If you listen carefully on July 1, you might just catch retailers, restaurateurs and hotel owners giving an audible sigh of relief, because that’s the day the long-awaited second round of penalty rate cuts is due to kick in.
In case you missed it, the cuts were announced by the Fair Work Commission in February. Evening and night shift rates were the first to be slashed. Now, public holiday rates are in the firing line. Workers who currently get 250% of their normal rate on a public holiday will get 225% and those who get 275% will see their pay cut to 250%. Employers stand to save around 10% per employee per shift. Opponents say it will cost workers thousands of dollars a year.
Retailers, restaurateurs and hotels are not the only businesses to benefit from the cuts (pharmacies are affected too), but it is them, more than anyone, who will see this as a sea change in the world of Fair Work.
Why? Because these are the industries that have been hit hardest by Fair Work pay violations since the act was passed in 2009. For the wind to blow in the other direction for once is—for them—a welcome development.
$190M in Back Wages Paid for Improper Recordkeeping, Failure to Pay
As we saw in a previous blog post, TSheets’ research has revealed that Fair Work violations have cost Australian employers $190 million in back pay—a sizeable bill that takes no account of any fines or legal fees they may have had to pay on top. For the businesses affected, the financial price has been heavy. The collective cost currently runs at $27 million a year, which has so far put $1,800 back into the pockets of more than 100,000 workers.
If underpaying workers doesn’t already look like a high-risk game, consider this: For some companies, the damage from a Fair Work violation runs much deeper. It can go far beyond a financial settlement. Since 2014, the Fair Work Ombudsman has successfully pursued at least 57 companies in the courts. In most cases, this was for lacking proper records, such as timesheets, or neglecting to pay their workers all the money they were owed. Sometimes, it was a combination of both.
The main targets for these prosecutions? You guessed it. Restaurants, retailers and hotels have accounted for almost 50% of the recent cases resolved in court. All told, the ombudsman has recovered more than $4.25 million through litigation since 2014, which is equivalent to each business paying more than $75,000. And this figure seems to be significant, because 46% of the companies that have been forced to pay these fines have subsequently gone bust.
That’s right. When you compare the names of the companies listed in the litigation section of the ombudsman’s website with the data collected by the Australian Investment and Securities Commission, almost half have insolvency notices next to them. These cases are rare, but when the courts find merit in them, the consequences are, for a business, about as severe as they come. If next month’s penalty rate cuts are the silver lining for retailers, restaurants and hotels, the cloud of Fair Work compliance is still very much on the horizon. Getting good advice and putting the right processes and procedures in place are a worthwhile investment.
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