Penalty rates cuts hit nation’s retail and fast-food franchises

With the July 1 deadline for the latest round of penalty rates cuts hitting over the weekend, more than 700,000 Australian workers including thousands in the retail and fast-food industries were impacted, but what does this mean for franchisors?

The retail and hospitality sectors operate a significant number of franchises within Australia, providing gainful employment to a diverse range of workers.

The penalty rates, which were introduced last year, aimed to stimulate the national economy and create new jobs by providing employers with a reduction in wage expenditure, however Gerard Dwyer, SDA National Secretary believes the cuts have not been a success.

“Joint research from Macquarie and Wollongong universities has confirmed that last year’s penalty rate cuts have failed to create any new jobs,” Dwyer said.

“Further, Australia’s Reserve Bank has consistently stated that low wage growth is a major handbrake on the Australian economy.”

July 1 saw retail and fast food workers’ Sunday penalty rates again slashed, which Dwyer said was an unfair and unwarranted move.

“On July 1, 700,000 Australians, including thousands of retail and fast food workers will get an additional pay cut of up to $55 a month when their Sunday penalty rates are slashed a further 10% to 15%,” Dwyer said.

“In total, these penalty rates cuts will cost retail and fast food workers, many whose employment is insecure and low income, between $2,000 and $6,000 a year. This is a pay cut they cannot afford and do not deserve.”

For small-business and franchise owners however, the changes warrant immediate adherence.

Ashik Ahmed, CEO of employment management software, Deputy said some franchisees may not fully grasp the new wage systems, which could lead to long-lasting financial implications.

“Though penalty rate changes may seem minor, they are just a small part of extensive Fair Work Award guidance, which is over 100 pages long,” Ahmed said.

“The guidance is complex and many smaller businesses, who do not have the luxury of HR, legal or finance teams run the risk of non-adherence.”

Ahmed said franchise owners who overlook or under-prepare for the changes are doing themselves and their workers a great disservice.

“For many, the first time they will hear they’re in breach is when they’re audited-then it’s too late,” Ahmed said.

With the penalty rates cuts now in full-effect, franchisees and franchisors are being urged to prioritise wage updates to ensure compliance.

“Having spent the past decade working with businesses in the hospitality industry, I know first-hand how these subtle but significant changes pose a serious risk to businesses,” Ahmed said.

“Complex award issues aside, Sunday is one of the busiest days of the week for the hospitality industry. These changes could quite easily slip under the radar amid busy trading period.”