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The hospitality problem: Why staff are being underpaid and how STP is set to stop it



Featured | Finance

By Angus Capel

By: Angus Capel, Small Business Advocate, Xero


George Calombaris is the latest in a long list of hospitality bosses to be caught underpaying their workers. This time, by millions of dollars. And while public response has been swift in condemning the now-former Masterchef star, this behaviour is nothing new within the industry. Indeed, it follows a string of high profile underpayment cases including the likes of Neil Perry, the Shangri-La Hotel and Domino’s.

In 2018, a Fair Work Ombudsman blitz found 72 percent of hospitality businesses across drinking and dining hot spots in Glebe, Richmond and Fortitude Valley were breaching regulations. The most common offense? Underpayment of hourly rate wages owed to workers. In an industry that employs more than 830,000 people within Australia – that means an awful lot of money is being unlawfully withheld.

So, why do some hospitality businesses continue to underpay their staff?

  • Wrong award classification – from sous-chef to server, there are countless classifications within the hospitality industry. And staff are often paid at the wrong one (consciously or not).
  • Complexity of interpreting award rates – from penalty rates for weekends and public holidays to overtime, mastering awards rates is by no means simple.
  • Systems without flexibility – while hospitality staff regularly work outside of their allotted hours, rostering systems may not have the flexibility to take this into account.

Then, of course, there’s the issue of egregious behaviour within a competitive industry. However, it’s often the case that businesses trying to do the right thing are unnerved by the complexity of the system.

How can businesses make sure they stay within the rules and do right by their people?

  • Build a relationship with a hospitality industry specialist accountant or bookkeeper (they’re always on top of complex rates and classifications).
  • Have a chat with the Fair Work Ombudsman’s office or visit small business showcase online.
  • Set up simple but smart systems and processes to cater to the variability of the industry.
  • Implement a rostering and award interpretation business app that seamlessly integrates with Xero such as Tanda, Deputy or KeyPay (this way, overtime will never go unnoticed).

Underpaying staff gives an unfair competitive advantage to the businesses breaking the rules while piling up financial pressure on the good guys. And, up until this point, it’s clear that threats of auditing and fining haven’t been enough to affect industry-wide upheaval.

But change is here. As of 1 July 2019, Single Touch Payroll legislation has ensured that both employees and the ATO now have full oversight of wages paid each pay run and superannuation payments made quarterly. This newfound transparency will empower employees to check whether they are being paid the right amount, every time. It’s also set to shine a light on those who aren’t willing to contribute to fair competition within the hospitality industry.

The long-awaited result? An environment that supports employees, business owners and consumers alike, and ensures the best businesses (in both ethics and output) are the most successful.

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