Hospitality and Accommodation Industries – Minimum wage increase

Hospitality and Accommodation Industries – Minimum wage increase in effect from 1 February 2021 for workers in the hospitality industry.

The Fair Work Commission announced a 1.75% increase to national minimum wage in the Annual Wage Review 2019/20. The hospitality industry, among a number of other sectors, are required to increase pays effective 1 February 2021. Despite the Australian Chamber of Commerce and Industry, and other industry bodies arguing there should be no increase at this time.

After 12 months of feeling the impacts of COVID-19 on the accommodation industry, a big focus has been on keeping costs low for small and medium businesses. So, an increased wages bill is the last thing many Accommodation businesses need right now.

On a brighter side this increase in award wages is the lowest increase we have seen in several years and the commencement date of the increase has been deferred from the usual 1 July start date to 1 February 2021. For the average worker in hospitality the increase amounts to around $13.00 per week.

With the increasing cost of payroll, many businesses may look to engage workers outside of their payroll system, avoiding the increasing minimum Award hourly rates and the additional superannuation costs and compliance thereof. Workers may offer this as their preferred option resulting in less cost for you and more money in their pockets if you are not paying part of their wage to their super or the ATO as tax on their behalf. What’s the harm?

If a worker is a deemed employee by the ATO, you are legally bound to pay them under the appropriate award, withhold tax and pay employer superannuation directly to their nominated superannuation fund. Unfortunately, simply ‘deciding’ whether to engage staff as employees or contractors is not an option.

The penalties of meeting your employer obligations in this regard are severe, with interest and penalties of up to 200% of any unpaid taxes and superannuation. Further, directors can be held personally liable for employer related debts (superannuation, PAYGW tax).

Not a great time to be increasing the payroll costs for a struggling hospitality industry. But worse still would be being subjected to an ATO or Fair Work review for failing to meet your employer obligations, and the costs associated therewith.

Please take the time, now, to review your current payroll setup to ensure you are meeting all your obligations. If in doubt seek professional advice.