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Help your staff through penalty rate cuts

Congratulations, hospitality employers of Australia! Starting the first of July of this year, you’ll be […]

By Dave Eagle

Congratulations, hospitality employers of Australia! Starting the first of July of this year, you’ll be making more money on public holidays. That’s great news—for you. The bad news is reserved for your employees. They’ll be paying for that increase in your profit in the form of lost wages.

For those who haven’t heard yet, the Fair Work Commission decided back in February to cut the penalty rates of hospitality and retail workers across the country. These cuts apply to Sundays and public holidays—Saturdays are untouched for now. For hospitality, the cuts look like this:

Penalty rate cuts hospitality

The full public holiday rate cuts go into effect on 1 July, but it’s still unclear when the Sunday rates will kick in. The plan at the moment is to incrementally move towards the full cut over a year or two, with the first one scheduled for 1 July, as well.

What this means for the industry

waiter penalty rates Australia

Courtesy of INKCINCT Cartoons

This is, for obvious reasons, a sensitive topic. On paper, the penalty rate cuts seem like a good idea. Because larger chains and companies often have their own workplace agreements with trade unions directly, these rules don’t apply to them. So, the rate cuts will mostly provide financial relief to owners of small businesses, where profit margins are slim and overhead is often a puzzle to be figured out every month. In some cases, that relief means they’ll be able to able to stay open longer—with more revenue and profit as the reward.

penalty rates hurt Australia's hospitality industry

Courtesy of INKCINCT Cartoons

But that financial relief comes at a cost, a cost which has to be assumed by the people who can least afford to bear it. It’s estimated that nearly half a million people will each lose up to $6,000 a year as a result of the new rates. There’s a very real possibility that those people will become disgruntled over their situation if they’re not just exhausted from having to work longer hours just to tread water. And this puts owners in a tricky situation.

Employers aren’t responsible for this change. They’re not the ones who chose to put the burden on their employees. While they are the ones who most directly benefit from these changes, they’re also the ones who will deal with the fallout in the workplace. We know how difficult and stressful hospitality work is, and we don’t envy either side of this equation. The next few months may not be pretty.

With that said, it’s worth mentioning that our knowledge of the high tension atmosphere of restaurant work comes from having been there ourselves. Most of us who’ve been around with Kounta since the beginning are hospitality refugees. We’re people who looked long and hard at our restaurant workplaces and thought, “No, I think it’s time I took a break from all this. Instead, I’ll help build a cloud-based software platform and make sure it’s running 24/7 for an entire planet’s worth of customers.” Our admiration for hospitality workers isn’t a secret, and we’ve written many blog posts around keeping them happy and setting up them up for success. Let’s add this post to that growing list, and discuss a thing or two you could do to ease their burden.

Keeping employees happy after penalty rate cuts go into effect

hospitality penalty rates

Courtesy of INKCINCT Cartoons


First, there’s the obvious solution: you can give everyone raises! Of course, being obvious doesn’t make something practical, and we may need to get a little more creative here. Across-the-board raises will end up costing you more than the rate cuts cost employees.

But what about passing those savings right back to your employees in the form of bonuses? That’s a more reasonable starting point, but it’s also not doable for every business. For the purposes of this discussion, we can say that there are three kinds of businesses out there:

  • Those operating profitably, for whom the rate cuts just mean more profit

  • Those operating at a break-even point and understandably excited at the potential for profit

  • Those operating at a loss and looking at the rate cuts as overdue breathing room

If you’re in the first group, the option to maintain pay grades for staff on Sundays and holidays should not be overlooked. You can do the simplest of math—no numbers required—and see that this can be readily done. You’re already spending X and earning Y. If you make X smaller by, say, $100, then Y gets bigger by $100. The space between X and Y remains the same, except that a portion of that difference has moved from your employee’s pocket to yours.

Bottom line: if you were able to afford it before, then you can more than afford it now. That’s because the only thing that’s changed is an increase in your profit. For those of you not willing to just give away your newfound profit, or if you’re the owner of a restaurant/cafe in one of the second two groups, the math gets a little more complicated. And that’s where software comes in.

A practical solution

staff scheduling and rostering

Using rostering software like Deputy and integrating it with your POS can give you valuable insights into how much you spend on labour versus how much you earn in a given shift. This is great for planning, but it’s a tool that can also be used to figure out the new financial reality of the penalty rate cuts.

Let’s say you own a small cafe, and historically spend $1,000 for labour every Sunday. You’ve got 4 people who work and you’re only open for 5 hours that day.

Do you know how much longer you can stay open now that you’re paying less to your employees? Well, neither do I, but Deputy can figure that out in about a second. Base your work shifts on the same budget ($1K), but stretch them to 6 hours. Then 7 hours. Then 8. Keep playing around with the numbers to get a sense of what you can now afford. A level 1 employee will be making $4.55 less per hour under the new rules. A level 6 will lose $5.62 per hour. Adding just one hour to your operation times means employees are earning the same as before (albeit with a little more work, but not an unreasonable amount). That also means more tips for them, and more revenue for you.

You don’t have to reserve this exercise for just the days affected by the rate cuts, either. Maybe even the lower penalty rates still don’t save you enough to merit staying open later. In that case, you can calculate the savings you’ll be receiving for these days, and look to spread that extra cheer out during the normal workweek when employees are paid their regular salary.

schedule and roster staff easily

In the hands of a responsible and caring owner, your employees don’t have to suffer more financial hardships as a result of this new policy. And there’s potential fallout for you, too, even if your business now brings in more money. Quality employees in hospitality are hard to come by. For a lot them, it’s a transitional stop on the way to something else, a way to make extra money while in school, or until that first big break in their chosen field happens. When you find someone who’s reliable and great at his job, you do what you have to do to make sure he stays.

On the other side of things, hospitality workers will often echo their employers’ concerns, but from their perspective. Good, caring employers are hard to come by. Often, the bottom line is more important than a satisfied employee. When workers find someone who’s willing to act in ways that let her staff know she cares about their well-being, it breeds a loyalty that’s otherwise hard to come by. When bosses demonstrate that they’re willing to work with their employees, employees become much more willing to work for their employers.











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