Is the employer obligated to let the employee substitute the time for sick leave?

If an employee is on annual leave and they, or a spouse or dependent, becomes sick or is injured you can agree, if asked, to substitute sick days for the annual leave.

Please note, however, if an employee has been allowed annual leave and before taking it he or she becomes sick or injured, or a spouse or dependent becomes sick or injured you must allow him or her to take any period of sickness or injury that the employee would otherwise take as annual holiday as sick leave.

To discuss further please contact the Restaurant Association Helpline on 0800 737 827 or email info@restaurantnz.co.nz.

To find out which establishments are participating in the Restaurant Association gift voucher programme please check our  website www.dinefind.co.nz. You can find which businesses accept the gift vouchers by looking for this participating icon (below) on the establishment’s listing.

1. Payment for working on a public holiday

Anyone who works on a public holiday is entitled to be paid at a rate of time and a half.

If the public holiday is a day that they would normally work (for instance the public holiday is on a Monday and the employee usually works on a Monday), and they do work it, then they are also entitled to one days full paid leave (an alternative holiday)  to take some time in the future.

If the public holiday falls on a day that is not a normal day of work for the employee, and they do work it, then they are entitled to be paid at time and a half but they do not earn an alternative holiday.

2. Payment if not working on a public holiday

The terms of the Restaurant Association individual employment agreement template sets out that employees agree to work on public holidays if requested by the employer.

However, if an employee would normally be working on the day that the public holiday falls, but it has been agreed that they have the day off, they are entitled to be paid the amount of pay that they would have received had they worked on that day (their relevant daily pay).

If the employee does not work on a public holiday because it is their normal rostered day off, there is no obligation to pay the employee for that day.

If you are not using the Restaurant Association employment agreement template you should check your own operation’s employment agreement to see what it says with regards to employee’s working on public holidays.

3. Closedown periods:

An employer can close down their business each year for a period of time (commonly Christmas/New Year) and require some or all employees to take their annual leave. If an employee does not have annual leave available, you may direct them to take the leave as unpaid leave, or provide other arrangements like allowing the employee to take leave in advance of their annual leave entitlement. You need to give your staff 14 days notice of any closedown period and you can only have 1 customary closedown in any 12 month period.

It should be noted that a public holiday that occurs during an employee’s annual holidays must be treated as a public holiday and not as part of the employee’s annual holidays. The employee is entitled to be paid for a public holiday if the holiday would have otherwise been a working day for the employee.

Refer to sections 29-35 of the Holidays Act 2003 for the legislation that covers closedown periods.

4. Special provisions relating to public holidays that fall on the weekend

There is special provision in the Holidays Act 2003 relating to Monday-ising public holidays when they fall on the weekend. This applies to Christmas / New Year public holidays as well as Waitangi Day and ANZAC Day. What this means is that these public holidays will be observed on Saturday or Sunday for workers who usually work on those days, but will be transferred and observed on Monday or Tuesday for other workers for whom the weekend days are not a regular day of work. 

For reference: Refer to section 45 of the Holidays Act 2003:

If any of these public holidays:

(a) falls on a Saturday and the day would otherwise be a working day for the employee, the public holiday must be treated as falling on that day:

(b) falls on a Saturday and the day would not otherwise be a working day for the employee, the public holiday must be treated as falling on the following Monday:

(c) falls on a Sunday and the day would otherwise be a working day for the employee, the public holiday must be treated as falling on that day:

(d) falls on a Sunday and the day would not otherwise be a working day for the employee, the public holiday must be treated as falling on the following Tuesday.

An employee will still only be entitled to observe the public holiday on one day. So if for instance Christmas Day falls on a Saturday and an employee usually works on both Saturday and Monday (and works both days on the week of the public holiday), they will observe the public holiday on Saturday. Monday will simply be paid as a normal day of work (not at public holiday rates).

Remember that even if you chose to close over this period and your employees are taking their annual holidays they are still entitled to be paid for any public holidays that fall over this period if the public holidays would have been a normal working day for them. These days should not be taken from their annual leave entitlement.

5. Employees on call on public holidays have different entitlements depending on the nature of the call-out arrangement:

If the employee is called out, he or she is entitled to at least time and a half for the time worked, plus a full day’s paid alternative holiday (if it would otherwise have been a working day).

If the employee is required to restrict activities on the day to the extent that they have not enjoyed a full holiday, for example, if the employee is required to stay at home all day but is not called out, then the employee is entitled to a full day’s paid alternative holiday (if it would otherwise have been a working day).

If the employee is on call, but is not required to restrict activities, for example, if the employee can choose not to accept the call-out then entitlement to an alternative paid holiday would arise only if the employee accepts a call-out and the day would otherwise have been a working day for the employee.

If the day would otherwise be a working day for the employee, and they do not get called into work, they are entitled to relevant daily pay for the day. Any agreement for being on call would depend on the employment agreement.

Rights to an alternative holiday do not apply where the person called out has an employment relationship with the employer only on public holidays.

If you still have queries regarding public holidays please call the Restaurant Association Helpline on 0800 737 827 or email us on info@restaurantnz.co.nz.

The deadline for some businesses to register under the new Food Act is coming up.

Food businesses, including restaurants and cafes with an alcohol licence, need to apply by 31 March.

Over 5,000 food businesses across the country are already registered under the new law, which came into effect last year.

Sally Johnston, Manager Food and Beverage at MPI, says the new law aims to improve food safety by moving to a risk-based approach.

“It sets different rules for different businesses depending on what they do, and focuses on what’s most important for making sure food is safe.”

While new businesses have to comply straight away, existing businesses are changing over to the new rules in stages. Other businesses that need to register by 31 March this year include Early Childhood Education centres that serve food; processors of nuts, seeds or coffee beans; and manufacturers of food for vulnerable people (like babies or the elderly), ready-to-eat salads, and sauces, spreads, dips or soups that need to be kept cold.

“Local councils and MPI are working with businesses to help them change over to the new rules. We’ve been holding workshops for food businesses around the country and have published online tools, step-by-step guides and videos on the MPI website.

“Under the new rules, higher-risk businesses, including restaurants and cafes, need to use a written plan for food safety, called a food control plan. Medium and lower risk businesses will follow a set of food safety rules known as a national programme.

“All registered businesses get checked by a food safety verifier. This is an important part of the system, as it’s how we check businesses are making safe food. Those that manage food safety well will be checked less often than those who don’t.

 “This means that doing things well can help businesses save time and money, as well as giving customers confidence that their food is safe.”

Most businesses need to register with their local council. They can find out how the rules apply to them by using a tool called “Where do I fit?” on the MPI website:www.mpi.govt.nz/foodact

Rotorua’s Capers has been named the 2017 Meadow Fresh New Zealand Café of the Year.

Having a formal staff training plan in place is not a legal requirement of the sale & supply of alcohol act but it is something you will be required to outline when you undergo your liquor licence renewal.

A training plan provides staff with clear roles and responsibilities and develops service that will ensure that staff are successful in implementing your host responsibility practices and meeting your obligations under the Sale and Supply of Alcohol Act.

The object of the Act is to ensure the sale and supply of alcohol is undertaken safely and responsibly. Training in this area will comprise part of an employee’s initial induction as well as ongoing instruction for all staff. As a tool to assist members to implement a staff training plan, we outline some of the key considerations when formulating one for your premises.

Intoxication

Staff should know how to recognise signs of intoxication, methods of preventing intoxication, and know the steps they need to take if dealing with an intoxicated person.

1  What happens if an intoxicated person tries to enter the premises?

Staff should know that they are required by law (and failure may result in them, and the manager and owner, receiving a fine) to:

• Prevent anyone becoming intoxicated
• Refuse service to anyone who is intoxicated
• Ensure intoxicated customers leave the premises
• Prevent intoxicated persons from entering premises
• Remove violent, quarrelsome, insulting or disorderly customers from the premises

2  How do you recognise intoxication?

Training should be provided to all staff on recognising typical intoxication indicators. The law says that a person is intoxicated when they are affected by alcohol or drugs, or other substances, to such a degree that two or more of the following are evident:

• Speech is impaired (slurring, difficulty forming words, loud, repetitive, loss of train of thought, nonsensical, unintelligible)
• Coordination is impaired (spills drinks, trips, weaves, walks into things, unable to stand or sit straight)
• Appearance is affected (bloodshot eyes, eyes glazed, unable to focus, tired, asleep, dishevelled)
• Behaviour is impaired (inappropriate actions or language, aggressive, rude, belligerent, obnoxious)

3  How do you monitor a customer’s consumption?

Provide tips on a servers role in monitoring the effect of of alcohol on customers – things like talking with the customer/building a rapport, monitoring glass collection.

4  How can you prevent intoxication?

Staff also need to know techniques for preventing intoxication. This may be the encouragement of low or non-alcoholic beverages, or food. Providing water alongside their drink or slowing down service are also useful techniques.

5  What do you do if you think someone is intoxicated?

It needs to be made clear at what point a staff member should involve management and others about what is going on. What is the policy on who can refuse service – is this communicated to a customer by the manager, or the server? Whose responsibility is it to remove a customer from the premises or to a place of safety (and do all staff know where that place is)?

Minors on the premises

Depending on your liquor licence, people under the age of 18 may be allowed on the premises, but they will not be able to purchase alcohol under any circumstances.

1  Explain the designation of the premise’s liquor licence and what that means.

If the licence is undesignated or supervised explain that people under the age of 18 are allowed on the premises, and may even be able to drink on the premises, but only if the alcohol is purchased for them by a parent or legal guardian. Outline the definition of a legal guardian – it’s not just an older person with them, it is a legal status and customers will be responsible for establishing proof of the relationship.

2  If they look underage what is the policy?

Many premises will have a policy to ask anyone who looks under the age of 25 to provide ID. Servers need to be clear that there are no exceptions to your establishment policy and be made aware of the potential consequences, for them, and the business, for serving to a minor.

3  ID – what proof of age is allowed?

There are only three types of acceptable forms of ID outlined in the sale and supply of alcohol regulations. These are, a current passport (New Zealand or overseas), a New Zealand photo drivers licence, an approved 18+ evidence of age card. Staff need to be aware they can (and must) refuse any other types of identification.

4  Date of birth – calculating the age correctly.

Do you have a sign to help ensure servers identify the correct age? If you do, make sure they know where to find it. This is useful as you don’t need to rely on a staff member’s mathematics skills and it can easily be updated daily. If you don’t do this, ensure servers are comfortable with making this calculation on their own (today’s date, subtract 18; anyone born after that date is under age).

5  Checking ID.

Do you have a procedure for checking ID? Go through this process and outline tips for spotting a fake ID.

• Check the date of birth first – you may not need to go any further than that point
• Hold the ID and feel for: raised edges around the photo, bumpy surfaces, irregular lamination, cuts, slits, or pin holes, peeling lamination or uneven corners, thickness and quality of the ID
• Check the photo: look at the person first and try and identify distinguishing features, then look at the photo – do they match?
• Shine a torch behind the photo and date of birth.
• If in doubt you can ask for a second piece of ID, or get them to sign, then check their signature

6  What do you if it is suspected the ID is fake?

Be clear on the procedure at this point. In all cases the ID should be retained and the involvement of the manager should be requested.

Low & non-alcoholic beverage options

1  What options are available?

Are staff as familiar with the range of low and non alcoholic drinking options as they are with your wine list’s other beverage options? Have a quiz to see if they know the range and talk through ways of promoting these options.

2  Drinking water.

The Act specifies that free drinking water must be readily available for customers. Ensure all staff know where to direct customers, if a water station is set up in a particular area of the premises, or what the policy for promoting and providing free water is if it is accessible from the bar.

3  Does the business have a policy for offering these options as part of your host responsibility plan?

If so staff need to be trained on when and how these options may be encouraged for designated drivers or subtly suggested to customers who need to slow down their alcohol consumption.

Food options

A range of substantial food options need to be available at all times that the premises is still operating.

1  Ensure that all staff are aware that food items are available at all times, even after the kitchen may be closed for service of main meals.

Make it clear that it is not acceptable to say that the kitchen is closed. If the business is still open then menu items need to be available, although it may be a different menu. Quiz staff to see how familiar they are with the late night or snacks food items and on promoting this menu.

2  Train staff on the reasons for, and how to go about, encouraging the consumption of food when customers are consuming alcohol.

Transport options

An on-licence holder must ensure that there is free, readily available, comprehensive and accurate information about the forms of transport that are available from the premises.

1  What alternative forms of transport can customers use when leaving the premises?

Make staff aware that it is their responsibility to provide information on alternative transport options and make arrangements for customers if necessary. Ensure all staff know where they can find this information and if you have a relationship with a particular transport provider. What is the business’ policy – will you provide the customer with business cards and let them phone themselves, or will your staff do that for them?

2  What is the policy if a server is concerned about ensuring a customer gets home safely?

These are just some of the key areas that may form the basis of your staff training with regards to the sale and supply of alcohol. Ensure that your training plan is regularly reviewed and updated, and be consistent with retraining existing staff to ensure they get regular a refresher of information on your premises policy.

Can you instantly dismiss someone for serious misconduct?

The short answer is yes, but the process is never ‘short’ when it comes to dismissal, even if it is for serious misconduct.

Some misconduct is so serious that it may warrant immediate dismissal. Whatever the behaviour, you need to follow a full, investigative process before you dismiss someone. If your investigation finds that your employee’s actions amount to serious misconduct — that you no longer have the trust or confidence that they can do the job — you can terminate their employment without notice.

Suspension

Generally, you can’t suspend an employee unless there’s a suspension clause in the employment agreement. In very serious cases, you may be able to suspend someone while you investigate the misconduct, e.g. to protect your accounts from possible interference after an alleged theft, or to protect the victim in the case of an alleged assault. Before suspending them, you must discuss the proposed suspension, and the reasons for it, with the employee and consider their comments with an open mind.

Before you dismiss an employee

When you’re considering dismissing someone, you need to be sure it’s the only acceptable option. When you’re making your decision, consider things like:

• whether there are any alternatives to dismissal, e.g. a final written warning. Consider:
• if there are any mitigating factors.
• were the company rules clear?
• did you contribute to the issue in any way?
• have you warned them over this or a similar issue before? How long ago?
• how long have they worked for you.

If you’re at all unsure on how to act, think whether a reasonable employer would consider dismissal as an option due to the seriousness of the misconduct.

Dismissing an employee — the step-by-step process

You can only consider dismissal if:

• your employee’s performance has not improved despite repeated attempts with a performance management plan, and you have warned them that dismissal was a potential outcome,
• you’ve formally warned your employee about misconduct, but their behaviour hasn’t improved and you have now lost trust and confidence that the employee can continue in the role,
• you believe the employee’s single act of misconduct
• is so serious that you have lost the trust and confidence in them to do the job.

Step 1 ~ Investigate the matter 

If an employee has engaged in serious misconduct, you may need to investigate and gather witness statements regarding what has occurred. You should get written statements from witnesses, with details like:

• the date of the incident
• what time it happened
• a description of the alleged behaviour.

Tell the witnesses that you’ll be disclosing their allegation to the employee you’re investigating. If you witnessed it yourself, document your own statement of the event, and get statements from other witnesses if possible.

If the employee has engaged in previous misconduct, or has been through a performance management plan, gather the previous warnings on their file. Refer to these warnings in Step 3.

Step 2 ~ Check documentation

Check relevant company policies and your employee’s employment agreement for clauses outlining what is considered to be serious misconduct, so that if the allegations are proved, you can confirm, that they breached your rules.

Step 3 ~ Provide written findings

Set out the details in a letter. The letter should include:

• details of the allegations (including any witness statements)
• details of any previous misconduct (include any written warnings, final written warnings, the reasons they were given and the date)
• excerpts of the relevant clauses in the employment agreement or company policies that may have been breached if the allegations are made out
• a date on which you want to meet with the employee to discuss the allegations (let them know they can bring a support person or representation)
• the consequences of what may happen if the allegations are upheld (specifically, that you’re considering dismissal).

Step 4 ~ Meet with the employee

Meet with your employee on the date stated in your letter. You can both have a support person or representative there, if you want to.

Discuss:

• the reason for the meeting
• the allegations against the employee
• the possible consequences if the allegations are confirmed.

Give your employee the chance to tell their side of the story.

At the end of the meeting, let them know how long you’ll take to consider the situation (normally a day or two), and when you’ll inform them of the outcome.

Step 5 ~ Make your decision and give written notice

Consider all the evidence and decide what the outcome will be. You may decide:

• that a final warning is an acceptable consequence
• to dismiss the employee.

When deciding how to deal with the behaviour, consider what an objective, reasonable employer would do in your situation.

If you decide dismissal is appropriate, it’s good practice to give the employee another chance to respond in person to your decision.

Detail your findings in a letter to your employee, stating:

• which clauses or policies have been breached
• why you decided on this outcome
• the required notice period, and their last day of employment with you.

For cases of serious misconduct where you have lost the trust and confidence in them to do their job, you may be able to dismiss them without allowing them to work out the notice period — this is called summary dismissal (otherwise referred to as “instant dismissal”).

What constitutes serious misconduct?

One of the questions that our Helpline regularly receives when an employer is faced with a misconduct situation with one of their employees, is how do they decide if it is misconduct or serious misconduct. Minor misconduct offences are typically dealt with at a lower level. They only become a formal disciplinary matter if the problem keeps happening. Serious misconduct however generally goes straight to a disciplinary process and the outcome could be as serious as dismissal.

Misconduct is defined as any form of wrongdoing that is of a more minor nature. Usually it will involve deliberate wrongdoing, but not always. Examples include (but are not limited to): lateness, being careless or negligent, using offensive language to others, failure to follow reasonable instruction, the breach of an employer’s internet use or social media policy and less serious breaches of health and safety.

Serious misconduct involves offences that are very serious in nature. It consists of situations where an employee’s behaviour is such that you feel threatened, unsafe or the act results in a major loss of trust or confidence in the person. Common examples include (but are not limited to):

• Dishonesty of any kind, including falsification of time sheets or any other document;
• Unauthorised possession of property belonging to the establishment, customers or other staff (theft);
• Possessing, consuming, using or being under the influence of alcohol, non prescribed, or illegal drugs while on or before duty;
• Insubordination, threatening or abusive behaviour including fighting (physical assault) and sexual harassment;
• Failure to safeguard the establishment’s property, including willful damage to property or equipment belonging to the establishment, customers or other staff members (health & safety breaches);
• Serious breaches of Health and Safety rules;
• Failure to comply with the business’ Code of Conduct and Policy;
• Any other behaviour which is considered as serious as any of the above.

In the past, employment agreements would commonly list conduct that amounts to “serious misconduct”, however this is less common today, although examples may be listed in a business’ house rules.

The problem with listing examples of misconduct, and serious misconduct, is that the list is never finite. In addition, if an employee engages in misconduct that is listed, that doesn’t necessarily mean that serious misconduct has automatically occurred. You must take into consideration the actual nature of the offence, the surrounding circumstances and the employee’s side of the story before deciding whether serious misconduct has occurred. When this is done, it is possible that what looked like serious misconduct may not be so serious after all, remembering that an offence can only be deemed to be serious misconduct if it is so serious that it undermines the trust and confidence you have in the employee.

Remember also that even if you do deem that serious misconduct has occurred at the end of the disciplinary process, the result may not result in dismissal. Often employers go direct from a finding of serious misconduct to dismissal, however one does not necessarily follow the other and a less serious sanction may result.

My employee has gone on ACC and I don’t know when they are coming back to work.

If you have an employee that has either injured themselves (inside or outside of the workplace) or is suffering from a long-term illness which prevents them from doing their job, you may be dealing with an “incapacity” situation. Dealing with these types of situations is never easy as an employer naturally feels sympathy for an employee who is sick or injured but, on the other hand, is keenly aware of  the pressures facing the business in the employee’s continued absence, particularly if  the employee’s role is key.

So, in answer to this commonly asked question, you do not have to keep an employee’s role open indefinitely – there is a time where an employer can “fairly cry halt.” However, there is an obligation on the employer to follow a careful process, which includes careful consideration of a number of factors.

As always, an employer must act in good faith and be fair. The Employment Relations Act 2000, s 103A test for justification applies to any decision to dismiss: “whether the employer’s actions, and how the employer acted, were what a fair and reasonable employer could have done in all the circumstances at the time the dismissal occurred.” Case law has established the kind of factors that need to be considered by an employer who is considering dismissing an employee due to incapacity:

• The terms and conditions of the employee’s employment. You will need to review the employee’s employment agreement and other company policies to see if there are any express obligations to provide the employee with reduced or alternative duties and if there is a clause which enables you as the employer to terminate the employee’s employment on the grounds of medical incapacity. The Restaurant Association employment agreement contains the following clause: “The Employer may terminate your employment on notice (which may be unpaid) if you become incapable of the proper ongoing performance of your usual duties as a result of physical or mental illness or injury.” You will be able to rely on this clause if you are faced with an incapacity situation.
• The nature of the medical condition or injury including how long it has already continued and the prospects of the employee recovering from it and returning to work. For example, if the employee has only been away from work for a few weeks due to a minor injury like a sprained wrist for example and his/her doctor has indicated a return to work date, then it is likely that it would be considered unreasonable to terminate the employee’s employment. However, if the employee has been away with a severe back injury and his/her doctors are unable to indicate a return-to-work date, then it may be reasonable to consider possible termination due to incapacity.
• The nature of employment and whether the employee is in a key or senior position within the business. If the employee’s role is key to the business, for example, if he/she is the Head Chef, and you are able to show that the absence of the employee from their role would have a significant detrimental effect on the business, it is more likely that considering termination on the grounds of incapacity would be considered reasonable. You must consider factors such as how crucial it is to the success of the business that the role continues to be filled and how difficult it would be to find a temporary replacement for the role. In this context, the size of your business and the pressures faced by you as an employer will also be relevant.
• How long the employee’s employment was likely to last in the absence of sickness or injury. You should consider the likelihood of the employee being employed long-term were it not for the incapacity. For example, if the employee is employed on a fixed-term basis, then it will likely be more reasonable to consider termination at an earlier stage than with a permanent employee.
• Length of employment to date. Typically “long-standing” employees should be given longer to recover.
• Cause of the incapacity. This is an important consideration. If the employee’s illness or injury has in some way been caused by the company (for example, an accident due to inadequate health and safety precautions being taken), it may difficult to justify moving away from your initial obligation as an employer to support and rehabilitate the employee.

What is the first step?

If you are dealing with an incapacity situation, the first step you should take should be to meet with the employee informally to discuss the employee’s injury or illness and their likely return to work date. If it appears that the employee may be away from work for some time and the business will struggle in the employee’s absence, this is something that you will need to communicate with the employee.

The next step will be to begin a formal process whereby you would invite the employee to a formal meeting to discuss their illness or injury and likely prognosis, how the employee’s absence is impacting the business and the possibility that the employee’s employment may be terminated due to incapacity. The Restaurant Association Helpline can help you draft a letter like this. You must be aware that terminating due to medical incapacity is not a simple process and there may be a need for several meetings before any final decisions are made regarding the employee’s employment.

Must-dos – procedural fairness and common errors

When dealing with an incapacity situation you must ensure that you do the following:

• You must give the employee adequate notice of the possibility of dismissal and you must not provide any false reassurance regarding the employee’s job
• The employee must be aware of their right to be represented during the process
• There must be adequate notice of the possibility of dismissal
• You must make a fair and adequate enquiry including seeking information about the employee’s illness or injury, requesting medical reports and so on
• You must make the employee aware of the information that you hold about the situation
• You must keep the lines of communication with the employee open and consult with the employee

It is important to be aware that the Courts are likely to scrutinise closely any decision to dismiss an employee on the grounds of medical incapacity. We recommend calling the Helpline if you are dealing with a situation like this.

Is it harder than ever to recruit quality hospitality employees who meet the skill requirements to fill management roles in your business?

Results of a recent survey confirm that the emphatic answer to this question is “yes”. 

The member survey conducted by the Association on recruiting managers shows that a whopping 96 per cent of employers who have recruited for a manager over the past year have had difficulty in filling the role. More than 62 per cent said they had to repeatedly advertise for the position before a suitable candidate was found. And although this current survey focused on front of house managers, we are aware that recruitment for skilled chefs is just as extreme and they continue to be one of the hardest vacancies to fill. Our growing recruitment issues are being exacerbated by the needs of our burgeoning industry which it is expected may require an additional 50,000 workers by 2020.

New Zealand’s hospitality industry has returned to a period of exponential growth. In 2015 sales across the hospitality industry grew by 10 per cent and new businesses continue to open to meet the demand of our discerning domestic dining public. International tourist visits are also at record levels, with no sign that this will abate (thank goodness). Visitors spent $8.7 billion for the year ending June 2015, and this is expected to grow by 11% from 2015-21 while visitor numbers will increase by 4%. That will equate to over 3.8 million visitors a year – each one of them needing workers to cater to their needs. As a result of this demand, however, competition for experienced staff is at its highest levels ever.

Any solutions?

In the short term the Restaurant Association has the opportunity this month to campaign again for the Café, Restaurant Manager position to be re-admitted onto Immigration New Zealand’s Immediate Skill Shortage List (ISSL) and we will be strongly advocating for this to happen.

While our case is strong, one of the hurdles we face in convincing Immigration New Zealand to add this occupation back onto the ISSL is around the qualification requirements of the industry’s employers for their Managers. The survey enforces the industry’s view that management experience, rather than qualifications are more valued. The survey indicates that a minimum of 3-5 years in a management role is the ideal experience level required for an employee joining your business at management level, however, 60 per cent of employers don’t expect any formal qualifications for a candidate. Were the role to be reinstated onto the ISSL, it is suggested that a NZ Registered Certificate (Level 5) would be the appropriate qualification requirement for someone in this position and this is where the industry and Government have an opposing view. Immigration New Zealand have indicated that when Managers were last on the ISSL, visas approved under this category were very small (only 10 per cent of the approved visas for this occupation) and this is because the visa applications did not meet the ISSL criteria.

Of the 871 visas approved for this position in the 2013/14 year, only 38 were approved using the ISSL, with the rest meeting approval through a labour market check. It is for this reason that Immigration will possibly find a lack of justification to add the role back onto the ISSL. We will be doing our best to change that view however and will keep members informed of our endeavours.

In the long term, one of the solutions to managing our industry’s skill shortage issues is to retain those already in the industry and train them up to fill those skilled positions. Our industry has notoriously high staff turnover and when employees leave a job, they don’t always stay within hospitality. To address this we need to start thinking of the long term. As an industry we need to be extolling the benefits of a career in hospitality, which are wide and varied and the Restaurant Association sees this as one of our key responsibilities. Employees with management potential should be identified and nurtured, and given the skills they need to become great managers, rather than getting thrown into a role they are not yet ready for because of a vacancy shortfall within the business. While it may fulfill your short term requirements, an employee who becomes disillusioned due to a lack of knowledge and support will potentially leave the industry completely and this is a flow we need to stem.

Providing your staff with opportunities to continue learning is a good strategy to ensure they stay with you. The Restaurant Association’s Emerging Managers workshop is a great professional development opportunity for your rising managers to help them develop and fine tune their leadership skills. It is run by one of the industry’s most respected restaurateurs, Krishna Botica, and is currently “on the road” around the country to provide an opportunity for more employees to attend. A follow-up workshop, Established Managers, has also been developed to provide

a more detailed look at hospitality management techniques, styles and systems. It is perfect for those who have attended Emerging Managers, or front of house or kitchen managers looking to develop their skills further.

As you will also be aware, the Restaurant Association is committed to working on initiatives to introduce more workers into the industry, as in the long term this will be essential to meet the industry’s employment demands. Our ProStart programme, which provides students with the basics of hospitality through a four week programme, is set to grow in the next weeks and months as we expand the current Auckland programme into the Bay of Plenty and Waikato regions as well. Graduates are motivated, keen to develop and seeking opportunities to work within our industry. We aim to supply people that will fit well within your respective businesses and once placed we continue the relationship with both employer and employee to ensure everything is working well.

There is no denying that the recruitment challenges are there, but with our support and the industry’s willingness to embrace practical solutions to assist we see that there is an opportunity to build on some real solutions to our sector’s current skilled staff shortages.

Whilst customers assume we are just in the business of selling food, we are also in the business of renting chairs to people who eat food. In order to maximise revenue ideally we like all of our seats occupied from the beginning to the end of service with hungry and thirsty guests.

Whilst of course many restaurants accept reservations at any time their revenue can be limited by having seats empty at the beginning of service or at the end of service as often the most popular bookings time slots in the evening are around 7pm-8pm.

Restaurants can try to mitigate this bottle neck by having two sitting times such as 6.30 and 8.30 this however does create pressure on service with potentially the restaurant being filled twice all at once which can unduly stress the front and back of house.

Other strategies to maximise occupancy are the offer of a “deal” available only at an off peak time. This dynamic pricing is how airlines and hotels work however they have complex algorithms that constantly update pricing hundreds of times a day whereas a restaurants price differential is usually just a simple early dining offer.

One of the major issues with running a reservation system is the matter of reservation no-shows which has a major impact on the profitability on our industry.

Third party restaurant reservation websites such as Dimmi in Australia and Open Table in the USA report no–shows being between 4% and 20% of all bookings made on their sites. This is obviously unacceptable and they are now starting to ban people who are frequent no-shows from using their service. Though they would only be able to identify a no-show if the restaurant can be bothered reporting them. Banning also does not make up for the lost revenue and it would seem to be easy to circumvent by re-registering with another user name.

Highlighting this problem the Sydney Morning Herald recently published an article on the issue and the fact that Dimmi has just banned 3000 users who have been consistent no-shows at restaurants that they take reservations for.

Restaurants are always trying to mitigate this loss of revenue with constant communication with customers which may entail any number of re-confirmation phone calls or emails.

This takes up significant resources and is no actual guarantee that they will turn up at the agreed time with the same number of guests they booked for. Guests of course can have genuine reasons for not honouring a booking but with such small profit margins any loss of revenue can have a major impact on viability.

Restaurants however are adapting their business model to deal with this loss of revenue. Some are adopting a “Ticket System”, just like you buy a ticket for a show or movie, you prepay for a ticket to dine at a restaurant at a certain time slot and with a minimum spend. You don’t turn up they don’t care as you have been charged and have agreed to a no refund policy.

This works well for high demand restaurants whereby the numbers of potential guests that may balk at this are more than covered by large numbers of customers who are happy with this system as they have every intention of honouring a reservation.

Nick Kokonas, the co-owner of the famed Chicago restaurants; Alenia, Next and Aviary has developed a ticketing booking system called Tock, which also features dynamic pricing. So a booking a table at 5pm on a Tuesday is going to cost you less than 7.30pm on a Saturday. Previously he was losing $260K on no-shows and had a cost of $140K in wages for reservation staff. This new platform seems to be working very well for them and they are also selling the software to other restaurants with over 1000 signed up and unlike third party booking systems they charge the restaurant no further fees. Open Table for instance charges $1 per booking and they retain all the information on your guest whereas the Tock system is controlled by the individual restaurant.

No Reservations

The other option of course is not to take reservations and this is becoming much more common, though restaurants such as the famed Boulcott Street Bistro, in Wellington, have not taken dinner reservations since 1991.

The no reservation policy fits well with the busy work and social lives of the modern customer, as often they don’t want to be tied to a time slot to dine that may have to be booked days in advance. They often may even not know what their dining requirements are from one day to the next.

Whilst restaurants that take reservations can be fully booked, a restaurant that does not reserve means even if you make last minute plans you will always get a meal,  you just wait your turn if all the tables are occupied and often can have a drink and snack in their bar.

No reservations also means less pressure on prices as revenue is maximised and the cost of no-shows and the labour cost of running a reservation system is removed.

Mix it Up

There is a third model and that is a hybrid of accepting reservations for a portion of the restaurant and saving a number of seats for walk in guests. Two MBA students at Wharton School recently modeled this system in a paper called Pricing Restaurant Reservations: dealing with No-Shows and concluded that this amalgam of accepting some reservations and allocating tables for walk in guests was the optimal system. However they also concluded for it to work optimally it required a no-show penalty in return for what they called the no-wait guarantee.

They also concluded that when the restaurant faced a larger potential market, it should allocate less capacity for reservations and then when it exceeded a certain threshold of customer demand it is better off if it stops taking all reservations.

Every reservation system of course has its advantages and disadvantages and has to work to suit your target market and brand. If you operate a white table cloth operation that accepts reservations at any time then you have to build into your pricing a contingency to cover the no-shows and extra labour.

Restaurants can also operate a mix of any of these 3 options by say accepting reservations for lunch only but not for dinner or take bookings for parties of a certain size or at a suitable off peak time.

Whilst in an ideal world every reservation would be honoured and we would all be full from open to close, this is not the reality and we need to use systems and policies that give us the best opportunity to collect as much rent as we can from our chairs.

MIKE

Has the hospitality industry reached a point where it is appropriate to advocate for a industry-wide credit card surcharge to be added to the customer’s bill? 

For the Restaurant Association this topic has recently come to the forefront through discussions with some of our members advocating for this change and as a result of merchant rate increases across all of the banks. As a result we are trying to gauge the overall viewpoint of the industry on this topic. A survey of our members indicates that only 7% of operations currently ever apply a credit card surcharge and of  those that do, it is generally only for large functions such as weddings or large group bookings where it is felt that it is more fair to put the cost back to the consumers. In hospitality it is not yet being adopted as a ‘standard’ measure for all credit card transactions, with general opinion from the survey seeming to indicate that this would offend and lose customers.

It is also felt that unless it became an industry-wide initiative not all businesses would charge it and therefore some would use it as a competitive marketing ploy. One of the other arguments against a surcharge is that these fees should be built into our pricing, so that menu prices include enough margin to cover the additional cost that is imposed on businesses due to credit card commissions. Historically, when businesses were not legally allowed to on-charge this cost, it was simply treated is a cost of doing business and managed as such.

However, we are now faced with credit card surcharges all the time imposed by other industries – from paying our rates online, to booking concert tickets or that overseas flight – and the consumer discussion around this seems to be accepting of this extra charge as simply a way these companies are passing on the credit card merchant fee. Tourism operators and hotels are also more commonly adopting the charge, so why then do we feel it would be so negatively received by our customers? What of that small percentage that have already started applying the surcharge? They say consumer response, while there may be a few niggles, is generally neutral.

What are the rules around adding a ‘credit card surcharge’?

Since 2009 merchants have been allowed to charge a surcharge when a customer pays by credit card. It was anticipated that allowing surcharges would provide more transparency on the credit card companies’ fees and eventually bring them down. In theory prices should have come down at those businesses that have been imposing a credit card fee as they are able to recoup that business expense. However, that doesn’t appear to have been the case. In addition there have been some concerns that some merchants have set their surcharges at a level that does not reflect their actual cost of accepting credit cards.

A surcharge designed to generate a profit or cover non-credit card related costs risks infringing the Fair Trading Act. This brings up a notable discovery from our member survey – almost 25% of the respondents indicated that they did not know what merchant rate they currently pay for credit card transactions.

Adding to the discussion is the growing numbers of consumers choosing to go contactless. Merchants pay credit card fees for both credit and debit cards when they are processed as a contactless payment. Increasing numbers of consumers are choosing to use their contactless cards for small purchases they would have previously paid for with eftpos, because of the ease of the transaction for them. Of course because of the fees many businesses have chosen not to accept contactless payments yet, but they could be forced to if consumers start to expect it.

There may be a small groundswell advocating for an industry-led initiative around credit card surcharges, as just over 40% of our survey respondents indicated that they have considered credit card surcharges for the future. Many are reluctant to move unless it becomes more common place first.

What next?

The Restaurant Association would welcome any further feedback on the topic – your views either for or against – as it will lend weight to our discussions with the credit card companies.

If you do want to add a surcharge for your customers paying by credit card here are some points to note:

You must disclose your surcharge policy before any purchase is made, so consider having a sign near the entrance (perhaps), on menus and at the point of sale (definitely). It should never be a surprise for your customer as this could create negativity from them if the fee is not managed transparently.

Surcharge fees should also be disclosed on every receipt as a separate item, so that the clarity of the on-charge is intact.

If you are adding a surcharge to recoup the merchant fee charged to you, then the surcharge should not exceed this rate. For instance, if your merchant fee is 1.8%, your credit card surcharge should not exceed this amount, otherwise your argument that you are simply passing on the cost loses credence.