Labour costs and penalty rates – FSR survey results
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The results are in for Foodservice Rep’s latest survey on labour costs, penalty rates and practical solutions.
Responses were received from across the spectrum of the industry, with cafes, fine dining restaurants and QSRs comprising the bulk of contributions. We also heard from the pub/club market, casual dining, hotel/accommodation and others including bakeries, aged care and mobile catering. A majority of 42 per cent of respondents were from suburban areas, with 26 per cent each from CBD/inner city and regional/rural Australia and 5 per cent from tourist destinations. A majority (42 per cent) of respondents typically employed between 16-30 staff.
Penalty rates ‘extremely significant’
Penalty rates were cited as extremely significant to overall labour costs by a majority (66.67 per cent) of respondents, very significant by a further 20 per cent and moderately significant by just 13 per cent.
Public holidays were clearly the period which create the greatest financial pressure for these businesses, cited by 73.33 per cent, with Sundays cited by 66.67 per cent and Saturdays by 40 per cent.
The leading effects of penalty rates on business operations were reduced staffing levels and closure on public holidays, closely followed by reduced trading hours and increased menu prices or surcharges.
A majority of 46.67 per cent of respondents felt the current system strikes a very poor balance between worker protections and business sustainability.
However, only 26.67 per cent of respondents described staff recruitment and retention as extremely difficult in the current environment; the majority (60 per cent) instead described this as moderately difficult.
Super costs impacting business
The most important worker groups to the staffing model of our respondents were local full time employees (53.33 per cent) closely followed by students (46.67 per cent).
Beyond wages, the non-wage labour costs which most impacted respondents’ business were, unsurprisingly, superannuation (80 per cent), followed by compliance and record keeping/ workers compensation (60 per cent for both) and payroll tax (53.33 per cent).
A majority (40 per cent) of respondents said they would be very supportive of government tax subsidies or incentives to offset non-wage labour costs for specific worker groups, but 33.33 per cent were neutral about this, and only 26.67 per cent said they would be somewhat supportive.
Asked whether a payroll tax or superannuation subsidy for working holiday markers (WHM) make them more likely to employ or retain these workers, the majority said this would be a significant likelihood (33.33 per cent), but 26.67 per cent said this would make no difference and a further 26.67 per cent said it was not applicable to their business.
As to whether targeted tax or super relief for mature age (55+) workers would encourage the hire or retention of older employees, a majority (50 per cent) of respondents said Yes – somewhat.
The potential policy measures cited as being most helpful to hospitality business were firstly public holiday wage support payments (73.33 per cent), followed by super subsidies for specific workercohorts / simplified award compliance (both 60 per cent) and payroll tax relief for hospitality businesses (46.67 per cent).
Improving sustainability of hospo employment
Asked what would be the most effective way to improve sustainability of hospitality employment while maintaining fair worker outcomes, responses included:
“Penalty rates [should] only apply after the worker has worked a minimum amount of hours in the week, be it 30, 38 or another arbitrary number. Penalties for someone who has not worked at all in the week is ridiculous, unsustainable and inflationary.”
and
“Government must spend more resources on training skilled workers and set higher benchmarks on work ethics … not leaving businesses, especially small businesses to drown in poorly skilled, low work ethic workers. Zero productivity will be the result of a workforce full of delusional, self-entitled workers.”
Survey respondents’ suggestions
Others mentioned the abolition of payroll tax, more realistic public holiday rates, removal of penalty rates for weekends/public holidays, rebates/subsidies for very small hospo business and better management of hospitality venues.
Asked whether non-wage labour cost reforms would be more effective than changes to penalty rates, a clear majority believed a combination of both these initiatives would be the best way to go.
Other comments we received in connection with the survey included:
“The proposed introduction of full pay to 18 to 20 year olds will lead to mass unemployment in the this age group. They need onsite training and supervision for a year or two before they are able to contribute at an acceptable level.”
and
“It’s too late now but pay day super is going to be an expensive nightmare for small takeaway restaurants to administer.”
In closing, one respondent urged: “We need to elect those who have worked in the industry [and] have a good understanding of the industry, not those with uni degrees [who] have not worked in the industry a day in their life. How does one make policies for an entire industry when one has not experienced working in the industry firsthand? They simply impose policies unto the industry. In recent years many of these policies have been unsupportive to businesses, unrealistic and downright communistic, which sounds ideal but not profitable. When business isn't profitable or feasible, there will be no business in the end.”
All of which is food for thought …
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FSR's labour cost and penalty rate survey reveals how hospitality operators are managing Sunday and public holiday pressures, staffing challenges, and the case for targeted reform.