The latest minimum wage and award wages increases are set to have a substantial impact on hotel profitability. Lightspeed APAC, Managing Director, Andrew Fraser, shares an insight into the latest changes and what employers can do to manage these rising costs.

What important changes came into effect on July 1?

As of July 1, the Fair Work Commission (FWC) has implemented new policies that grant Australian minimum wage workers an 8.65% wage hike. Award workers will get a wage increase of 5.75%. This substantial increment, described by Treasurer Jim Chalmers as “the largest in history,” will positively affect nearly three million workers.

Along with the changes to the national minimum wage and award wages, the super guarantee rate will also increase from 10.5% to 11%.

What does this mean for the accommodation sector?

There’s no doubt that the increase in both wages and superannuation is a significant victory for minimum wage and award workers. However, it poses challenges for struggling hospitality venues, which have witnessed a 10% rise in wages in less than a year. Unlike for retail businesses, a 4.6% – 5.2%  rise in hospitality wages was deferred until October 2022, so the new rate rises come in quick succession and will impact hospitality venues’ bottom line.

The mandatory wage rise will substantially impact employee wage bills, particularly in the hospitality industries, where the majority of workers are covered by industry awards. In fact, before the FWC ruling, many hospitality and retail industry bodies had called for a smaller increase, citing the impact on small businesses.

These changes will significantly impact venues’ profitability, as rising costs have already led to decreased food and beverage profits. A report by the Restaurant and Catering Association (R&CA) reveals that nearly half of the hospitality businesses experienced a decline in net profit, mainly due to economic conditions and staffing costs. Around 40% of business owners work unpaid hours to cope, which is an unsustainable practice that affects employment levels.

The financial burden of rising wages adds to the bleak long-term outlook for many venues. According to R&CA’s report, 5.7% of business owners expressed their intention not to operate their venues in the next 12 months. This highlights how the mandated cost increases have become unmanageable for businesses.

How can employers support their business amid these rising wages and costs?

In order to support their business amid rising wages and costs, there are several steps business owners can take. 

Although cutting staff hours may appear as a straightforward solution, it can result in negative consequences for the business, such as increased wait times or compromised customer service. Rather than simply cutting staff hours, venues can focus on optimising staffing costs in a strategic and cost-effective manner. Understanding the specific industry award that applies to their employees is vital. This enables them to grasp the nuances and triggers within each award. For instance, being aware of when overtime applies or when penalty rates must be paid for specific circumstances can help manage costs more effectively.

Leveraging software solutions can also be beneficial. Using a payments and point-of-sale (POS) platform like Lightspeed allows businesses to analyse revenue patterns and identify peak and slow periods. This is a big help in staff rostering for different days and seasons, ensuring the right number of employees are scheduled to meet demand. Also implementing technologies such as QR ordering can automate tasks and save time and costs for hospitality businesses, allowing staff to focus on more revenue-generating activities.

Ultimately, it’s essential that businesses plan ahead and analyse actuals. Employers can cost the roster for the week and compare it with income estimates to calculate a wage cost percentage. Analysing the actual outcomes and addressing questions regarding overtime, employee work patterns, and areas for improvement can provide valuable insights to manage costs more efficiently moving forward.

By doing these steps, employers can navigate the challenges posed by rising wages and costs more effectively, ultimately supporting their business in the process.

Are future wage increases likely?

The adjustments in national and award minimum wage are imminent, so it is crucial for businesses to stay ahead of the game so they can navigate future wage increases effectively.