Thursday, 12 January 2012

Penalty rates and public holidays

This is from one of my readers:

"For some time there have been rumblings within the hospitality industry on the effect that penalty rates are having on the profitability of many business ventures. Most recently Masterchef, George Colombaris, conveyed his thoughts on the matter which in turn set in motion some significant scrutiny from on the factual content of his arguments as to why penalty rates are hobbling his businesses. I’m sure we haven’t read the last about this particular issue as many businesses are challenging the currant IR laws, most notably being Qantas and to a lesser degree the drama we witnessed at the Biaida Poultry processing plant.

What’s for certain is that if you’re a business owner, this issue is pretty close to your heart and I’m no exception.

The basic problem is that the Fair Work rules are bolting-on a Monday to Friday regimen onto an industry that operates nights and weekends as well as Monday to Friday.

I agree that there should be incentives in place to attract and retain people who seek employment in this field but I feel the penalty rates in particular are too severe. Personally I would prefer to offer the best candidates a better rate rather than all the candidates, irrespective of skill and qualifications, the same rates.

For the record we have paid our staff the new Fair Work rates since Jan 1 2010. We were advised that we could enter into an agreement with our staff effectively paying them a higher base rate to cover the costs of them working on weekends and public holidays. However, if they were disadvantaged in any way, then the agreement was non-binding. Whilst this might sound like a good idea, the reality of rostering many people covering a variety of shifts on a seven day a week roster, taking into account the obviously busy periods like summer, the needs of the mostly part time workers and the total unpredictability of the business makes it near impossible to forecast. This means the margins for error in underpaying someone loom large. This is why we decided just to bite the bullet and pay everyone according to their category of employment and their subsequent rates. At least doing this we are following the law.

The fines for inadvertently underpaying one of your staff are considerable. If say, I underpaid someone according to the information provided on the Fair Work website, we are liable to pay them back, with interest plus we attract a fine. Conversely should I get the rates wrong and over pay them, I have no recourse to retrieve the lost wages. This is where it gets curious: If I overpaid someone all year, yet failed to pay them the correct loading, then the Fair Work Ombudsman can pursue me to pay the staff member their outstanding loading and we run the risk of a hefty fine even though I have already overpaid them.

Opening on a public holiday used to be an opportunity to make up for quieter times. Now many businesses don’t bother opening as the penalty rates eat into the gains they make. Most often, you make zero profit, we are luckily enough not to go backwards, we break even but we certainly do not make any money. And before you say, ‘Greedy restaurant owner always trying to make money’ which is what I read the other day on a blog comment, what are we in business for? Yes to make money, to make a profit and sometime recently this fact has become shameful in the eyes of some people?

Why open then, I hear you ask? Well if we didn’t we’d then face the issue of not being there for our customers. Recently in Hobart several large passenger ships docked on what was a public holiday. Thousands of tourist mooched around the streets looking for places to eat and drink and many left unhappy, taking away a tarnished view of the city as a result. Inevitably, the letters to Mercury complaining about ‘lazy cafe owners’ started coming in and armchair experts tossing in their two bob on the sorry state of hospitality in Tasmania.

If I didn’t open nights or weekends my staff bill would be a third of what it is but my T/o would only be reduced by a quarter, maybe I should seriously consider this.

More importantly, when farmers and food producers stop picking and processing on weekends, nights and public holidays and our food supply suddenly reduces, then people might understand. We live in a seven days a week 24 hour a day world these days and ripe fruit needing to be picked don’t recognise penalty rates."
Posted on by Rita


Anonymous said...

Yet another Capitalist restauranter whining

sir grumpy said...

I have no sympathy for cruise ship passengers arriving on OUR public holiday.
Ain't we entitled and why didn't the cruise line take this into account?
Also, they mostly eat aboard because it is all paid for and people are greedy.
Come when we're open. Most of us can'r afford a cruise.
What are we, Disneyland tassie, where the locals are just bloody extras for tourists?
As for penalty rates, well maybe both sides should nut something out that fixes this forever.

Sydney said...

Wow, this topic seems to be poping up on a lot of blogs lately. I'm doing some research on restaurants at the moment and this is the third website bringing up this issue!

Nuf Sed said...

So just let me get this straight in my head. Here we have a restaurant owner who says he does not want to pay staff extra to work on weekends/late nights/public holidays, and then writes this bull:

"overpaid someone all year, yet failed to pay them the correct loading, then the Fair Work Ombudsman can pursue me to pay the staff member their outstanding loading and we run the risk of a hefty fine even though I have already overpaid them."

Sorry, but thats a load of bull shit.

Ok so if you were meant to pay someone $50,000 for the year of work, and you actually had paid them $60,000 but you conveniently 'forgot' to pay loading of $2000 - You aren't going to get fined by the ombudsman.

Because with the extra 10k you gave them, they are still 8k infront even if you didnt pay the 2k loading.

You do not get fined for over paying staff. So either someones lying to you, you've read it wrong or you are simply confused.

What has constantly bemused me over the years is people who open businesses when they don't know how to run a business. These are laws folks.

It's just like me arguing with a copper about exceeding the speed limit - he is not interested in what my opinion is - he will fine me anyway, because that's the law.

So many places shut on public holidays due to having to pay staff extra - meaning about 90% less places are open on public holidays, therefore everyone open is a heap more busy. Therefore making the additional cash needed to pay staff.

Go for it... open on public holidays, just don't complain of labour costs.

I have no problem with anyone 'making' or trying to make money... go right ahead!

As for lazy cafe owners - well actually there are plenty. You don't make any money whilst you are shut, yet they complain if they have to open somedays.

If you only want to work 9-5 Monday-Friday with a 1hr lunch break, and annual salary, get a job in an office.

Hospitality is hard work. You make NO money while you are closed.

Cafe's in general, around here, mostly make no money anyway.

Anyone can make money - just have something better than average, work hard, market it and build strong relationships with customers.

Kris said...

In no way am I trying to hi-jack the thread, but I'd recommend anyone really interested in the numbers at play take a look at this article on an economics blog that investigates the hoo-hah over George Calombaris’ claim that the minimum wages he has to pay his staff on Sundays make it uneconomical to open his restaurant(s).

[One of] the key point(s) to me is the fact that "...45% of workers in the accommodation and food services industry are award dependent, meaning they’re paid exactly according to the minimum conditions in the industry. Only 15.2% of workers across all industries are award dependent. This means that if a change to the award system really had made it less profitable to employ staff, we’d expect to see the impact of the change most severely in the accommodation and food services industry. If Mr Calombaris’ story was accurate and modern awards were strangling his industry, we’d expect to see the profitability of restaurants go down, and employment in food and beverage service go down. This hasn’t happened."

He then explores that data that essentially disproves the thesis. Well worth a look.

Anonymous said...

Nuff Said

1. You are wrong. Despite overpaying someone the incorrect rate, the loading IS treated differently AND attracts a fine AS WELL AS paying back the correct loading EVEN if you have paid the incorrect hourly rate

2. You are wrong again, I do know the law, hence the letter to Rita

3. 90% places shut on public holidays? Wrong again. Where do you get your data?

4. Places are not AOTOMATICALLY busier just because other places are shut. This assumes that customers who frequent Garagistes for instance would then go to The James Squire Taphouse just because their first choice is closed on a public holiday. Wrong. Assumptions again, not fact.

5. Cafes around here mostly make no money anyway. Where do you get this information?

6. Your final statement is so grandiose yet so trite. The only speck of truth in you response is that Hospitality is hard work, all the rest is just conjecture, plucked from nowhere without any foundation, truth or scholarship

Good day to you Sir

Anonymous said...

What that report does not highlight is that restaurant and cafe owners are ABSORBING the downturn, ie worrking harder and earning less whilst trying to keep standarsd as high

Anonymous said...

People that work in the hospitality industry choose to do so, they arent forced, as do those that choose to do mon to fri 9 to 5.

Life would be alot simpler for hospitality buisnesses if the award hourly rate casual and full time was incresed on an average to include penalties across the board
so for instance a level 5 chef min full time at present earns 19.19 an hr and a casual get 23.99 and hr. If you made it, full time $23 and a casual $26 for instance ( no sums were done for this example)inclusive of an average penalty. the same for wait persons on there various levels, with this in mind small buisnesses would be able to set an acurate labour budget for the financial year, which would give them an acurate idea of the revunue needed to sustain there buisness and as a whole you'd probably find that the guest frequenting these buisnesses on any given day would get better service across the board.

Anonymous said...

"If I didn’t open nights or weekends my staff bill would be a third of what it is but my T/o would only be reduced by a quarter, maybe I should seriously consider this."

Yes I suggest you do consider it. And quit whining about it.

Either open, or close.

I have to pay staff costs too. Amongst a million other things. That's the cost of doing business.
No use complaining.

Anonymous said...

Oh great, lets all close weekends and public holidays and then hear the fallout from whingers saying lazy restauratuers never open etc

Anonymous said...

Personally I dont think they 'Need to work' as there must be some monied benafactors underpinning this little vanity project if you catch my drift

Anonymous said...

@Anonymous Jan 13 4:22pm

Find me any business in any industry who is not doing the same? Hospitality is not some special creature.

Anonymous said...

These cafe owners are a whinging lot Rita, do they think they're the only ones who work hard?

Anonymous said...

You have to question the commitment of these cafes that chop and change their opening hours leaving their loyal customers in the lurch

Anonymous said...

Interesting thread...opening hours seem to attract passionate responses from all areas..I sit back and wonder when I see a business change its trading times if they have worked out when they can trade effectively and stay viable. I tend not to think here is a greedy business owner, hampering the customer with limited trading. Depends where the business is located, what the passing trade is and how many staff it requires to operate. If trading on a public holiday brings good trade and a business can cover staff on penalty rates its a win win situation, if they open on a day they are usually closed because its a public holiday and have extra costs to operate its a good chance they will trade at a loss or just to cover you can argue its good for business that people come who maybe normally wouldn't go to the cafe/restaurant and will return..and thats a good point. Being out of Hobart and not having a flow of customers during the week isn't it not wise to trade on weekends when its always busy? It takes nerves of steel to make these decisions and work them...Cafes/restaurants are different from some businesses in that to get to a point where you open the doors there is many many hours of food purchasing, preparation and the like..purchasing is a fine line and not something you can have on a shelf for weeks or put on special later..its either done or dusted..Then its open to the customers likes and dislikes of food offered..the overheads are hilarious before you get staff and open doors. Happy customers go home, unhappy ones go online..People who choose to work in the industry either are passionate about it or work in it because its something they do before they do something else..most cafe owners have staff changes on a regular basis and actually struggle to get staff for weekends/peak holiday periods and public holidays. That bit of stress can leave an owner working on a busy day with reduced staff and it happens often.. no money bonus can induce someone who has booked holidays, Falls, or you do your best. Its your business and you wont it to work. Moving away from the topic as this seems to have done with reference to the Lotus is a good, strong business with hard working dedicated people...they amount of times I have heard positive reports of their business and food is encouraging and to be admired. I have no affiliation to them other than being a cafe owner myself and personally if they have decided to not trade a day after something they choose to do for themselves and its not something they do on a regular notifying customers this will happen..well its not something to complain about. Speculating on how they run their business is a tad crude..I know they work hard. All businesses are struggling to some extent right now..the people who lie awake at 4am thinking about how to advertise, promote, encourage and employ are the owners not the just pray that when they do come they have a good experience.

Jasmine Kamaralli said...

To all those people who like to post spiteful, misleading, malicious comments on internet blogs: why don't you grow a spine and put your name to your comments? Take a bit of responsibility for the hurtful, petty bs you spread.
Better still, take up gardening or some other constructive hobby to pass all that spare time you have NOT running a thriving cafe you've built from scratch.

Anonymous said...

The great thing about the web is that if you are close to seomthing, you can comment anonymously without fear of a retribution of sorts. I thinks its healthy to have a differing opinion, I mean whats the difference between those 'Anonymous Suggestion boxes' in many workplaces. They are designed so the person suggesting does not get pilloried in the workplace.
My tip is, get over your reactionary responses, deal directly with the issues and stop letting your loyalties blindside you to addressing this consistent feedback

Rita said...

I have deleted all irrelevant comments regarding Lotus Eaters Cafe in Cygnet. I admit to having taken my eye off the ball here regarding this particular post about Penalty Rates and Public Holidays but that is no excuse for allowing some of the vitriolic comments that LE has engendered.
I thank Richard Beecroft for his advice on this matter, also Winsor Dobbin for drawing my attention to it.
I have absolutely no opinion about LE, having eaten there only once a few years ago. My review can be found here on this website. I have attempted to eat there at least three times since then but they have either been closed or full.

Anonymous said...

Read your restaurant review of the Lotus Eater and you obviously have an opinion, and it seems very positive.