Neville Waldren: Surcharges needed in an industry with slim margins

Many people who have eaten out over the statutory holidays will have paid a surcharge. Some may have resented the extra payment, but others will have understood that the higher costs were the result of the new holiday legislation.

The restaurant industry is extremely competitive; success or failure is as thin as a piece of paper. Put another way, it is as thin as a 5c coin - the average profit a restaurant earns on a dollar of sales.

The industry is a major economic force and a significant employer. Last year it generated more than $3.7 billion in sales, and employed almost 75,000 people. Only the Government has more people on the payroll. But if the restaurant industry is big, most of its sales are generated by single small operators. The local restaurateur is the cornerstone of the community.

The industry's most precocious commodity is its employees, but the Holidays Act is unfairly drawn up in favour of the workers.

It requires that staff who work on public holidays get paid time and a half plus a day in lieu - effectively double time and a half. Each business has to weigh up these extra costs in deciding whether to open.

The industry is fragile in terms of profit. In a significant number of cases, staff in restaurants and cafes earn more than the owner, and the Holidays Act imposes costs that simply make it unprofitable to open on a statutory holiday.

Wages are typically a third of a restaurant's discretionary cost. Put another way, businesses opening on a public holiday will operate at a loss if they do not impose a surcharge.

The losers, apart from the customers facing a reduced choice, are the staff of about 20 to 30 per cent of the restaurants and cafes that elected to close rather than incur a loss.

The Government believes it is putting more money into restaurant workers' pockets, but many of the 27,000 employees who normally work on a public holiday will, in fact, receive less than the expectation built up by the Government because it was uneconomical for their employer to open.

I wonder what overseas visitors (22 per cent of the industry's income is generated by them) thought when they found some food-service outlets were closed.

Ross Wilson, president of the Council of Trade Unions, alleged that restaurants were misusing the Holidays Act by adding a surcharge.

This is well wide of the mark, given the economics of running a labour-intensive operation. Restaurant and cafe operators were, in reality, simply passing on new and higher wage costs.

Mr Wilson also suggested it was time for business organisations to stop their whinging and get into the Christmas spirit. Is he advocating that businesses should bear the brunt of the impact of the Holidays Act and provide their services to the customers at a loss?

And how might restaurant and cafe operators pay service providers for extra charges that are incurred for callouts on public holidays?

The Restaurant Association has told its 1700 business members that they have the right to recoup imposed incremental costs the same way that GST is recovered.

In sum, the Holidays Act has created job losses and discouraged investment in an industry that is number one in the retail sector.

It is agreed that other industries cannot impose a surcharge, but it is noted that petrol retailers, bread shops and cheese retailers are beginning to say that they need to be able to recover the extra costs of opening on a public holiday.

Few other industries are, however, as labour-intensive as restaurants and cafes. The industry's labour bill through the new regime will reflect at least a 64 per cent cost. By comparison, a clothing retailer could expect his wage cost to increase to 24 per cent by opening on a public holiday.

* Neville Waldren is the chief executive of the Restaurant Association.