Fair Work Commission Cuts Penalty Rates in the Restaurant Industry

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Lately, there has been much debate around the issue of penalty rates on Sundays and public holidays, particularly over the Easter holiday season, when many business owners indicated that engaging a casual employee to work over the long weekend would cost them up to $45.00 per hour.

Exorbitant public holiday penalty rates seem to be one of the key factors in restaurateurs around the country closing around public holiday weekends due to an inability to make a profit.

Cuts to penalty rates

The Fair Work Commission has recently announced a 25 percent cut in penalty rates on Sundays for casual employees, effective 1 July 2014.

What does this mean for employers?

It is important that employers understand how these changes impact on their business in terms of retaining staff and ensuring that these changes are effectively communicated in a positive and clear manner. In doing so, employers can avoid complaints which commonly arise out of simple miscommunication between the employer and employee.

In a practical sense, this means that casual loadings will be reduced from 175% to 150% as of 1 July 2014. It is anticipated that the 25 percent cut will provide considerable cost relief for cafe and restaurant operators currently trading on a Sunday. It will encourage businesses that are presently closed on a Sunday to re-evaluate the possibility of once more opening their doors. Hopefully, this will increase job opportunities, particularly for young workers.

Why have the changes been made?

This change has been imposed as part of the Fair Work Commission’s review of the modern awards system, after being encouraged by the Federal Government to consider the impact of employee costs on a business’s bottom line.

Where do I find this information?

Modern awards contain rates of pay. One of the other challenges facing businesses is the fact that modern awards in general are very detailed and challenging to interpret. This makes it particularly confusing for small business owners and individual employees who simply do not have specialist industrial relations experience.

Am I complying with the modern award?

I have recently looked after a number of cases where complaints have been made to the Fair Work Ombudsman’s office because either the employee or employer didn’t have an accurate understanding of the requirements under the applicable modern award. These complaints could have been avoided by seeking clarification as to how the relevant modern award should be interpreted and applied in a business setting.

If you have any concerns about how a particular modern award applies to your business or how the cuts to penalty rates may impact you, please do not hesitate to contact me.

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