Every financial year, the Fair Work Commission gets together for the annual wage reviews; and every June, they announce their decision. Soon after, two dominant sides make their stance – the unions, usually, dispute the insufficient increase while the Commission defends their decision.
And regardless of the conversation unfolding in the media, on July 1st every year, businesses do the necessary and oblige with the changes.
It’s a familiar, annual exercise.
With 2022’s minimum wage increase coming into effect from October 1, we delve into some FAQs on the national minimum wage increase and what that means for the hospitality industry with the help of our partners, KeyPay and their Compliance Specialist, Leanne Robertson.
Q&A session with Leanne Robertson from KeyPay
Leanne is an Implementations and Compliance Specialist at KeyPay, specialising in payroll compliance, with 5 years of experience in hospitality payroll.
In this interview, we speak to Leanne about:
- Key dates & resources to bookmark
- How to manage an increase in staff wages
- The impact of underpaying staff
- How to ensure you’re always paying the right wage
- Advice & risks of annualised salaries
- Benefits of automation for payroll
Q: What are the key dates & resources that hospitality businesses should bookmark in order to stay compliant with wages?
Leanne:
Fair Work Ombudsman
The Fair Work Ombudsman (FWO) website is a fantastic resource. There are a number of knowledge articles relating to wages and employment relations matters. The website also provides simplified information on award provisions.
You can also subscribe to their email service to receive updates on legislation and wage-related changes. My advice would be to select the awards you wish to be notified about when you create your subscription profile.
You can also contact Fair Work via chat or phone and they can answer any specific queries you have regarding employee entitlements and awards.
Industry Associations
Additionally, find out if there is an industry association you can become a member of such as the Australian Hotel Association or the Restaurant and Catering Industry Association. They usually provide regular email updates for members that include information about changes to relevant awards, legislation, and wages.
Key date(s)
In terms of key dates, the annual wage increase is usually announced in June each year. Keep an eye out for an email from Fair Work (if you are subscribed to receive updates) or check in with the website periodically during this time.
Q: What can hospitality businesses do to manage staff costs?
Leanne:
In order to manage staff costs effectively, there are 4 key tips to keep in mind:
1. Know your award
The first step to effectively managing staff costs is understanding the award that applies to your employees. Ensure you are aware of key provisions in your award that can trigger higher payments and take steps to minimise these instances occurring.
Keep an eye out for:
- When Overtime applies – Many awards dictate a maximum number of hours per day that an employee can work before overtime is payable
- Juniors serving alcohol – Many awards state that junior employees must be paid the adult rate if they are serving alcohol
- No meal break penalties – Many awards state that employees must receive penalty rates if they are not permitted to take a meal break
- Weekend and early/late work penalties – Many awards state that higher rates must be paid for weekend work or work that is considered early or late work.
You don’t have to be an employment law expert to understand your award. Fortunately, many industry associations offer training for their members.
For example, the Australian Hotel Association regularly holds training sessions for understanding the Hospitality and Restaurant Awards. They also provide simplified fact sheets for their members.
So I’d recommend doing some research to find an industry association related to your employees’ respective awards that conduct training that you can attend.
2. Cost your roster using software
To take this a step further to understand your costs in detail, I would suggest costing out a few different rostering scenarios.
This can be done with software like KeyPay, whose rostering feature allows you to play around with different hiring models to see the impact it has on your costs.
Below are a few scenarios to consider:
- Have you considered a 4-day work week?
- Replacing permanent staff with casuals or vice versa?
- Reducing overtime by calling in another staff member and sending someone else home?
It may sound small but little changes like these often have a big impact on the bottom line and can save you thousands per year.
3. Plan ahead and analyse actuals
“What gets measured gets managed.” The classic quote could not be more apt for my next piece of advice.
It’s important to look ahead and plan the week based on bookings and usual trade patterns.
Cost the roster for the week ahead and compare this to an income estimate to obtain a wage cost percentage. You can estimate your income based on:
- Predicted cover numbers
- Spends per head
- Average weekly income per low/mid/high periods
(i) Calculating your wage percentage
Once you have your estimated wages and estimated income, calculate your wage percentage by dividing your wages by income.
For example, $300 in wages for $1,000 of income is a 30% wage cost.
Anything from 25% to 50% is the standard in the industry depending on the type of business but you will become more familiar with your business the more you analyse your wage costs.
(ii) Analysing your wage percentage
Once the period is complete, it is also important to analyse what has happened by calculating your actual wage percentage to determine how you performed.
Look at variances between the roster and actual work (timesheets) and ask yourself:
- Was there any unauthorised or unnecessary overtime?
- Did employees work later than planned?
- If yes, was it because there was a genuine business need?
- What could have been done better?
This analysis will help you learn how to better manage your costs going forward.
4. Change the working culture in your organisation (if necessary)
Long hours are part of the culture in the hospitality industry. For instance, it may be common practice in your business for all chefs to stay back until the head chef leaves, even after a long day.
Don’t be afraid to question and change that culture to explore more cost-effective options for your business.
Take steps to move away from the practice of unnecessary long hours. Share this plan with your employees and set the expectation that you only require the employees to work their rostered times. Explain to them that if there is a need for employees to work longer, it will be requested and authorised by their manager.
Q: What is the impact of underpaying staff in the hospitality industry?
Leanne:
Underpayments within the hospitality industry have a number of negative impacts.
Employees lose trust in employers and the industry as a whole. This leads to an increase in talented people leaving in search of industries less fraught with pay issues. The negative association with pay can also deter young people from choosing the hospitality industry as their career path.
Underpayments can also have a significant impact on the reputation and finances of the business. Significant underpayments incur hefty fines from the FWO and are, often, reported in the media. This can leave a long-lasting negative impression on the brand impacting their customer base.
Q: How can hospitality businesses ensure they pay their staff correctly, according to the award, and any scheduled wage increase?
Leanne:
Using software like KeyPay that automates award conditions and wage increases is the easiest way to ensure that you are paying your staff correctly.
Annualised salaries and risks
However, the risk of underpayments increases when businesses pay annualised salaries. This is an arrangement where an employee is paid a salary designed to compensate them for all entitlements they would have otherwise received under the award including:
- Overtime
- Penalty rates
- Allowances
The issue arises when employees work a large number of hours, and their salary does not always compensate them adequately. As a result, they are not better off on the salaried arrangement.
If you pay your staff an annualised salary, you must ensure the employee is not being paid less over the course of a year than they would have been had the annualised salary not been agreed on.
Annual reconciliation rules
New rules have recently been introduced to non-hospitality awards, such as the Clerks Award, that mandate employers must perform an annual reconciliation to prove that staff on annualised salaries are no worse off.
While annual reconciliation is not compulsory for awards that apply to the hospitality sector, they very well could be introduced down the line.
Keeping accurate timesheets is key
It is important that you keep accurate timesheet records for all employees, including those who are paid a salary. Technology, like KeyPay, can make this process much easier as employees can create timesheets by clocking in either on their phone or on an iPad.
Q: So, what advice do you have for businesses that choose to pay their employees annualised salaries?
Leanne:
While annualised salaries seem to be the norm for permanent staff in the industry, however, businesses should consider eliminating this method to reduce their risk of underpaying staff and remove the additional step of ensuring that employees are no worse off on annualised salaries.
In the place of annualised salaries, businesses could consider moving to an hourly pay model using a payroll program that automates award payments.
The benefit of hourly pay for employees is also around motivation. Employees are much happier to perform overtime or work an extra workday if they know they will be paid for it straight away, rather than this being wrapped up in a salary.
Q: What are the benefits of automation/cloud technology for managing Modern Award and super updates like these?
Leanne:
Cloud technology and automation in payroll offer employers peace of mind. By using software such as KeyPay where Modern Awards are automatically kept up to date, you can rest assured that award calculations comply with Fair Work and employees are paid at the correct rate.
Plus, KeyPay alerts users each time there is a wage increase or any other change to the award that impacts employee payments.
Beyond that, I strongly feel that payroll automation saves businesses a lot of time. By automatically applying award pay increases or super increases, no manual work is required to painstakingly calculate and update every single employee’s file. This ultimately frees up precious time to focus on other strategic tasks at hand.
Lightspeed and KeyPay
Big thanks to Leanne for taking the time to speak to us about this very important issue on wages for our industry.
KeyPay integrates directly with Lightspeed POS to further streamline employee wages. They support bars, breweries, cafes, restaurants and stores, as well as service businesses of all sizes – from sole traders to corporates with over 3,000 employees.
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