SITXFIN004 Establish and Conduct Business Relationship Video Presentation

Summary

This discussion addresses the ethical implications of underpayment in the hospitality industry, exemplified by the case of George Calombaris's restaurant empire. It delves into the parties involved, the legal breaches against the Fair Work Act and Superannuation Guarantee Administration Act, and the financial repercussions including fines and back payments. The talk further explores the impact on stakeholders, including employee motivation and customer trust, and concludes with preventive measures businesses can implement to avoid such unethical practices.

Takeaways

• 😀 The discussion focuses on the importance of ethical business conduct in the hospitality industry, using the case of George Calombaris's restaurant empire, which faced underpayment claims.
• 👥 The parties involved in the case were the former employees, including waitstaff and potentially kitchen staff, and George Calombaris, a celebrity chef and founder of the restaurant.
• 📅 The issue gained media attention in February 2020, but the underpayment occurred from 2011 to 2017, affecting 520 employees.
• 💸 The underpayment issue arose from employees performing tasks above their classification level without receiving appropriate compensation.
• 📉 The financial impact included a total repayment of $7.8 million to employees and a $200,000 fine to the Fair Work Ombudsman.
• 📜 The incident violated the Fair Work Act 2009 and the Fair Work Regulations 2009, which protect employee rights and set minimum entitlements.
• 💡 Underpayment can occur due to incorrect classification of employees, failure to check penalty rates, and payroll system errors.
• 🤝 The incident negatively affected relationships with stakeholders, including employees, customers, suppliers, and the community, leading to loss of trust and reputation.
• 🛡 Preventive measures include compliance with legal obligations, internal audits, updating employee information, and correcting payroll configurations.
• 🔄 Backpaying historical underpayments is essential to rectify past mistakes and demonstrate ethical business practices.

Q & A

What is the main issue discussed in the script?

The main issue discussed is the underpayment of employees at George Calombaris's restaurant empire, which has led to legal and ethical implications.

Who are the parties involved in the underpayment issue?

The parties involved are the former employees, including waiters and waitresses, and potentially back-of-house staff, as well as George Calombaris, the celebrity chef and founder of the restaurant.

When did the underpayment claims come to light?

The underpayment claims first surfaced in 2017 and made headlines in February 2020.

What was the outcome of the underpayment investigation?

The investigation resulted in the need to pay back $7.8 million to 520 employees for underpayments over six years, along with a fine of $200,000 to the Fair Work Ombudsman.

Why is underpaying employees considered unethical?

Underpaying employees is unethical because it exploits workers for the profit of the business owners, potentially leading to decreased staff morale, productivity, and legal penalties.

Which laws were broken in this incident?

The laws broken include the Fair Work Act 2009 and the Fair Work Regulations 2009, which cover employee and employer relationships, minimum entitlements, and workplace fairness in Australia.

What are the potential penalties for breaching the Fair Work Act?

Penalties for breaching the Fair Work Act can include orders for back payment of underpayments and fines up to $3,663,000 per contravention for companies and up to $126,000 for individuals in cases of serious contraventions.

How did the underpayment occur according to the script?

The underpayment occurred due to a combination of factors, including failure to check penalty rates, incorrect classification rates, payroll errors, and not paying the correct superannuation contributions.

What are the effects of the underpayment issue on stakeholders?

The effects on stakeholders include loss of interest and productivity among employees, loss of customer trust, potential financial loss for the business, and damage to the reputation with suppliers and the community.

What preventive policies and safeguards are suggested to avoid underpayment?

Suggested preventive measures include compliance with legal obligations, developing a compliance framework, regularly reviewing and updating employee information, auditing staff pay records, and back paying any historically underpaid entitlements.

How does the script conclude on the importance of ethical behavior in business?

The script concludes that underpaying employees can significantly impact a company's reputation and financial stability, emphasizing the importance of ethical behavior and adherence to legal regulations to maintain employee retention, motivation, and overall business success.

Outlines

00:00

🍽️ Underpayment Scandal in the Hospitality Industry

This paragraph discusses the issue of underpayment in the hospitality industry, using the case of George Calombaris's restaurant empire as an example. It highlights the parties involved, including the former employees who claimed they were underpaid and the celebrity chef himself. The underpayment issue was first reported in 2017 and escalated in 2020, with a total of 520 employees claiming they were underpaid over six years. The initial settlement was for $2.064 million, which later increased to $7.8 million after further investigation. The paragraph also touches on the unethical nature of such practices, where businesses exploit employees to increase profits, and the potential legal consequences, including penalties under the Fair Work Act 2009 and the Fair Work Regulations 2009.

05:01

📜 Legal Implications and Causes of Underpayment

Paragraph 2 delves into the legal implications of the underpayment scandal, mentioning the Fair Work Act 2009 and the Fair Work Regulations 2009, which protect employee rights and set minimum entitlements. It also discusses the Superannuation Guarantee (Administration) Act 1992, which mandates employer contributions to employee superannuation funds. The paragraph outlines the potential penalties for non-compliance, including significant fines and even imprisonment. It then explores the reasons behind such incidents, such as failure to check penalty rates, incorrect classification of employees, payroll errors, and the complexity of the industrial relations system. The paragraph also addresses the issue of 'on the books' and 'off the books' payments, and the practice of misclassifying employees as contractors to avoid paying entitlements.

10:02

🤝 Impact on Stakeholder Relationships

Paragraph 3 examines the impact of underpayment on various stakeholders, including employees, customers, suppliers, and the community. It discusses how underpayment can lead to a loss of interest and productivity among employees, who may feel undervalued and demotivated. The paragraph also highlights the potential loss of customer trust and support due to negative publicity, which can harm the business's financial health. Suppliers may also be affected, as a business with a poor reputation may find it difficult to secure partnerships. The paragraph emphasizes the importance of maintaining ethical business practices to preserve stakeholder relationships and the overall reputation of the business.

15:08

🛡️ Preventive Measures and Safeguards Against Underpayment

The final paragraph focuses on preventive policies and safeguards that businesses can implement to avoid underpayment issues. It suggests ensuring compliance with legal obligations, developing a comprehensive compliance framework, regularly reviewing and updating employee information, and conducting audits of staff pay records. The paragraph also recommends back-paying any historically underpaid entitlements to rectify past mistakes. It concludes by emphasizing the significant business impact of underpaying employees, including damage to reputation, employee retention, and motivation. It highlights the importance of ethical behavior in decision-making and the consequences of unethical actions, such as fines and financial loss, using the example of the substantial penalties faced by George Calombaris's restaurant empire.

Keywords

💡Underpayment

Underpayment refers to the practice of paying employees less than the minimum wage or the legally required rate for their work. In the context of the video, it is a central issue as it discusses the case of George Calombaris's restaurant empire, where 520 former employees claimed they were underpaid. The video emphasizes the unethical nature of underpayment, as it exploits workers for the benefit of business owners, leading to legal consequences and damage to the company's reputation.

💡Business Ethics

Business ethics involve the standards and principles that guide the conduct of a business. The video highlights the importance of ethical behavior in the hospitality industry, particularly in relation to employee treatment. It points out that underpayment is not only illegal but also unethical, as it violates the principles of fair treatment and respect for workers, which are fundamental to business ethics.

💡Fair Work Act

The Fair Work Act is a piece of legislation in Australia that governs the relationship between employers and employees, ensuring minimum entitlements and fair work practices. The video discusses how the restaurant in question breached this act by underpaying employees, leading to significant penalties. It underscores the importance of compliance with labor laws to maintain ethical business operations.

💡Superannuation Guarantee

Superannuation Guarantee refers to the mandatory contributions made by employers to fund the retirement benefits of their employees in Australia. The video mentions the Superannuation Guarantee Administration Act 1992, highlighting the legal obligation of employers to pay superannuation contributions and the penalties for non-compliance, such as additional charges and potential criminal charges.

💡Stakeholders

Stakeholders are individuals or groups who have an interest or stake in a business. The video discusses the impact of underpayment on various stakeholders, including employees, customers, suppliers, and the community. It emphasizes that unethical practices like underpayment can harm the relationships with these stakeholders, leading to a loss of trust and support.

💡Employee Classification

Employee classification is the process of determining an employee's job category based on their skills, experience, and job responsibilities. The video points out that incorrect classification can lead to underpayment, as employees may be paid according to a lower classification rate than what their work merits. This is a significant issue in the case discussed, as it contributes to the overall problem of underpayment.

💡Payroll System

A payroll system is a mechanism used by businesses to manage employee payments, including wages, salaries, taxes, and other deductions. The video mentions that the Fair Work Ombudsman had alerted the company about issues with their payroll system 18 months prior to the incident. This highlights the importance of accurate and compliant payroll systems in preventing underpayment and ensuring legal compliance.

💡Industrial Instruments

Industrial instruments, such as awards and enterprise agreements, are legal documents that set out minimum entitlements for employees in specific industries. The video discusses the importance of being aware of and adhering to these instruments to prevent underpayment. It also mentions that employees and employers should be knowledgeable about how these instruments apply to their work situations.

💡Penalty Rates

Penalty rates are additional payments made to employees for working outside of regular hours, such as on weekends or public holidays. The video notes that underpayment can occur if employers fail to pay these penalty rates, which are often mandated by industrial awards. It is a critical component of ensuring that employees are fairly compensated for their work.

💡Compliance Framework

A compliance framework is a set of policies and procedures designed to ensure that a company's operations adhere to legal and ethical standards. The video suggests that developing a compliance framework can help businesses avoid underpayment issues by clearly outlining the company's obligations and ensuring that all employees are correctly classified and paid according to the law.

💡Back Pay

Back pay refers to the practice of compensating employees for wages or benefits that were not paid in the past. The video discusses the need for businesses to conduct audits and pay back any historical underpayments to employees. This is an important step in rectifying past mistakes and demonstrating a commitment to ethical business practices.

Highlights

Discussion on the establishment and conduct of business relationships in the hospitality industry with a focus on business ethics.

Case study of George Calombaris's restaurant empire facing underpayment claims.

Involvement of 520 former employees, primarily waitstaff, claiming underpayment over six years.

George Calombaris, celebrity chef and founder of the restaurant, is a central figure in the case.

The initial claim was made public in 2017, with the scandal intensifying in February 2020.

Underpayment issues are considered unethical as they exploit employees for profit.

Legal violations include breaches of the Fair Work Act 2009 and Fair Work Regulations 2009.

Penalties for breaches can reach up to $3.66 million for companies and $12,600 for individuals.

The Superannuation Guarantee (Administration) Act 1992 was also breached, affecting employee retirement funds.

Reasons for underpayment include payroll errors, incorrect classification rates, and lack of knowledge of industrial instruments.

The Fair Work Ombudsman had previously alerted the company about payroll system issues 18 months prior to the incident.

Impact on stakeholders includes loss of employee interest, customer trust, and supplier confidence.

Employees feeling undervalued can lead to decreased productivity and commitment.

Customers may lose trust in businesses that do not respect and value their employees.

Suppliers may be hesitant to work with businesses that have a poor reputation for employee treatment.

Preventive policies include compliance with legal obligations, internal arrangement development, and regular audits of pay records.

Back pay of historical underpayments is essential to rectify past mistakes and restore employee trust.

Ethical behavior is crucial for individual and organizational reputation, employee retention, and business success.

The case of George Calombaris serves as a cautionary tale about the consequences of unethical business practices.

Transcripts

so good morning everybody today I'm

gonna discuss and about the

establishment conduct business

relationship in regards with business

ethics and relationship within the

hospitality industry

so for the introduction is to be able to

present a recent issue or a case and

recommendations on successful business

in a relationship to a company to avoid

a similar situation occurring to them so

today I'm going to discuss the issue

about the George vampiress restaurant

empire hit by the underpayment claims so

first of all who are the parties

involved and when was this published the

parties involved here are the former

employees these are the waiters and

waitresses though I'm not really sure if

the back of the house is included in

this one but in regards with the news

that came out there's a total of 520 for

employees who claimed that they were

underpaid so I reckon there's also a

back of the house involved and then the

next party involved is George comparison

stuff he is also known as a celebrity

chef who is and who is in the program

MasterChef Australia he is the

shareholder and the founder of the

restaurant and this headline made it

last February

2020 but it first came out 2017 so for

this lab I'm gonna discuss what are the

issues and why is it unethical like why

is it unethical business practices yeah

conducts I mean so the issue here

started when an employee claimed that

they've been underpaid and the basis is

refusing to pay them back this happened

because they were performing tasks that

are higher grade than they were

classified the underpayment of - high

five hundred twenty four employees over

the six years at the raster chef's

starved Melbourne restaurant have

tripled the initial of one hundred sixty

sixty four employees and now they're

paying two hundred point six million

that was the initial payment that they

need and then after the course of the

investigation

he needs to pay a total of seven point

eight million for the under payments of

the employees on top of that pay needs

to pay a fine of $200 to deal with the

Fair Work Ombudsman for me this is

considered unethical because they are

exploiting the employees some business

chose to increase the profit for the

owners at the expense of their workers

this may result to the company paying

less their staff members

so some of the laws were broken apply to

this incident so the first law that was

broken to this incident was the Fair

Work Act 29 at 20 2019 and the Fair 2009

and the Fair Work Regulations 2009 in

this law and act they covered the

employee and employer relationship in

Australia they provide the safety of net

minimum and minimum entitlements and

they both flexible working arrangements

and fairness of work and prevent

discrimination against employees if you

have an employer play a breach the Fair

Work Act it can lead to orders for their

payment to the under payments and

attract penalties up to three hundred

six thousand six hundred sixty three

thousand per contribution for companies

and up to twelve thousand six hundred

for controversial for individuals in

cases of serious contributions being

when the person or business knew they

were contravening workplace practices

the contribution was part of a

systematic pattern to conduct penalties

can be up to ten times as much so one

hundred sixty a hundred twenty-six

thousand per contribution for

individuals and six hundred thirty

thousand per controversial for companies

another one is the superannuation

guarantee administration Act 1992

employees who pay superannuation

contributions of 9.5% of an employee and

in the ordinary time earnings this

applies to full-time and part-time

employees and some casual employees this

includes temporary rest as well the

employers who do not pay the correct

super for their employees may have to

pay super

new Asian charge which is made of a

shortfall amount interest on that amount

currently 10% and administration fee the

Australian Taxation Office can take

stronger action if an employer doesn't

pay the charge including issuing an ATO

penalty notice directing the employee to

paid unpaid super failure to pay can

sign up to ten thousand five hundred or

twelve months in prison so why do you

think this incident occurred so I think

it occurred because like paying staff

and Ally salaries but failing to check

their penalties penalty rates apply so

under payments from the under payments

from 2011 to 2017 were caused by

residents paying staff annualized

salaries but failing to check rated

amounts were above minimum rates once

overtime rates once over time and

penalty rates were ripped the next one

is they did not paid the correct

classification rate so here in Australia

classification classification rate

determines which classification

accurately reflects world skills and

experience and the work allocated to the

employee as a minimum as a minimum wages

or salary paid the meaning to the

employee should meet award rates of pay

which applied to the particular

classification lastly payroll error

according to ABC News the Fair Work

Ombudsman already alerted the company 18

months prior to the incident that there

is a problem with their payroll system

so how can this occur in your business

so now I'll be discussing how can the

secretary business one of the reason is

the failure to accurately work record

hours of work this includes breaks this

makes it difficult for the employers to

calculate minimum entitlements if they

fail to keep proper hours of record next

is the incorrect classification of

employees employees usually pay the

correct Industrial and industrial

instruments but they do not regularly

review and update employees

classification level the industrial

instrument refers to an instrument that

has legal application with respect to

minimum entitlements so those employees

covered within its scope third is a lack

of knowledge regarding to the applicable

industrial instruments employees are not

aware of how modern awards and other

industrial instruments applied to their

employees so any result they miss

applied the rules and last one is the

incorrect payroll configuration majority

of the companies do not under pay their

employees on purpose it could be simple

it could be a simple mistake like an

unchecked box in the payroll

configuration or incorrect information

and manual system making matters worse

is of chairs complex industrial system

retail retailers and their payroll

departments must be across with very

minimum wage penalty rates allowances

leave entitlements overtime and loading

which can change from state to state

industry to industry or at the whim of

the most recent court or Commission

decision

this can also the most common way of

under payments of course in the business

is the failure to pay penalty rates over

time allowances and/or the loading so I

said that earlier earlier and then

another one is of the books so of the

books usually these are the people who

chooses to work under the table they

receive less pay than the usual so just

to get the extra cash though you did not

realize when you do this this is one of

the reasons why employees get underpaid

and shank contract Contracting chef

contracting is wrongly claiming that a

work is a contractor when they are in

fact an employee often done in purpose

of a body employee entitlements by doing

so you are breaking the Fair Work Act

when a 2009 and penalties apply so going

back

how did this affect so how did this

affect the relationship with the

stakeholders and what could be the fxb

so now I will be discussing that that

Center stakeholders when we say

stakeholders these are not necessarily

apply to the management this applies to

all the people involved in the business

such as the employees customers clients

suppliers management and community so

first I will discuss the effect on

employees if this incident occurred to

your business one of which is the loss

of interest so when the employee you are

when employees are underpaid

they usually lost interest to work they

will have a mindset not to work as

productive because they are expecting

and they already know that they get the

spare and eventually they became less

productive and then the

usually also don't give their 100% so

since the company is not paying them

hundred percent there is a chance that

the employee will not be funded his

hundred percent work because he knows

that there is no point of doing it so

he's not motivated to work because he

knows like in return you're not paying

him as well so

the employee is also feeling undervalued

when a boy feels that their efforts are

not being recognized or appreciated

they'll soon begin to lack energy and

become less committed in their role so

further customers customers play a big

role in the business they are the main

role why you are providing the business

and they are the one who is responsible

for giving you your profit so without

the customers you won't be able to get

your revenues back even though you're

providing the proper what they call this

proper services yeah so how does this

affect the relationship return so the

city the employee is your customer lose

interest in your business when the bad

news comes when the bad news comes and

the headline shows that you're not under

paying your staff the customer will

think that that why would they support

you if you don't even support your

employees when you respect and give

importance to your employees your

customer ability but you value them so

they will lose your their trust so

meaning if they lose your their trust to

you you will get no support from them

and it return your business can either

financially be not okay or what and then

last is the feeling of unsatisfactory

for example since your employee is not

committed to his or her work it results

to him giving poor customer service

which results the customer feeling

unsatisfactory and for the supplier and

the main effect of this in your supplier

said you will have a bad reputation on

them if this happened most likely it

will be hard for you to acquire

suppliers and having a bad reputations

and wants to hardly require suppliers

they will lose your trust I did trust

you so instead of trusting them with

their goods and stuff they were things

like

maybe this guy he doesn't pay the

employees properly but if he doesn't pay

us back properly so there's no

consequences like that yeah so so now

I'll be citing preventive policies and

safeguards in regards with under payment

that you could put in place to prevent

it from happening

first is compliance of company's

obligation under law next and an

internal arrangement development of a

compliance framework that firstly

articulates a company's role obligations

under law and under internal

arrangements regarding the enumeration

of all its employees so next you can do

is review update employee informations

by doing so you will be able to align it

with updates of national employment

standard modern awards or enterprise

agreements their contracts of employment

and the recent case laws so another one

is audit all staff pay records to ensure

they have a compliant to ensure they are

compliant with entitlements owned by the

employee when the payments were

processed and lastly no and by auditing

compliance processes this will reduce

the risk of future and repeat under

payments of wages and benefits and

lastly you can do is back pay back pay

all the old entitlements that

historically were underpaid so to

conclude under paying employees can have

significant business impact from your

reputation in the market with customers

clients suppliers and staff so mp2

employee retention and motivation the

negative reputation that comes from

underpaying staff can be devastating for

the company

an ethical behavior has serious

consequences for both individuals and

organizations you can lose your job and

reputations organizations can lose their

credibility general morale and

productivity can decline or the behavior

can result to significant fines and/or

financial loss take the gorge for

embarrassment for example though it

there was no intention for him to

underpaid employees because of the

problem with the payroll system it

resulted them to lack a debate back to

back pain 7.8 million dollars to his

former and current employees on top of

that he needs to pay $200 to Fair Work

Ombudsman as a fine and if it is a very

complex area but no matter what ethical

behavior is all about decision making

this is about making decisions based on

your morale thighs and principles of

what is wrong and what is right so in

order not to be able to do this on a

deck of behaviors I've cited some

preventive safeguards that you can do so

make sure to always monitor and if

they're new what's this new loss that is

happening or legal regulations that you

can apply for your employees and that's

it thank you for listening to my report