Check, Please: The Difficulties of Staying Compliant in Australian Hospitality
Hospitality consistently receives the highest Fair Work Ombudsman disputes per year. In the 2018-2019 financial year, 36% of all anonymous reports were made in the industry. Data underscore troubles as well, with the fast food, restaurants, and cafe sectors leading the way in noncompliance rates. One report of a surprise audit conducted in 2018 netted […]
19 February 2020 |
Hospitality consistently receives the highest Fair Work Ombudsman disputes per year. In the 2018-2019 financial year, 36% of all anonymous reports were made in the industry. Data underscore troubles as well, with the fast food, restaurants, and cafe sectors leading the way in noncompliance rates. One report of a surprise audit conducted in 2018 netted $471,904 unpaid wages from businesses in Melbourne, Sydney, and Brisbane. Compliance issues harm business. There’s the spectre of litigation, as well as the direct blows to brand value. For the workforce, it’s disheartening to learn you may have been ill-compensated for your hours. One survey by hospitality job platform Barcats found of participating hospitality professionals, 40% suspected pay shortages in packets, with 33% of that number discovering suspicions were true. How non-compliance hits business growth In our study conducted in partnership with Workforce, we found two of the most prominent concerns organisations have about compliance is damage to employee morale (mentioned by 58.1% of respondents) and damage to brand equity (44.2%). Morale is key to engagement. According to Gallup’s State of the Global Workplace study, engaged employees consistently produce better business outcomes: 10% higher customer ratings, 20% higher sales, and 21% higher profitability. Research also says that highly engaged business units reported a 24% lower turnover in high-turnover organisations. And the hospitality industry has a problem with turnover. High competition, low barriers to entry for businesses and workers alike, and casual employment, all contribute to turnover. Replacement hiring has costs. In one case study on Australian four and five-star hotels, researchers from Griffith University found $9,591 was the average cost for replacing an operational employee. At the same time, $109,909 per annum per establishment was the average cost for replacing executive, managerial and supervisory staff. It doesn’t stop at that. The Fair Work Ombudsman imposes a strict set of penalties on those who fail to adhere to workplace laws, each misstep potentially costing businesses thousands to millions of dollars if they aren’t careful. Sanctions include: On-the-spot fines Court appearances Money paid per infringement, amounts varying by severity Paying back employee entitlements plus interest Mandatory training and audits Compensation payments Some cases can go back decades. One such high-profile case is that of George Calombaris’ (of MasterChef Australia fame) MAdE Establishment group. In 2017, the group paid $2.6 million to 162 affected workers from three Melbourne restaurants. Two years later, that figure grew: In 2019 the company revealed they paid $7.8 million in wages to more than 500 employees. They attributed the errors to lapses in annualised salary arrangements, resulting in mistakes in overtime and penalty rates. Watch: ASBFEO Ombudsman Kate Carnell on Governance and Compliance There’s even talk of the government drafting laws to criminalise intentional wage theft. Groups believe such rulings merits greater consequences, but it remains to be seen whether harsher penalties make it into law. Why labour violations happen With these risks, why do most businesses only learn of errors through employee complaints? The root is the same barrier preventing hospitality businesses from addressing compliance inaccuracies immediately: the complexity of Australian labour regulations. Wages are influenced by everything. Fair Work also makes periodic amendments to industry award rules, necessitating thorough reviews of changes lest an employer be liable for violations. A payroll officer needs to take all that into account for calculations. That requires accurate timesheet and attendance records and onboarding documents, including employee information such as birthdays and qualifications. Human resource professionals have their hands full with workforce management, not just with running the daily operations, but also recruitment and onboarding processes to mitigate turnover. Less breathing room means payroll officers may not catch errors on time—according to our Workforce Management Trends study, 46.1% of HR professionals say manual errors are a challenge they regularly face with time and attendance. How successful businesses navigate complex regulatory changes Technology helps. Hundreds of workforce software solutions exist in the market aiming to solve payment problems their way. What makes for good software? Seek solutions considering compliance central to their system. Such systems should have an award interpretation engine that: Automatically updates base rates according to age and Fair Work standards Applies prepared allowances directly into staff wage calculations Calculates higher duty rates Provides detailed timesheet breakdowns that summarise all applicable modifiers to an employee’s wage for easy double-checking Investing in automated solutions cuts down time alongside accurate employee clock-ins. That simplifies the double-checking process and can export directly to payroll as well. Hospitality leaders can make data-driven decisions when it comes to staffing, which streamlines operations and minimises human error. That puts the future of your workforce firmly in your control: as technology develops, so can the scale of your operations.