Hospitality suffering under IR regime

On my way back from the Boondall ice skating rink this morning I stopped in at my favourite north side cafe, Dandelion & Driftwood, and while walking back to my car I noticed this sign on the neighbouring restaurant:

photo-9 The sign basically says that Mario will only open on Sundays if he gets a confirmed booking for at least ten people because otherwise he can’t afford the penalty rates. I had a brief chat with Mario and he told me to quote him as saying “Because of Fair Work Australia there are eight people who now don’t have a job on Sunday.”

I believe in fair wages and protecting workers’ conditions, but the hospitality sector appears to be struggling under the IR system. Let’s hope the current review into the Modern Award system can strike an appropriate balance (see Union offers olive branch on IR reform).

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8 Responses to Hospitality suffering under IR regime

  1. The Happy Hillbilly says:

    I think it would be wise to get the other side of the story – ie, the staff – before making a judgement as to what is really going on. Given Mario’s actions it sounds like an internal workplace dispute.

  2. The Happy Hillbilly says:

    Mario appears to say that he has been in the business over 20 years – surely he has been paying penalty rates the whole time since their existence spans longer than 20 years and certainly pre-dates Fair Work Australia by a very long time.

  3. Holden Lover says:

    I believe what Mario has said is true and it is not a dispute, sorry happy. Prior to 2010 hospitality and retail had different penalty rates for casuals part time and full time. Now however all staff receive double time for Sundays. So if we are looking at $17.00 an hour on a Monday a Sunday thats $34 an hour. That’s a lot of entrees and main meals to cover those wages. Makes sense that you need 10 customers to cover wages. Now you may think that $34 is fair enough for a sunday however working in the cafes catering and restaurant industries has always been a 7 day a week award but since 2010 basically this has now become a 5 day a week award. The Governments stated in 2007-2009 that no employee or employer would be worse off under Fair Work Act however there is no way that both could not be worse off. There had to be a looser and employers were always going to lose. Unfortunately the modern award review will not change the current system enough to make Sunday trade viable for many cafes and restaurants. The same goes with many small businesses I have a fruit shop in my local area that only has the owner on Sunday again he cant afford based on his turnover and being right next to woolies that he can have enough sales to cover wages.

  4. The Happy Hillbilly says:

    Thanks for that info Gene.

    Hi Holden Lover.

    Economist Matt Cowgill has a good post on this exact topic http://mattcowgill.wordpress.com/2012/01/10/george-calombaris-would-you-like-penalty-rates-with-that/
    Now of course you can point out that Matt works for the ACTU but the facts he raises are pertinent nonetheless. Two years after the 2010 award you refer to came into effect, profits and employment in the restaurant industry showed no signs of any significant negative impacts that could be linked to the legislation. If Mario’s experience has been replicated broadly across the industry, you would expect good statistical evidence to back it up. But the facts up until that point – the first two years the award was in operation – appear to say otherwise.

    Accordingly, Fair Work’s review of the issue last year concluded that..

    “The Commission found that while there was some evidence in support of parts of the employers’ claims, it was far from compelling, and rejected the submission that reducing the Sunday penalty rate would result in employers offering more hours of work on Sundays, resulting in the promotion of more efficient and productive performance of work through the mix of employees engaged. The Commission was not persuaded that a sufficient case had been made out to warrant varying the awards in the manner proposed by employers.”http://www.landers.com.au/Publications/Workplacerelationsandsafety/Publicationdetail/tabid/334/ArticleID/603/Default.aspx

    How it’s travelling now I’m not sure, I don’t have any more up to date info. However, we know that the economy began to struggle and has been somewhat soft since – perhaps Mario’s is simply a victim of slower economic growth.

    Unions and employer groups both have their standard arguments and “we’ll all be rooned!” is one such that employer groups use. Evidence that Hospitality is being harmed as a direct result of the modern award system seems a little thin.

    • Gene Tunny says:

      Thanks for those references, HH. That’s certainly a good post by Matt Cowgill but I’d note he looks at the impact on total employment rather than hours worked. I expect that changes to penalty rates have had a significant impact on hours worked in the industry, because some restaurants aren’t opening on Sundays for example, but not necessarily on total employed persons. Workers may still have a job in the industry although they work fewer hours.

      Anyway I’m unsure if looking at Labour Force Survey data can help us figure out whether there is an impact or not, given that the data are probably unreliable at that level of detail anyway. It would be much better to run a targeted survey of employers and workers in the industry to gauge whether there has been an impact.

  5. The Happy Hillbilly says:

    That’s a fair point Gene.

    I must say though, I have some difficulty reconciling employers claims that the award is making their operations uneconomical with the fact that employment in the industry grew 4% under said award. If their claims are broadly true, they appear to have pulled off a remarkable feat in continually expanding while going broke. The ingenuity of entrepenuers in the hospitality industry must be something of a wonder to behold.

    But I agree, a targeted survey would allow us to better judge the impact (if any).

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