Penalty rates and Fair Work.


22nd January, 2020

How to stay on top of penalty rates and avoid a Fair Work claim

Politics aside, Australia Day means we have a public holiday fast approaching and that means making sure you’ve either planned for some downtime, or to pay a little extra to keep staff on. Here’s how to navigate penalty rates now and in future.

Balancing the competing priorities of public holidays with customer expectations, managing staff and balancing your cash flow is no mean feat for small business owners.

And a day like Australia Day is no exception.

This year, Australia Day (26 January) falls on a Sunday, which is when the main festivities occur, such as citizenship ceremonies and council-run family days. Other Australians might attend or host a barbeque with friends or head to the beach. There’s a list of planned events available here.

The following day, (Monday, 27 January) is the nationally recognised day for a public holiday.

Small business owners will be weighing up what the holiday could mean for changes in both customer and staff behaviour.

Accountant Dr Steven Endicott of Melbourne’s CIA Tax advises clients to consider closing their business and taking the day off.

“People actually understand the labour cost reasons,” said Endicott.

READ: Employment law basics for the new business owner

If you do decide to open for business as usual, reduce paid staff and rely more on business owners or family for free labour.

Also, bear in mind that it’s reasonable to charge a surcharge of 20 percent. Just be sure to communicate that up front, he said.

“Or, consider running a reduced or streamlined service.

“For example, don’t offer a full menu if you run a café.”

Opportunity versus cost: Deciding whether to stay open

It’s worth conducting a financial forecast to assess whether being open is viable and how to roster staff to maximise profitability, Sydney’s chartered accounting firm Box Advisory Services founder Davie Mach advises.

It’s also worth understanding the ‘branding effect’ that comes with closing during a holiday.

READ: Avoiding a seasonal cash flow nightmare

“Given that small businesses rely heavily on their local community’s support, it may pay to be open during the public holiday if you’re a café, restaurant, medical centre or similar, as you’ll most definitely find that you’ll enjoy the benefits of being known as a business that operates consistent hours no matter the time of the year,” said Mach.

Observing the letter of the law

An employer can ask an employee to work on a public holiday, but, an employee may refuse a request to work if they’ve reasonable grounds to do so.

Fair Work Ombudsman Sandra Parker says inspectors can issue a compliance notice if they believe that an employer has breached workplace laws.

The industry watchdog is cracking down on alleged non-compliance in the fast food, restaurant and café sector, she said.

“Where employers don’t comply with our notices, a court can order them to pay penalties in addition to back-paying any affected employees,” said Parker.

Be warned: penalties apply

Small business owners intending to open on the public holiday should check employee Awards or Enterprise Agreements, which will set out their entitlements when staff work on a public holiday.

After all, most employees (regardless of whether employed casually, part-time or full-time) will be entitled to penalty rates on both Sunday and Monday.

The rate will vary by award and depending on your particular enterprise agreement.

Be sure to check the Fair Work website, which explains that Awards, enterprise agreements and other registered agreements can provide entitlements for working public holidays, including:

  • Extra pay (such as public holiday rates)
  • An extra day off or extra annual leave
  • Minimum shift lengths on public holidays
  • Agreeing to substitute a public holiday for another day

To assist you in getting the numbers right, check out the Fair Work calculator here.

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