The Penalty Rate Conundrum

With the ANZAC day public holiday just behind us and the Queen’s Birthday public holiday just around the corner, many businesses in hospitality, tourism and retail industries will be asking themselves whether it is worthwhile opening on public holidays.

With the ANZAC day public holiday just behind us and the Queen’s Birthday public holiday just around the corner, many businesses in the hospitality, tourism and retail industries will be asking themselves whether it is worthwhile opening on public holidays.

With profit margins in these industries already under pressure, penalty rates have a significant impact on the ability of businesses to trade profitably.

The Productivity Commission’s report on the inquiry into Australia’s Workplace Relations Framework released in December 2015 recognised the impact of penalty rates and included a recommendation to align Sunday penalty rates with those applicable on Saturdays.

However, the reality is that any change is likely to be a long time in the making and may well depend on the result of the upcoming Federal election.  Also, there is no recommendation that would offer any relief on public holidays.

Consequently, businesses must continue to face the reality of penalty rates and manage their business accordingly. This means considering whether or not to:

  • Limit hours of operation; and
  • Apply a public holiday surcharge.

Public holiday surcharges seem to be gaining traction with patrons increasingly showing a willingness to pay the higher prices.  However, it is critical for businesses to get customer feedback first and to communicate the reason for introducing a surcharge.

Also, whilst restaurants, cafe’s and bistro’s are exempt from the component pricing requirements of the Australian Consumer Law and do not need to have a separate public holiday menu, they do need to include details of the surcharge prominently on their usual menus.

Even where businesses do implement a surcharge, the most critical thing to get right is their roster – Always has been, always will be.

These days, there are a number of affordable software packages to assist business with their roster such as DeputyKeyPay and Zuus Workforce.  A key benefit of these packages is that they will cost the roster so that you can actively control wage costs.

Businesses should also ensure that they know the wage cost benchmark for their industry and that they have regular reporting against that benchmark.  This reporting process is essential because it allows for any rostering issues to be identified and addressed before too much damage is done.

A great source of this information is the ATO’s Small Business Benchmarks.  The ATO have compiled benchmarks for many business types including takeaway food services, coffee shops, restaurants, pubs, taverns and bars.

Businesses should also look at their hiring, training and retention practices.  At the most basic level, quality staff allow a business to operate on a leaner roster.  There is also an additional pay-off in the form of superior customer service which we all know leads to higher revenues.

And finally, businesses that are unsure about what rates should be paid for what shifts, should acquaint themselves with the Fair Work Ombudsman’s Pay & Conditions Tool.  It is a great resource to help Businesses stay compliant.

You can click here to speak to a businessaccounting and bookkeeping firm. We also offer hospitality business consultation and mortgage services. We will give you a call to know more about your needs. We will explain to you how we can improve your business.

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