Small to medium businesses could pay staff with simple all-in rates and engage part-timers more flexibly as part of a proposal which is being pushed in industrial relations reform groups and has attracted significant interest from the Morrison government.

The Council of Small Business Organisations Australia wants to introduce two sets of loaded hourly rates for small to medium businesses – one rate for week days and one for weekends – that would roll up industry awards’ penalty rates, loadings and allowances to aid business simplicity.

Attorney-General Christian Porter is overseeing the IR talks. Alex Ellinghausen

The proposal would also remove a controversial feature of some awards where part-time workers must get paid overtime if they work beyond their set roster, even if that roster provides for just a few hours work a week.

Unions have not responded to the proposal so far but the Morrison government is understood to be giving it serious consideration.

Australian Council of Trade Unions secretary Sally McManus was briefed personally on the proposal last week.

COSBOA chair Mark McKenzie argued a small business award – which could also be legislated or added as a separate tier in awards – would simplify hundreds of rates and classifications, reduce the need for casuals by making part-time more flexible and deter underpayments by reducing complexity.

“We think it’s absolutely essential for restoration of jobs lost for business during COVID-19,” he told The Australian Financial Review.

“We have not seen anything for small business in this space for the better part of 20 years. This is potentially a game changer in a world that has fundamentally altered pre-COVID.”

The IR working groups, set up to aid the economic recovery following the biggest recession since the Great Depression, have so far failed to reach consensus on anything significant with some participants describing the process as drawn out and “torturous”.

Unions and employers are now set to progress with either informal talks or lobbying of the government.

COSBOA has argued that simplifying the rules for small business is essential to the jobs recovery, pointing out that 910,000 small to medium enterprises that have registered for JobKeeper employ an estimated 2.9 million people.

If 80 per cent of those employ just one full-time equivalent that could generate 728,000 jobs over the next three to five years.

Under its small business award proposal, the quantum of the all-hours rate would be determined by a formula that would be revisited every year by the minimum wage panel.

Only businesses with less than 40 full-time equivalent staff would be able to opt into the loaded rates.

However, other employer groups have argued loaded rates should apply to every business regardless of size, taking the position “if it’s good for small, it’s good for all”.

Safeguards would exist for part-timers, including allowing them to earn overtime when working beyond full-time hours, requiring agreement to work hours beyond their roster and creating a maximum weekly hours.

Mr McKenzie said small to medium businesses were less likely to negotiate enterprise agreements that created flexibility around awards and that a small business award would give them “the confidence to employ”.

“Our key test is it needs to be understood by the employer and the employee sitting around the till,” he said.

“It needs to give equal agency for both to understand what agreement they’re entering into as they’re re-entering the workforce.”

The changes to part-time employment would allow staff to pick between casual or permanent employment, he said, while business would get flexibility in both options.

“The combination of the all-hours rate and the flexible part-time is really a neat mix for providing the business and employee with a degree of predictability about the future in a highly uncertain world.”

The idea of loaded rates has attracted previous support from Fair Work Commission president Iain Ross, who in 2016 proposed one higher hourly rate in awards to replace weekend penalty rates.

At the time unions were concerned one rate could leave those who worked only on weekends at a disadvantage. However, the COSBOA proposal for a week and weekend loaded rate could address those concerns.

The ACTU has declined to comment on the working groups.

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