they would restructure employment types and 50.2 percent said they would be restructuring rosters.

Adapting to change and staying positive

As Australia’s largest employment sector, retailing is an important fabric within the Australian community providing jobs for our young, part-time and casual work for those requiring flexible employment, and opportunities for many Australians to be their own boss.

Despite the challenges ahead, our advice is not to panic and, where possible, hold onto staff. The more Australians gainfully employed, the sooner our economy will make a recovery. The retail sector tends to recover six months ahead of the rest of the economy, and our projections are suggesting the retail sector will begin to bounce back in the September quarter this year. The last thing employers should do is to cut off their noses to spite their faces. 

In saying that, it is important to understand your obligations as an employer under the new legislation, what it will cost you and whether your business can continue to operate under the current arrangement. If you plan to reassess your current structure, reassure your staff; fully understand your options and try to come up with a solution that is workable for your business and your staff. At such a critical time, skilled staff will be vital to your business’ success.

Of course, negotiating your way through the myriad of legal obligations and awards can be overwhelming, but the good news is there is help. The AIRC’s website (www.airc.gov.au) contains a wealth of information about the modern retail award and the Government’s workplace website (http://www.workplace.gov.au) outlines the ins and outs of Fair Work Bill. 

Employer associations are also a great reference point, because they not only provide information and services to assist you in finding a solution for your business, but they also understand your industry. In the case of the Australian Retailers Association, our Employment Relations experts can look at businesses on a case-by-case basis and provide advice on what employment structures might be best suited to your business. One of the main services we provide is assisting members in drafting and implementing workplace agreements, drafted to reflect terms and conditions that are much more simplistic and user-friendly than award terms. 

As the economy tightens and the new Fair Work Bill and modern retail award come into play, even more retail franchises will reassess their current employment arrangements. If your business is one of them, you’re not alone. We are all in this together and there’s a network of support to help. 

Richard Evans is Executive Director of the Australian Retailers Association – the leading voice in retail. To find out more call 1300 368 041 or go to www.retail.org.au

Employment Relations advice for ARA members

The Australian Retailers Association is the leader in providing employment relations services to the retail sector with the ARA Employment Relations team at the cutting edge of all industrial relations matters. The ARA team lobbies government, participates in industry events, presents submissions to Federal and State Industrial Relations Commissions and the Productivity Commission.

The ARA employment relations team is well positioned to assist members with:  the design and implementation of workplace agreements; conducting compliance audits of employment arrangements and record keeping; representation and advice in unfair dismissal claims; employee performance management; design of roster and work patterns to meet employer/employee needs; as well as training on the latest industrial laws and regulations.

Members also gain access to the Employment Relations Telephone Advisory Service to confirm current employment conditions along with the rights and obligations of employers and employees. To find out more, call 1300 368 041 or go to www.retail.org.au