Health, leisure worst hit by 'double dipping' ruling

Healthcare and leisure employers could face a combined $343 million-a-year increase in their leave bill as a result of a landmark ruling granting regular casuals paid leave, according to a Credit Suisse analysis.

The Swiss bank ranked the two sectors' wage bills as likely to be the worst affected by the Federal Court's judgment, even on conservative scenarios that assumed just 10 per cent and 25 per cent of the workforce respectively was affected.

The court's Rossato v Workpac decision last week held that a casual coal miner working regular and predictable shifts was entitled to permanent benefits, such as paid leave, and their 25 per cent loading could not be used to offset the liabilities.

Unions have praised the decision as a "massive" step in reducing insecure work but employers have warned that it will send employers to the wall with multimillion-dollar backpay bills at a time when most businesses are struggling to survive.

According to Credit Suisse's analysis, released on Monday, the cost to healthcare employers of paying annual leave to 25 per cent of their casuals would be an extra $166 million a year, while the leisure sector – which includes tourist and hospitality businesses, would be hit with the highest bill at $177 million.

Annual leave costs in manufacturing would rise by $132 million under the same scenario, while retailers would experience a $138 million hit.

Cost hard to estimate

In total, the scenario played out across 20 different industries led to $1.3 billion extra a year in holiday pay.

"The cost of broader permanent employee entitlements is hard to estimate and may be much higher," the report said.

The Credit Suisse analysis, completed by head of environmental, social and governance research Phineas Glover, said the Workpac ruling was yet to play out in other industries but that it increased the risk of litigation and compensation for business.

"The clearer set of principles provided in the case will be a clarifying factor for other potential plaintiffs," he said.

"This risks opening the gates to similar litigation and/or even pre-emptive payment settlements."

Agriculture, transport, construction, property, manufacturing and healthcare – where casuals made up 57 per cent, 24 per cent, 24 per cent, 22 per cent, 21 per cent and 20 per cent of the workforce respectively – "appear to be more at risk".

One of the report's "counterintuitive" findings was that despite casuals being paid 25 per cent extra in lieu of permanent entitlements, on average they earned 23 per cent an hour less than permanents based on median weekly earnings.

As a result, the report said businesses could face even more significant cost increases from converting casuals to permanent and reclassifying their wages.

This report makes very clear that not only are casuals paid less overall ... but they are also paid less on an hourly basis.
— Sally McManus, ACTU secretary

Assuming just 10 per cent of casuals were reclassified, the report estimated that leisure and healthcare's wage costs would climb by about 10 per cent based on the pay gap in median earnings.

Mining recorded one of the biggest pay gaps between permanents and casuals, at 23 per cent, behind ICT (29 per cent) and professional services (28 per cent), while leisure and healthcare had pay gaps of 18 per cent and 15 per cent respectively.

Australian Council of Trade Unions secretary Sally McManus said the report confirmed union claims that permanents were generally paid more than casuals.

“This report makes very clear that not only are casuals paid less overall than permanent workers but they are also paid less on an hourly basis," she said.

Ms McManus said the ruling had not abolished the use of casual employment, "just the exploitation of these contracts by unscrupulous employers who have people working long-term regular and predictable hours".

"This would be a only a small proportion of overall casual employment."