A leading industry group believes the wage awards system needs to be simpler and more flexible to allow small businesses to grow and employ.
Australian Industry Group head of national workplace relations policy Stephen Smith says small businesses such as fast food, restaurants and retail struggle to keep their doors open because of the level of weekend penalty rates in the relevant awards.
"Australian consumers expect to be able to go out for a meal, to buy a coffee, or go shopping on any day of the week, and they expect to pay reasonable prices when they do," Mr Smith told a House of Representatives committee in Melbourne on Monday.
He believes employees who work weekends are often young people who are studying during the week and would be happy with the pay rate that applies on week days.
At the same time, many employers were paying penalty rates because of a lack of flexibility with working hours, when they should be allowed to roster staff to work their 38 ordinary hours across a wider band of hours.
It is also too difficult and costly to terminate poor performing employees, Mr Smith said.
He said rather than the modern award system that started in January 2010 becoming more flexible, there is a risk that the trend will be in the other direction.
He believes a big problem is the system of four-yearly reviews encourages unions to "dream up" and pursue a raft of restrictive and costly claims.
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