Australian businesses can rescue our standard of living if the government gets serious about tax reform. Only through productivity growth can Australia balance the books and give our lowest-paid workers the opportunity to get ahead.
Industries like manufacturing and agriculture employ hundreds of thousands of Australians on minimum or award rates. These workers earn between $47,622 and $65,000 per year before tax. More than ever, these workers are seeking extra shifts to keep up with the cost of living, with The Australia Institute’s Centre for Future Work finding that, ‘One in three workers (32 per cent) reported that they wanted more paid hours.’
The problem for businesses is not the willingness of staff to work extra hours – nor what their staff receive as award rates – but the mountain of taxes associated with paying them. For full-time workers on minimum wage, overtime is taxed at 30 cents in the dollar and paid by the business on behalf of the worker. The business is taxed 4.85 per cent payroll tax and 1.8 per cent in WorkCover on the entire rate.
A minimum wage earner working overtime costs a business $38.55 an hour for the time and a half and $51.40 for double time; however, the worker only ends up with $25.30 or $33.75 per hour in their bank account. The government, the big winner in overtime, collects $13.25 or $17.65 an hour.
Within manufacturing businesses like mine, the general rate is between $30.00 and $40.00 per hour, depending on experience and qualifications. A worker on an hourly rate of $35.00 costs the business $74.65 per hour for double time, of which the government pockets $25.65.
When it comes to overtime the harder you work, the luckier the government gets. There are few decent reasons why a worker who has already paid 38 hours of income tax ought to pay more. Particularly in the case of low-wage earners who pay 16 cents in the dollar for most of their 38 hours, and then 30 cents for overtime, further negating the benefit of their additional efforts.
Businesses are financialised penalised similarly as they are forced to pay an increase of 50 per cent or 100 per cent on their payroll tax and WorkCover premiums. It defies logic that a worker working from one hour to the next should require a jacked-up premium to do the same job. The arbitrary application of the increase only further disincentivises businesses from offering more hours to willing workers.
Few Australian production-based businesses have the margins in their products to pay a decent base wage alongside regular overtime. Workers who cannot get additional hours are forced to find other jobs. Second jobs are often part-time, casual, or part of the gig economy. In most cases, the worker ends up earning less per hour than had they worked more hours in their full-time job.
Too often, in the productivity debate, the government bypasses practical changes in favour of nonsense about innovation and grants. Businesses don’t need the government handing back its own money for consultants and renewables; we need a prudent government that prioritises tax reform to incentivise greater productivity. By slashing taxes for Australia’s hardest workers, our economy will grow, and the Australian Dream will again become achievable for everyone.
Marcus Bastiaan director of The Specialty Group
‘One in three workers (32 per cent) reported that they wanted more paid hours.’
