Restaurant wages and the wash-up

Hot topic: the hospitality industry accounts for around 7 per cent of Australia's workforce.
Hot topic: the hospitality industry accounts for around 7 per cent of Australia's workforce. Photo: sorendls

Is there a way to pay all hospitality staff properly and still have an industry able to turn a profit? Yes, but we are likely to have to pay for it.

It's been the biggest and most persistent story in food all year. Prominent chefs and restaurateurs keep hitting the news, not for foam 3.0 or vegan ham, but because they're accused of underpaying employees.

Many of those who haven't made the headlines are quietly scared they'll be next.

Rockpool's Neil Perry.
Rockpool's Neil Perry.  Photo: Louie Douvis

Hospitality workers in their hundreds have signed up with Hospo Voice, a Victorian offshoot of the United Workers Union that seeks to shame laggardly restaurants and cafes into workplace compliance. Partly as a consequence of Hospo Voice call-outs, the Fair Work Ombudsman has been overwhelmed with complaints about restaurants.

Although making up only 7 per cent of the labour force, the hospitality industry accounted for 17 per cent of disputes and 36 per cent of anonymous tip-offs received in the 2018-19 financial year. Ombudsman Sandra Parker has declared fast food, restaurants and cafes a priority focus for her office.

Hospo Voice is counting its victories. "More and more employers are deciding that stealing wages is not worth the risk to their reputation, so increasingly we are seeing employers cleaning up their business, and paying correctly," says James Madsen-Smith, a front-of-house worker at a Footscray pizza restaurant and the leader of Hospo Voice's branch in Melbourne's western suburbs.

Hopefully we are now at the forefront with best practices and we're setting a standard for everyone to follow.

Neil Perry

But is the story as simple as criminal business owners exploiting powerless workers for profit? There are counter views, mutterings of unfairness, and a rising of the ranks, particularly among career chefs and waiters in fine-dining establishments. Some see the targeting of celebrity chefs such as Rockpool's Neil Perry as a witch hunt that's gone too far, diminishing the legacies of major contributors to a dining culture that is an international selling point of our liveable cities. 

In food businesses around the country, there is disquiet about the ructions in the industry. At the same time, some employees have been gratified to receive redress for underpayments and some businesses welcome the oversight that encourages a level playing field: restaurants with higher wage bills find it hard to compete with those underpaying staff.

It's not an easy topic to grapple with but I've identified five themes: workplace culture and skills, prices, the regulatory framework, the place of the union, and the role of consumers. Let's dive in.

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Culture and skills

Most people in hospitality will admit that the industry has traditionally been something of a shadowy hinterland with substandard record-keeping and a culture of long hours.

I've written hundreds of profiles about chefs and it's more or less a truism that they've come up the ranks doing 80-hour weeks. Being paid for all those hours was not an expectation and, if they later became business owners, they sometimes carried those habits forward to their own employees.

No matter how normal it is or even whether it's mutually agreed, not being paid for hours worked is always underpayment, according to Australia's Fair Work legislation. Josh Bornstein is a workplace lawyer who has acted against restaurants including Rockpool. "In restaurants, compliance is the exception rather than the rule," he says.

Ex-Rockpool chef Robbie with his wife Rebecca, who now run the City Larder.
Ex-Rockpool chef Robbie with his wife Rebecca, who now run the City Larder.  Photo: Greg Briggs

But underpayment cannot always categorised as theft. Robbie Bell was employed as a chef at Rockpool Bar and Grill in Melbourne between 2010 and 2015, and now owns City Larder foodstore with his wife, Rebecca. He never fussed about unpaid hours from the overtime he put in. "I'm in it because I love the job," he says. "I would ask myself, am I learning? Is this going to progress my career? Am I being treated with respect? Am I able to use my skills? If it ticks the boxes, I'm going to do it. It's about the package, not about working these hours for this money."

Strict adherence to rules can sometimes hamper innovation. Passionate chefs often want to test and tweak dishes outside regular working hours. In a less regulated kitchen, they might clock off and keep going but in a rule-bound workplace they can't. One executive chef who preferred to remain anonymous told me that his junior chefs resist when he sends them for mandated breaks. "They don't want to leave," he says. "They ask me what they have done wrong." Another restaurateur said, "In the old days, a chef would come in an hour earlier with an apprentice and play around with ideas. Now they can't."

Most chefs now tend to accept that the kitchen caves of yore must transition into modern workplaces, not least because of a welcome light shone on the poor mental health of many hospitality workers. "There's a balance," Bell says. "No one should be exploited, no one should feel like a slave." But if you want to be there, then you should be allowed to, he says.'

Kirsten Baker of Finders Keepers Cafe in Melbourne.
Kirsten Baker of Finders Keepers Cafe in Melbourne.  Photo: Supplied

That's not how everyone sees it. Kirsten Baker is co-owner of Finders Keepers, a cafe in Melbourne's eastern suburbs that opened in 2014. She and her husband, Sean Minter, have been vocal about their adherence to workplace law. "It's heartbreaking that those insane hours are worn as a badge of honour," she says. "The reality is that the benefits for the people that own the business are probably far greater than for the individual. It may benefit the careers of some chefs but many others would fall through the cracks and we see that with mental health and financial issues."

Bornstein has little time for the willing-worker argument. "I don't think the ranks of the underpaid who want to keep being underpaid are nearly as strong as the underpaid who want to be paid properly," he says. Not everyone is looking for a glittering career, anyway: they just want a decent pay cheque.

Hospo Voice has a particular focus on migrant workers, who may be more vulnerable due to temporary visas and lack of English. "We know of countless venues where locals and migrants are both having their wages stolen, but migrant workers are being paid a fraction of the locals, sometimes as low as three to four dollars an hour," says Hospo's Madsen-Smith. "This is the dirtiest secret of the hospitality industry right now: venues are thriving off the sweat of a migrant underclass."

Restaurant and Catering Industry Association CEO Wes Lambert.
Restaurant and Catering Industry Association CEO Wes Lambert. Photo: Renee Nowytarger

Prices

What is the problem, then, with paying people for the hours they work? Contrary to the cliche that restaurateurs are fat cats raking it in, profits are so slim in most restaurants and cafes that it's hard to afford the true cost of wages.

"We advocate 100 per cent compliance with workplace law," says Wes Lambert, CEO of the Restaurant and Catering Industry Association. "We also know that profits are down and many operators are squeezed."

The association's 2019 figures show the average independent restaurant or cafe runs at a 5 per cent profit. Three-quarters of business owners say they pay themselves less than the award wage and things are getting worse. "We are three to five years away from a zero-profit average," Lambert says. "That's where we're heading if the award goes up 2 to 3 per cent and rent and energy prices continue to rise."

Matteo Pignatelli of Melbourne's Matteo's restaurant.
Matteo Pignatelli of Melbourne's Matteo's restaurant. Photo: Supplied

The traditional formula for restaurant profit and loss is 30 per cent of revenue is spent on food, 30 per cent on overheads such as rent and utilities, and 30 per cent on wages, with 10 per cent left over for profit. "But wages are now 41 per cent, on average," Lambert says. "A coffee has been $4 and steak $28 for the past 10 years, while rents, food and utilities have continued to rise."

"The margins are incredibly slim," says Raymond Capaldi, who owns pie wholesaler and cafe Wonder Pies. "If we have an order for 100 pies, I better not make 101 pies because my profit is gone in those extra ingredients. It's that tight." If businesses could charge more it would help but competition keeps prices flat.

In 2000, there were 15,000 restaurants in Australia. Now there are nearly 50,000. Consumers can and do vote for cheaper prices every day.

Radek Sali is chair of Made Establishment.
Radek Sali is chair of Made Establishment.  Photo: Justin McManus

When restaurants are so squeezed, our vibrant dining culture runs the risk of dumbing down. "The repercussions of high labour costs are that many chefs are resorting to practices such as buying in fish already filleted, beef already broken down and portioned, and fruit and vegetables already washed, peeled and diced," says Matteo Pignatelli, owner of Matteo's restaurant in Melbourne, and a former president of the Restaurant and Catering Industry Association. "Apprentices are missing out on being taught these basic skills, among others. More importantly, innovation is stifled and we end up with food that is a bit same-same ... pizza and pasta everywhere!"

The regulatory framework

Restaurateurs often complain that night, weekend and public holiday penalties are outdated in a culture that is increasingly operating 24/7/365. Many also say the award covering waiters and chefs is complicated and tricky to apply and underpayments are likely to be errors, rather than strategic rip-offs.

After Radek Sali bought into Made Establishment in 2017, his team noticed payment discrepancies that, in the wash-up, totalled $7.83 million in back-payments to 515 current and former employees. Sali notes that there were as many overpayments as underpayments – staff weren't chased up for those.

Fair Work Commissioner Sandra Parker.
Fair Work Commissioner Sandra Parker. Photo: Nick Moir

He's unimpressed by Hospo Voice rhetoric that brands the group – and particularly its celebrity figurehead, George Calombaris – as wage thieves. "It's out of touch and looking for headlines. The term 'wage theft' isn't thrown around with the intent of solving the issues. It's done with intent to create more fear. We self-reported. We paid people back. We were on the front foot. We didn't hide anything," he says.

Payment scandals keep surfacing in all sorts of industries. "Woolworths, prison guards, the ABC, Bunnings, legal firms, there are lots of companies getting it wrong," Sali says. "It shows that the system isn't working. If everyone is getting it wrong, the system is wrong."

Sali also blames an unsophisticated back-end to a fast-growing business: they got the food right but failed with the paperwork. "The systems and processes weren't good enough," he says.

Workplace lawyer Josh Bornstein: 'Complex schemes are devised by accountants and lawyers to suppress wages and underpay ...
Workplace lawyer Josh Bornstein: 'Complex schemes are devised by accountants and lawyers to suppress wages and underpay workers.' Photo: Arsineh Houspian

Perry says Rockpool was in the same boat. "At no stage did we rub our hands together and go, 'OK, if we rip off the employees this is how much money we can make'," Perry says. "Wage theft was never a business plan. Rockpool – and just about every other restaurant in Australia, and across every other industry – has had problems with compliance. We thought we were doing the right thing and that people were being properly remunerated but sometimes when you delve into the depths of the award, you miss things that have major impacts on the outcomes."

Penalty rates are designed to compensate workers for the negative impacts that working weekends, public holidays, late-night or early-morning shifts have on their family and social lives.

So are Australia's 122 industry awards that convoluted? Ashik Ahmed is the founder of Deputy, a developer of rostering software. "Anything to do with hourly payment in Australia is complicated," he says. "I often feel like businesses are set up for failure. The way the awards are written is not helping anyone."

In 2000, there were 15,000 restaurants in Australia. Now there are nearly 50,000.
In 2000, there were 15,000 restaurants in Australia. Now there are nearly 50,000. Photo: iStock

The 99-page Restaurant Industry Award of 2010 mandates the way employers should calculate the many permutations of full-time, part-time and casual workers, across various levels, hours and days, and with numerous penalties and allowances. A chef working an evening shift is likely to have three different hourly rates applied across that period.

"It's very, very complicated," says the Restaurant and Catering Association's Lambert. "We have been shouting it from the rooftops. Many restaurants get it wrong."

Lambert says calling Fair Work for clarification doesn't always bring joy. "Fair Work will not provide written advice and if you call and get a different agent, you may get different advice. It's easy to say it's easy, but it's just not true."

As an example of the award's complexity, Lambert points to clause 34.2 (a) (i) which refers to additional payment for work done after 10pm on a weekday. At that time "an employee ... must be paid an additional amount ... for each hour or part of an hour worked during such times". Between 10pm and midnight, the loading is 10 per cent. "In layman's terms, this means that if you have an employee who clocked out at 10.01pm on a shift meant to end at 10pm, you owe them one full hour of overtime, not just that one minute worked," Lambert says. "That's just one thing that can catch out restaurants."

Cafe owner Kirsten Baker has an alternative view. "The award is not too complicated," she says. "You can go on the website – it's a few clicks and you can see what you should be paying. If you need to, you can call up and clarify something." Baker has no patience with those who get it wrong. "As businesses get larger and more complicated, it's their responsibility to hire someone to help. It's not an excuse. I'm very black and white on that."

Bornstein accepts mistakes do happen. "It can sometimes be the case," he says. "But a lot of people say that and when you drill down it doesn't always bear out." He believes underpayments are often structural and purposeful, especially when big private equity groups buy into hospitality, as has happened at Rockpool. "Elaborate and complex schemes are devised by accountants and lawyers to suppress wages and underpay workers, followed by complaints about the complexity of the award system when exposed," he says.

Waiter Kris Recke, who does not wish to reveal his employer, estimates he's worked in two dozen venues in six years. "There are only two that have paid me properly," he says. "It's appalling. I feel the industry is built on the exploitation of people not knowing their rights or being too scared to speak up because they will lose their shifts."

He recently recovered $800 back-pay from a family-run restaurant that failed to pay him penalty rates for late nights and weekends. "When I got my first pay cheque, I could see there was something wrong," he says. "It took me two minutes to look at the Fair Work website and see what I should be getting. I don't see how them underpaying me could be anything but malicious."

Union tactics

Hospo Voice is a new type of union for the digital age. With its online calculators, employer review site, social media focus and cheap membership ($9.99 a month compared with, for example, $48 for a food factory worker with the Australian Manufacturing Workers Union), it's making inroads into an industry that hasn't traditionally been organised.

The union organised a picket of Rockpool Dining Group restaurants in central Sydney and Melbourne's Southbank on a sunny spring day at the end of October. In Melbourne, protesters moved between Sake, Rosetta and Rockpool, some wearing shark costumes, others carrying banners such as "Take wage theft off the menu".

The action was a real-world reinforcement of a #rottenrockpool social media campaign that claims payslips had been forged and employees abused. The poster boy is Rohit Karki, a former chef who says he worked 70 hours a week at Rockpool, including consecutive 20-hour shifts, for $12 an hour. While the rally roiled, bemused diners twirled pappardelle and sliced into $60 steaks. It became something of a flashpoint.

"I felt that it was a witch hunt," says ex-Rockpool chef Robbie Bell. He kicked off a countervailing #thankyourockpool social media flurry that put an alternative view. "Neil Perry is one of the top people in the industry. When I worked there, we were well looked after and the salaries were good. We did do extra hours, no two ways about it, but I loved the job. I couldn't see the rally and not speak out." 

Six months ago, Bell was surprised to receive an email from Rockpool with back-payment "in the thousands". "I didn't ask for it, I didn't feel that I deserved it," he says.

Restaurant industry players grumble that Hospo Voice is "political" and "they're on a membership drive". That's absolutely true (though industry organisations are political, too). Since the 1980s, union membership has declined about 40 per cent: fewer than 10 per cent of private sector workers are now in a union.

Hospo Voice sees itself as part of a broader battle against economic inequality and government policies that have chipped away at industrial rights. Its aims go way beyond ensuring your waiter gets paid extra for working Sundays – though they'll certainly count that as a victory along the way. 

"Wage theft is a massive problem across the whole economy but hospitality is ground zero,"  Madsen-Smith says.

"Unions used to be the main regulator but they have been wiped out," says workplace lawyer Bornstein. "Hospo Voice is doing a very good job of representing workers in this industry but I don't think union membership overall can recover unless there is fundamental structural change in the labour market. It's hard to be optimistic about that happening but I am going to keep fighting while I have breath in my body."

The role of consumers

Many restaurateurs lament that diners are unwilling to pay more for food. "People do not realise what it takes to produce a restaurant meal," chef Capaldi says. "You put a dish up 50¢ and people complain." Diners need to join the dots: if they support higher wages, they need to accept higher prices. It doesn't make sense to waggle a finger in judgment about "wage theft" with one hand while using the other to signal a waiter for a $4 coffee or $8 dumplings.

But perhaps diners don't care much. Last year, Baker implemented a 10 per cent weekend surcharge to go towards recouping the extra pay for staff (most receive $31.23 an hour at weekends, compared with $26.03 during the week). "Our regulars were supportive but trade declined so we took it off again," she says.

"You want to educate people but at the same time you don't want to preach to them when they are coming for brunch. There's so much focus on fair trade and free range but what about the people right in front of you? In this Instafamous age, everyone wants to take photos of the food we're serving them but they don't seem to care if the people making it are being paid properly. There's a disconnect."

Perry remains positive about the future of the industry and nurturing its talent. "We put an amazing amount of energy into our people, so they can serve with love and cook with love," he says. "We wouldn't have amazing, world-famous restaurants if our people were flogged till they had nothing left to give."

He notes that Rockpool Dining Group has invested in new payroll systems and processes and that the company supports the Fair Work Ombudsman's efforts to improve conditions for Australian workers.

"We aren't the only employer talking with Fair Work about compliance but hopefully we are now at the forefront with best practices and we're setting a standard for everyone to follow. I am for every Australian raising up and having a great future."

Disclaimer

As with many big issues, this one is complicated and there are inconvenient patches of grey that mottle the ground between those who prefer to see the world in black or white.

I've been writing about restaurants, cafes and chefs for 20 years. I sometimes work with restaurants on events, make videos with chefs for a cooking video business that I run, and have friendly conversations with chefs and restaurateurs and indeed their employees.

But I also strongly believe in the role of unions and support fair work.

Ethical truthfulness is my guiding principle and I find it's possible to tread complex lines with integrity.