McALARY-SMITH, Ms Lynda, Australian Small Business and Family Enterprise Ombudsman, Office of the Australian Small Business and Family Enterprise Ombudsman STORER, Mr Aidan, Executive Director, Policy and Advocacy, Office of the Australian Small Business and Family Enterprise Ombudsman Committee met at 09:01 CHAIR ( Dr Garland ): I declare open this public hearing of the Standing Committee on Employment, Workplace Relations, Skills and Training for its inquiry into the operations and adequacy of the National Employment Standards. I begin by acknowledging the traditional custodians of the land on which we meet today and pay my respects to their elders past and present. I also extend that respect to any Aboriginal and Torres Strait Islander peoples joining us today. In accordance with the committee's resolution, this hearing will be broadcast on the parliament's website, and the proof and official transcripts of proceedings will also be published on the parliament's website. I remind all present that, as chair, I will ensure that proceedings are conducted in an orderly, respectful and courteous way. Those present here today are advised that filming and recording are permitted during the hearing. I remind members of the media who may be present or listening online of the need to fairly and accurately report the proceedings of the committee. I now welcome the Australian Small Business and Family Enterprise Ombudsman to give evidence. Although the committee does not require you to give evidence under oath, I should advise you that these hearings are formal proceedings of the parliament. Consequently, they warrant the same respect as proceedings of the parliament itself. Giving false or misleading evidence is a serious matter and may be regarded as a contempt of parliament. I now invite you to make a brief opening statement before we proceed to discussion. Ms McAlary-Smith : Thank you for the opportunity to address the committee today. You've received our submission with respect to the operation of the National Employment Standards. Before we dive into questions, I just wanted to briefly acknowledge the particular challenges of small businesses in navigating the complexity of the industrial relations system in Australia. The National Employment Standards are, of course, a critical component of that. But it's not only the NES; it's its intersection with the industrial instruments that apply in workplaces as well. I'm very happy to take the committee's questions. CHAIR: Excellent. I may begin with some of those questions before throwing to some of my colleagues. We've read your evidence and we've heard from a number of people already who have said that consistency is really important, and that has an impact on compliance. I'd just really invite your reflections on that. Ms McAlary-Smith : Yes, I would certainly endorse that position. In the natural operating environment of the small businesses, it's changes that might happen not only within an employment context but also more broadly. With our small businesses at the moment, they're grappling with a number of changes. Obviously, there have been significant changes in relation to workplace relations over quite some period of time. In addition, we have payday super coming in from 1 July, which broadly everyone's very supportive of, but it is obviously a challenge from an administrative and process point of view and cash flow. You've got the decisions from the RBA around surcharging as well. You have the transition of youth wages in the retail sector for those who are over 18 as well. So any consideration of changes with respect to the NES, I would just caution in terms of the capacity and capability of businesses to actually be able to absorb that and apply it. And, of course, a number of our small businesses—in fact, most of our small businesses—would be covered by modern awards as well. The NES is obviously a really important component, but they're grappling with the application of the modern awards as well. CHAIR: Yes. I think, on that point, to draw things out a bit and to reflect on your submission too around talking about a positive educational partnership, something we've heard a little bit on so far is that, when changes are made, people are not necessarily aware of those changes in terms of the industrial relations legislation. Just on that point, thinking about information, education et cetera, do you think would be helpful for your members? How do you engage with small businesses already? I guess as the ombudsman, obviously, you have a particular role to play in terms of the outreach as well. How does that happen? What are the gaps? Where is the noncompliance happening? And how could we improve that? Ms McAlary-Smith : In terms of the services that we provide, we've got a website where we have a lot of information available across a whole range of small-business issues. We've also got a contact centre where people can actually call us. We also provide assistance where a small business is in dispute with either another business, if it's covered constitutionally, or with departments or entities related to the Commonwealth. A lot of our outreach is connecting with a whole range of different stakeholders—so small businesses, of course, actually themselves but also through industry associations, local chambers of commerce and other networks within the Commonwealth where there are people on the ground, particularly in regional areas and in different communities as well. There are opportunities around even at the local government level. One of the things we always come to is where small businesses are just naturally doing their work and what their natural business operating systems are. So, rather than requiring businesses to have to know about necessarily everything and know where to go and the websites and the like, how can we actually reach deeply into small businesses? We're pretty active in the social media space in terms of trying to communicate with businesses through that way. And trusted advisors are a really important pathway—so accountants, bookkeepers and lawyers. Most small businesses will have at least one of those, if not all of those. And they're people they trust and who understand their particular context of their own business. With any sorts of thoughts around education activities, I think it's going to where small business is already getting their advice. One of the challenges is there's actually no shortage of information, support and advice for small businesses across a whole range of things, across all three levels of government. But the challenge possibly comes because there's so much of it. Where do you actually start? Different agencies will have their own material, and it's beholden on a small business to know I might need to look at ASIC's website, I've got to look at the Fair Work Ombudsman's website, I might need to look at the Fair Work Commission's website—so I think the more that we can actually go to where small businesses are running their business and operating and where they're getting their advice from that works for their business and hooking into that rather than expecting small businesses to have to come to government for advice. CHAIR: So is that outreach? We've actually heard a little bit about accountants being pretty critical— Ms McAlary-Smith : Yes. CHAIR: in the advice that they're able to offer their clients in small business. Mr Storer : Can I just add one comment? CHAIR: Yes. Mr Storer : Just adding onto thinking about education and guidance, it's also important to remember that small businesses are incredibly diverse. CHAIR: Yes. Mr Storer : There's not a 'one size fits all' approach to education and guidance. You've got different cohorts. I mean, we talked about core businesses. We've got a whole variety of businesses. So it's really thinking about how you actually—and also, I think, given the time-poor nature—go to them and meet them where they're at. In thinking about that, how do you provide information, education and forums—different forums that could be digested in different ways? We've often heard from small-business stakeholders that face-to-face type, rather than lots of passive reading of lots of written information, is often a more effective way. So thinking about whether there are opportunities there to actually meet the needs of those in the way that they consume information within the restrictions that they have around their time limited nature as well is really important. CHAIR: So I guess, just to reflect on some of your responses so far, would you say the gaps are not having the full swathe of options in terms of getting out to meet people where they're at and I guess, again, trying to understand where those noncompliance areas seem to be in terms of what are the common areas where small businesses are not potentially meeting their obligations? Ms McAlary-Smith : I think there are a couple of things that we would say from our conversations with small businesses that they grapple with. First of all, it's knowing what applies—which modern award applies. In some businesses and with different staff you might have multiple industrial instruments that apply in your workplace. So there's complexity with that. There's then complexity around potential employment status and casual conversion potentially as well. Then there's complexity around implementing wage rates, particularly if you work outside maybe standard hours. If you've got a nine-to-five business, that's probably less of a challenge, like Monday to Friday. But, if you're working across different hours and different days of the week and operating on public holidays, that can be challenging as well in terms of knowing all the various different wage rates that actually apply or that could apply in a particular business and staying up to date, of course, as well with annual wage reviews. There can also be some challenges around record keeping as well—the record keeping that's required. In our experience talking to small businesses, if there are missteps in terms of employee entitlements, often it's inadvertent. It's either they didn't know that they were meant to do something or they've tried, and a common thing that we would hear from small businesses is loaded up rates. They find penalty rates very confusing, so they sit and they have a bit of a go: 'Well, if I pay my staff extra for a particular hourly rate, that should hopefully cover off penalty rates.' They can run into trouble then if that on balance doesn't actually work out. Of course, some awards don't actually allow that, or there are very formal ways. If you do it, there's a very formal way where you need to do—so in hospitality, for example, you've got to do annual reconciliations. If you pay an annualised salary in hospitality, it's actually more record-keeping work than if you paid them on an hourly basis. So they would be some of the challenges as well. CHAIR: Yes. Something we've heard as well has been some confusion around parental leave provisions across a number of businesses. I'm just wondering if that has come up as an issue with the people that you're working with. Ms McAlary-Smith : It comes up in a couple of different ways and in leave more broadly as well. Sometimes, particularly when it comes to certain types of leave—and I'd include parental leave and family and domestic violence leave in this—the nervousness of small businesses not wanting to say the wrong thing to their staff and being nervous about, well, if they say the wrong thing, will they be—if they use the wrong language, will they then be exposing themselves to a discrimination complaint as well. So we would hear those sorts of perspectives from small businesses. In terms of parental leave around eligibility and how it actually works in practice, and then also return to work as well after parental leave, that can be really difficult for small businesses to even navigate. In practice, and if they are in a position to replace someone while they're on parental leave, it's ensuring that's done in the appropriate way, and then that person's being exited for the person to return from parental leave. Then, if you have a staff member entitled to special leave during the course of their pregnancy because of pregnancy related issues, small businesses are not necessarily across all of that because they don't have dedicated HR or IR expertise or it's expensive to buy in. One service which we hear very positive things about, and I think there can be more opportunities to promote this, is a service that the Fair Work Ombudsman provides. Basically, the Fair Work Ombudsman provides subsidised legal service by legal firms where small businesses can actually get written legal advice around tricky questions that they might have in respect to the Fair Work Act. The feedback that I have from businesses that have used that is fantastic. So I think anything that we can do to shine a light on that so businesses know—because that's an existing service that is available from the Fair Work Ombudsman, which can be tailored to small-business needs. In terms of when you're thinking about educational opportunities, that's an existing service that works well, but I think there's an opportunity for more small businesses to know about it. CHAIR: So it's just ensuring that they're aware that they can access that? Ms McAlary-Smith : That's right, and also how it's pitched as well, because small businesses are naturally a bit nervous about talking to regulators. CHAIR: Okay. Ms McAlary-Smith : The ATO grapples with the same thing as well. Small businesses might be a bit hesitant potentially to go to the Fair Work Ombudsman to say: 'Hey, I've got a problem. I'm not sure I've done the right thing here. Can I get some legal advice?' They're concerned that they will then have workplace inspectors racing out to see them the next day. So any assurances that can be provided from the Fair Work Ombudsman that they have this service and that it's a safe space to use it, I think, would be very impactful. CHAIR: Thank you. I'll hand over to Ms Ambihaipahar. Ms AMBIHAIPAHAR: I think you've answered a number of questions I already wanted to ask. But, through you, Chair, my background is I worked at the AHA and also for a number of unions, so this is kind of my jam, and I understand some of the challenges with compliance, particularly for small businesses. I'd love to hear your reflections or your thoughts on where someone is considering starting up a small business or whatnot, in a sense of educating themselves before going to that process. I say that because I've had the privilege to be able to do operational aspects as well at St Vincent de Paul. With my background, I was able to correct a lot of things to make sure it's compliant. Obviously, that was quite beneficial. I'd like to hear from you guys what you think—if that's something that needs to be taken into consideration. Ms McAlary-Smith : I think there are great opportunities in that space. It's getting the timing right. When we look at communicating, educating and providing services to small businesses, and going to Mr Storer's point that they're so diverse, as well, what's the right point where a small business is open to learning about something and it's at the right timing so they'll retain that information as well. It's one of the challenges. I know there have been conversations over the years at the point at which you register your ABN or you incorporate, should a small business get sent a whole heap of information about everything to do with running a business, including potentially employing people. I think that the challenge with that is that most small businesses start out firstly as sole traders, incorporated or otherwise. The right point is kind of at that juncture when they're looking to employ their first person. I think the challenge is—there's a bigger challenge for a small business going from being a non-employing entity to employing your first employee than, for example, going from your first employee to maybe your fifth employee. That jump from zero to one is quite significant. If there are ways in which—it's when small businesses are thinking about that growth stage and they're wanting to bring people on to work for them. The other flipside as well is some small-business owners don't start their own business; they purchase another business. If you're purchasing another business, you might be inheriting an existing workforce. We see that in franchising a lot as well. I think opportunities around business purchase as well, if it's in an employing entity, could be a good opportunity as well, because you might go from not being an employer yourself to then buying a business and all of a sudden—on Friday you're not an employer and on the Monday you could be employing 20 people. And there's no ramp-up to that in terms of learning how you need to meet your workplace obligations as well. Again, in the natural business system, I know the Fair Work Ombudsman and the Fair Work Commission are working through at the moment how they connect their incredible data sources as sources of truth into the business software, for example. So, when a business is using their business software to run their business, if they were able to record the hours that their staff are working or even do rosters through that and it's connected into an authoritative source of what wage rates are then the ability of your system to be able to say, 'Well, if Aidan's working these hours this week, this is what the wages are going to be.' I think there are great opportunities in that space, but I really think it's being really precise around the just-in-time—at that point when they need the information. Mr Storer : Can I add that one risk that we're hearing a bit about is we've heard instances of where a small business is looking for information maybe about what an applicable award rate is for someone they're about to bring on. They're going to OpenAI tools, which obviously scrapes from everything that's on the web. So there are some real risks around that and getting information back that's, you know—they'll get multiple answers. Often we've heard stories of awards that don't even exist that actually appear on those searches. So again, if businesses or business owners are increasingly resorting to those sorts of tools because they're quick, they're cheap or they're free in many cases, it's thinking about how we can use the capability of AI tools but do it in a way that they're only gathering information from trusted sources—so more closed AI tools—is something that I think would be really valuable. CHAIR: It sounds like there are lots of ways people can find information and not all of them are— Mr Storer : Accurate. CHAIR: accurate and reliable. Ms McAlary-Smith : That's right, and sometimes that's from fellow business people as well, in terms of when you're talking to others in industry or family and friends and the complexity of figuring out what your industrial relations obligations—it's just complex. So getting it from someone who actually is the authority on it is actually really important. CHAIR: On that note, obviously, you're a very important source of information and assistance for small businesses. How do small businesses and family businesses find out about you and your work? Ms McAlary-Smith : That is a challenge we also grapple with in terms of, again, getting the message out. So they will come to us in a couple of different ways. You've obviously got business.gov.au. That is a repository of a whole heap of Commonwealth information. We've got close relationships with all the states, which have state-based small-business commissions. The way that we sort of collectively take that challenge is 'no wrong front door'. If someone comes to, say, the Victorian Small Business Commission and it's actually a matter for us, we make sure that's a warm transfer across to us and us referring on to other states if it's not within our jurisdiction. But it's a challenge we have. We've got newsletters and we've got great content on our website. As I said, we're active in the social media space and there's more we can do in that space as well about getting the messaging out. Also, what we've historically done is through industry associations and chambers of commerce. One of my priorities coming in as the new ombudsman is really focusing on businesses that aren't connected into other groups—who aren't members of chambers and aren't members of sectorial associations and the like, and particularly those in remote and rural and regional communities as well. What we'll be doing is exploring how we do that in the best way. That might be through local council connections across the country. There are also a number of Commonwealth agencies—and AusIndustry is one—that have got people in different towns around the country, so how do we actually connect into where small businesses are already naturally operating? The feedback we get from the businesses we help is brilliant, but they need to know about us to know that we're here to help. CHAIR: Yes, and, on that as well, in terms of that information and outreach, something we've heard a little bit about so far in this inquiry has been—we've got a very diverse country and we've got a lot of businesses that are run by people for whom English may not be their first language. Ms McAlary-Smith : Yes. CHAIR: And it may not be the language they're most comfortable reading, particularly legal-style information. Do you have programs to engage with people who may not have English as their first language? Ms McAlary-Smith : We ourselves don't have formal programs. Where we have specific initiatives we're working on, it might be in partnership with those who do. I definitely think there's more we can do, absolutely, in that space. One of the things we're looking at doing is even we're reviewing our website and how information—the content on there. Also, we use a translation service, for example—we use TIS if we've got a phone call and we need to. Also, from a dispute resolution perspective, if we've organised a mediation and someone needs a translator, we would organise that at our cost, not at the small business's cost. But I think there's absolutely more we can do in that space. CHAIR: Great, thank you. Did you have any further questions? Ms AMBIHAIPAHAR: No, Chair. CHAIR: I'll just double-check that Ms Roberts doesn't have any questions. Ms ROBERTS: No, thank you, Chair. CHAIR: Thank you so much for your attendance here today. You'll be sent a copy of the transcript to request any required corrections. Enjoy the rest of your Friday..