Background: Within Australia there are presently some 40,000 cafes and restaurants and about 250,000 workers. More than two thirds of employees are un-skilled or semi-skilled, and comprise the bulk of the wage cost. IR challenges which concern this group have the potential for significant impact on restaurant earnings and operations.

The restaurant industry has been chosen because it is representative of many of the challenges facing small business. The challenges are significant especially when it is considered that the restaurant industry consists of many small operators, sometimes at the mum and dad level, and there are a few resources to tackle the rising IR complexity, especially in rural areas. Restaurant businesses lack human resource management skills and resources and in turn employees lack union representation

Industrial relations issue

A penalty rate is an issue in the industrial relations facing by the restaurant industry (taken to also include café operators and catering providers, but excluding large franchise operators). Penalty rates in particular have apparently caused restaurant owners cost difficulties. The employer pays the penalty for requiring workers to work at unsociable times such as late at night, weekends and public holidays. In the restaurant industry Saturday penalty rates are 1.25 times ordinary earnings, on Sundays the rate is 1.5 times, and on public holidays the rate is 2.5 times. Overtime, that is work beyond ordinary hours, also attracts penalty rates. The union view is that staff should not have to work at minimum wages during unsociable hours. The essential point of conflict for the restaurant industry is the need for some protection of the unskilled and vulnerable workforce contrasted with the need for restaurant owners to achieve an adequate level of business profit and return on equity in a very competitive and low margin business. This type of IR framework increases staff hiring pressure, because owners and managers face increased employment risks. The above trends indicate that penalty rates are likely to increase the risk of a restaurants failure. Small restaurant operators are very likely to use family members or ‘safe’ employees extensively to avoid industrial risks.

Theory to address the issue

The pluralist approach assumes that any employment relationship automatically has the potential for conflict and this is why effective conflict management so important, and this is the aim of Fair Work Australia. The role of the state is to protect the weak and to try and reconcile conflicting opinions and to keep conflict within acceptable bounds. At the present time the restaurant industry operates under the pluralist approach whereby industrial peace needs to be achieved through some type of adaptation to the different stakeholder perspectives. Restaurant employers, if it were possible, want to rewrite the entire industrial award. This type of IR framework increases staff hiring pressure, because owners and managers face increased employment risks. The above trends indicate that penalty rates are likely to increase the risk of a restaurants failure. Small restaurant operators are very likely to use family members or ‘safe’ employees extensively to avoid industrial risks. Employer opposition against penalty rates places it in direct confrontation with the union and the government. These last two parties are unlikely to agree to any changes until unemployment in the industry increases. The employees, and the union, want penalty rates to remain. The government has continued on its task of promoting industrial stability and protecting the workers in the restaurant industry

Recommendation

Ideally, restaurant employers and trade unions and the government should be able to come to an agreement. Each side has something that they want (employers want to reduce staff hiring pressure while trade unions want above minimum wage for any overtime worked), so they should compromise and come to an agreement as soon as possible. It is in the best interest of both parties to come to an agreement because restaurant employers do not want to have a failing business while employees want higher wages. More so than employers and trade unions, it is also in the interest of the government to do something about the situation so that stability returns to the industry and workers’ rights are also protected.

If collective bargaining agreements cannot be reached between employers and trade unions and the government, then labour laws should dictate the number of hours that employees can work each week. In addition to regular working hours, there should be a provision that employees can work overtime but not more than three hours per week. The penalty rate for this overtime can be a standard 1.75 across all weekends and public holidays. If an employee has already worked three hours overtime in a week and is needed to work more, then the penalty rate can increase to 3. Because this will likely be not attractive to employers because of the extra cost involved, the employers can find someone else to fill in with the overtime. If there is no one else available to work overtime, then employers should consider hiring more staff because the amount of work that they have requires it.