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 www.mattcowgill@wordpress.com 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."