Three-month probation without pay uncovered as FWO issues stinging hospitality industry report

The Fair Work Ombudsman has warned the hospitality industry of a generally high level of non-compliance following an audit in three different states, although an industry leader says the problem stems from over-complicated laws.

The Ombudsman has revealed the results of an audit of 120 companies in Western Australia, South Australia and the Northern Territory, with some surprising cases – one business tried to hire an employee on probation for three months without pay.

Fair Work Ombudsman Bill Loizides said in a statement the FWO was “disappointed” to find such a high rate of contraventions.

But Restaurant and Catering Association head John Hart told SmartCompany the real issue lies in the complexity of the laws.

“The reality is that under the current arrangements, it’s almost impossible to be fully compliant,” he says.

“There are still arguments between FWO and ourselves, and Fair Work Australia, as to what the rates should be, because it’s just so complex to calculate what a certain rate should be for an individual.”

The hospitality industry has been driving a campaign to reduce penalty rates, with leaders saying businesses are closing their doors due to excessive wages demanded for weekend work.

The audit resulted in 269 employees being reimbursed a total of $222,305. In another significant case, nine employees in Adelaide were back-paid a total of $57,000 after the FWO found they were being paid below the national minimum wage.

The audit focused on cafes, restaurants and take-away outlets in Adelaide’s Gouger and Rundle Streets, the Perth CBD and all throughout Darwin.

In South Australia, 22 of the 59 employers audited were non-compliant, with 17 underpaying a total of 129 staff $97,309.

In Western Australia, 19 businesses were non-compliant, having underpaid 66 staff a total of $62,128 – the FWO found most businesses that were non-compliant were unfamiliar with any changes in wages. In the Northern Territory, nine non-compliant businesses had underpaid 74 staff a total of $62,868.

“Inspectors found that most non-compliant employers were from a non-English speaking background and had limited understanding of their obligations under workplace laws,” it said.

The audit comes as the FWO is starting a three-year campaign for the hospitality industry, which will provide information for business owners. But John Hart says the real problem lies in the fact the laws are simply too complex.

“Simplicity is what we need, so I’m not at all surprised there’s a high level of non-compliance,” he says.

TressCox Lawyers partner Rachel Drew told SmartCompany this morning that non-compliance is common among businesses where trials are offered – which can be common in hospitality.

“There are plenty of examples where employers have attempted to hire younger people, and they say they’ll put them on a trial period of a week,” she says.

The FWO has been adament in stamping out “unpaid trials” over the past few years. 

The Restaurant and Catering Associating is embarking on its own campaign, which Hart says will take place across the entire year. A large part of the campaign will be encouraging businesses to become knowledgeable about their obligations, as well as conduct audits of their own businesses.

But the industry still demands changes to what it deems complex remuneration laws.

“I haven’t seen any changes that contribute to simplicity, it just seems to be tinkering around the edges.”

The hospitality industry has been one of the most vocal proponents of change to the current wages system. Leaders have warned that unless penalty rates on weekends are reduced, more SMEs will have to close their doors.

They argue problems in the industry – such as the higher Australian dollar and a decline in tourism – make such high rates unsustainable.