How Penalty Rates Impact Your Business

September 16, 2016 Jessica Ure No Comments

When it comes to reimbursing hospitality workers for their precious time, Australia steps up as one of the most generous nations on the planet. While Brits, Canadians and Americans tend to receive the same rate for working weekdays, weekends and after hours, Australia serves up a host of tiered penalty rates for its hospitality labour force.

For employers, an understanding of these penalty rates is an absolute must. So what are penalty rates, and why do they matter? Here’s our beginner’s guide to how penalty rates hospitality impact your business.

Weekends

Loved or loathed depending on who’s writing the check, weekend penalty rates for casuals can earn employees a mint, and costs employers a bomb. On Saturdays, rates can spike by 25-50%, while Sundays see some hourly rates jump to double the usual weekday cost. Exact rates vary between states, with penalty rates Queensland slightly different from penalty rates WA.

While there’s always been controversy surrounding weekend penalty rates, the latest data from Vote Compass confirms that the majority of Australians support Sunday pay rates, with 57% agreeing that “People who work on a Sunday should get paid more than people who work on a Saturday.”

Public holidays

In 2017, Australian states are on track to enjoy up to 14 public holidays. Activation of the public holiday pay rates penalty varies from state to state, as official public holidays do differ. For example, in Canberra Monday September 25 is recognised as Family & Community Day while in WA, Monday June 5 is celebrated as Western Australia Day.

In both cases, penalty rates for public holidays will only kick in within the state that’s celebrating. For national holidays like New Year’s Day, all states will operate on public holiday rates.

Overtime

Under the Hospitality Award, employees are entitled to overtime when they slog it out for longer than initially required. This includes working outside ordinary hours, and exceeding the agreed number of hours. While rates do vary from state to state, the Hospitality Award sets out when overtime rates apply, and who receives them.

In the same way that casual employees benefit from weekend and public holiday pay rates, full time employees are the main beneficiaries of overtime. Rates jump when employees rack up more than their maximum number of ordinary weekly working hours, while part time employees are also entitled to overtime when working outside usual times, or more than their agreed hours. In comparison, casuals don’t receive overtime, and are paid their usual rate for all hours worked.

Late night/early morning shifts

In the hospitality industry, business can fluctuate wildly from hour to hour. In some scenarios, employees are entitled to penalty rates when working late night or early morning shifts in order to meet the needs of the business. For example, if a Sydney restaurant is unexpectedly slammed by diners just before it’s set to close its doors at 10pm, an employee may be asked to stay on until 12am in order to shut up shop. In this case, penalty rates NSW may apply. Similarly, a Melbourne bar employee may be asked to clock in early in order to prepare a venue for an event, or complete a stocktake inventory. In return, they could be entitled to penalty rates Victoria.

If employers fail to pay up, employees are entitled to collect owed penalty rates under the Penalty Interest Rate Act 1983. Interest rates are currently set at 9.5% per annum, as fixed by the Attorney General.

As an employer, it’s your responsibility to develop an in-depth understanding of pay rates in your state, and honour them accordingly.

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