Impacts Of Cut Penalty Rates On KFC Australia’s HR Management And Recommendations

The Australian Fast Food industry and KFC

The first KFC restaurant in Australia began operations in 1968 – at a place called Guildford, in Sydney. The firm has struggled through to time to achieve success. However, we currently serve more than 1.5 million customers every week across 700 restaurants globally. For a long time, the company operates successfully with the competitors in shadows on how the company manages to remain successful in the dynamic market for such a long time (Flabbi, Macis, Moro & Schivardi, 2014).

Nevertheless, the Australian fast food industry is fast growing in the global spectrum. Over the past few years, campaigns on consumer health awareness have altered the way businesses operate in the Fast Food and Takeaway Services industry in the country. There is a case of increased awareness about the nutritional content of food offered in fast food stores and restaurants such as KFC (Gerdeman, 2012). Therefore, consumers are smarter and choose healthier food options thereby affecting industrial demands. KFC, on the other hand, has made appropriate responses by introducing healthier, premium food choices with less sugar, fat, and salt. Most importantly, KFC offers good, higher quality options on the offered dishes. KFC then expects an increase in its revenue by 3.9% come 2020 (Ellison & Mullin, 2014, p. 679).

Talking of changes in the hospitality and tourism industry in Australia – one of which KFC is part; associated stakeholders decreed a cut of the penalty rates for overtime and public holiday workers. However, such changes on the penalty rates have detrimental effects on KFC’s casual and permanent workers who work during public holidays, in the evenings and night hours, as well as on Sundays. Concerning the imposed charges and changes made in the industry’s legal framework, this paper will look into the impacts of such legal, environmental factors on:

• KFC’s HR planning
• Job design
• The quality of organization work practices

Otherwise, this paper will also justify appropriate recommendations that KFC Australia needs to undertake towards negotiating with the concerned stakeholders to amend the imposed penalties.

Impacts of Cut Penalty Rates on the job design, HR planning, and quality of work practices of KFC Australia

1. Analysis of Award-Reliant Workers

The average number of workers employed by KFC in Australia is approximately 2, 500 between 2017 and 2018. In Sydney, however, the fast food industry – between 2017 and 2018, recorded approximately 290,000 workers. A broader research outcome showed that the period between 2017 and 2018 marked close to 490,000 retail workers who are non-managerial as well as another 220,000 managerial workers in the industry – within Australia as a country. Currently, KFC has close to 800 award-reliant workers. Out of the total population that is close to 3,000 workers, about 1,200 work on Sundays, representing close to 46% of total workers in the company.

1. Key Findings through the Perspectives of the KFC’s HR

Impacts of Cut Penalty Rates on HR Planning, Job Design, and Quality of Work

After a thorough close up an overview of the associated impacts of such cut penalty rate changes, the HR establishes that:

• Up to 2,000 workers in the firm are working under the awards on which such changes are proposed.
• About 1 in 3 non-managerial workers are not part of the EBAs and will face the impacts of the changes proposed
• The proposed changes will affect about 52% of female workers and 48% of male workers.
• Both part-time and full-time employees working on an 8-hour shift on Sunday will face the impacts of the changes made. Such employees are likely to lose at least $90.90 every full change on Sundays.
• The changes will most likely, affect employees that earn the least amounts including students and employees relying on operating on the weekends.
• Modeled Financial Impacts on the Affected Employees

The HR, in its deliberations on considering the revocation of such changes, has given an outline regarding the importance of finding the lives of many workers at stake because of the changes. As mentioned before, most of the employees who are affected by the FWC decisions are low earners (Matsa & Miller, 2013, p. 141). Most of the workers are parents that return to the workforce after taking breaks while others are students. The affected employees have their weekend shifts with disproportionate percentages of annual and weekly wages. For instance, students employed on a full-time basis only operate in the weekends – meaning that reducing Sunday rates will affect them significantly (Kryscynski, 2015).

Otherwise, the HR department devises analysis models that highlighting the financial impacts of the implemented Sunday rate changes on employees within every award subject. However, the models assume that (1) employees are under the minimum hourly adult wage (2) employees are within the relevant award and; (3) employees work for 48 Sundays annually. On the contrary, it is important to note that the models of the Sunday shifts represent eight employee working hours minus a 0.5-hour break. Apart from that, the models show the impacts of workers on two different scenarios within the awards (Hicks, Keil & Spector, 2012, p. 317). The scenarios include:

1. Full-time employees working for 48 Sundays every year (situation one)
2. If Current Pay (Every Sunday per employee) = $270.50; then
3. Annual Pay (summation of all Sundays) = (48 Sundays X 270.50) = $12,984
4. However,Sunday Pay (After the change is effected per employee) = $161.67; then
5. Annual Sunday Pay (After change) = (48 Sundays X 161.67) = $7,760.16
6. Annual Pay Reduction (due to changes) = (12,984-7,760.16) = $5,223.84
7. Casual employees working for 48 Sundays annually (situation two)
8. If Current Pay (Every Sunday per employee) = $281.50; then
9. Annual Pay (summation of all Sundays) = (48 Sundays X $281.50) = $13,512
10. However,Sunday Pay (After the change is effected per employee) = $188.57; then
11. Annual Sunday Pay (After change) = (48 Sundays X $188.57) = $9051.36
12. Annual Pay Reduction (due to changes) = ($13,512-$9051.36) = $4,460.64

The figures below show the proposed outcomes (If all employees worked for 48 Sundays annually).

Current Pay (Every Sunday per employee)	$270.50
Annual Pay (summation of all Sundays)	$12,984
Sunday Pay (After the change is effected per employee)	$161.67
Annual Sunday Pay (After change)	$7,760.16
Annual Pay Reduction (due to changes)	$5,223.84

Full-time employee wages when working for 48 Sundays every year

Current Pay (Every Sunday per employee)	$281.50
Annual Pay (summation of all Sundays)	$13,512
Sunday Pay (After the change is effected per employee)	$188.57
Annual Sunday Pay (After change)	$9051.36
Annual Pay Reduction (due to changes)	$4,460.64

Part-time employee wages when working for 48 Sundays annually

1. Effects of Changes on KFC Operations

As mentioned before, the proposed changes will affect about 52% of female workers and 48% of male workers. Most workers in KFC are female compared to their male counterparts. Therefore, in association with the Workplace Gender Equality Agency, KFC estimates that since a larger percentage of the hospitality and fast food industries’ employees are female, they stand a chance of a greater change impact compared to male workers (Hamel & Prahalad, 2015, p. 156).

However, recent studies performed by the HR on the impacts of reducing employee wages – mainly female workers showed that reduced payments reduce employee engagement, morale, involvement, and training among other implications. When workers form a negative attitude towards business processes, policing becomes difficult (Gayle, Golan & Miller, 2012, p. 844). Most importantly, it is difficult to predict outcomes if such a situation occurs – and even if the prediction was made, the results are likely to become ambiguous. According to the theory of standard human capital, a labor market that is a presumably absolute reduction of minimum wages or slight increase on minimal wages will reduce the ability of workers to undertake general workforce because the employee will not be able to afford such training. A slight reduction in employee’s wages (for workers within the awards) could force KFC to pay more salaries to workers who are not eligible for the awards (even for them that are unskilled). The situation could cause a reduction in the economic rent for KFC. Therefore, the company will have to increase its training processes to increase general workforce productivity – and recover the lost surplus (Duval, Sharples & Sutherland, 2017, p. 6).

Recommended Actions for KFC Australia

The situation will also affect production cost and efficiency. On efficiency, without morale and positive engagement of a larger percentage of the workforce, reduction of work efficiency is realized leading to increased production time (David, 2009, p. 46). Alternatively, a high production cost is achieved. Workers paid minimum wages will have reduced efficiency and productivity levels during their working periods compared to employees who get paid higher salaries. Therefore, KFC- apart from advocating for scrapping-off of the implemented changes will react to penalty changes by slightly increasing its minimum wages for its workers while maintaining its performance standards for those within the awards and those that are not affected. On production cost, KFC understands that with an increase in wages, production costs also increase for every employee. Therefore, the management will cut working hours, recruit more employees, as well as slightly increase its purchase prices within Australia (Collins & Leaderpowertools, 2009). However, an alternative strategy that KFC could employ is estimating and reducing costs of error corrections in production that unskilled workers create – including charges of lost production time. Most importantly, the management understands that the best way to breach the gap between minimum wages for workers and higher production costs offer recruits minimum wages while ensuring that they get periodic performance-based wage increment (Clark, 2017, p. 421).

1. Effects on Gender Pay Gap

Even though the cuts in penalty rates do not affect workers in the fast food industry as those in the hospitality and retail industries, they still significantly feel the impacts of such prospects – more so, female employees. Female workers’ average wages will dramatically reduce compared to the average salaries of male counterparts. Arithmetically, in every industry that such change in penalty rates will be implemented, the gap in gender pay is imminent (Cardoso & Winter-Ebmer, 2010, p. 156). Gender pay gap refers to the ratio of male to female or female to male, based on hourly earnings.

On the other hand, even if the gender pay gap that currently exists – based on award-reliant employees is theoretically zero, the resultant conclusion does not change. The outcome does not change because dollar reduction and a similar percentage in pay apply to fewer men compared to women – resulting in the gender pay gap that widens. Assuming that other factors that extend the gender pay gap are constant, changes in penalty rates would afflict a deficit of 0.1 percent in magnitude fora hourly wage rates in the entire industry (Bryman, 2013).

1. Effects of Changes on Penalty Rates on Individual Work Choices

Conclusion

While assessing the effects of changes on penalty rate, it is vital to determine the effects of such changes on processes of recruitment and individual preferences. Such considerations are necessary because apart from effects that changes have on employees, altering penalty rates applies the rotational that disutility makes Sunday work’s penalty rates irrelevant. Most considerably, workers prefer working on Sunday and are not forced (Brotchie, Newton, Hall & Nijkamp, 2017). After performing an internal survey in KFC Australia, the research outcomes – from the determinations of the HR showed that majority of workers that worked overtime and during the holidays loved working on Sundays and not Saturdays (Bennett, Dawson, Bearman, Molloy & Boud, 2017, p. 677). On the contrary, some of the impacts of changing laws on penalty rates on recruitment processes include:

• Increasing the duration and likelihood of unemployment for employees with low wages – more so during cases of economic turmoil
• Encouraging workers to reduce or stop training of employees
• Increase in cases of job turnover
• Reducing school attendance as students and parents will not be able to pay for fees
• Abolishing part-time work
• Driving employees to go for alternative jobs that are uncovered thus having wage in such sectors reduced
• Encouraging firm management to reduce employee fringe benefits
• Encouraging the management of the firm, through the HR Department to install devices that save labor
• Increase in inflationary pressure
• Crime rates among the youth increases because of high rates of unemployment
• The firm ending up hiring unskilled and incompetent personnel

Because the proposed changes will affect about 52% of female workers and 48% of male workers, KFC will implement some strategies to curb negative resourcing outcomes likely to be encountered. Most significantly, the changes in penalty rates could result in a reduction in employee engagement, morale, involvement, and training processes (Ben-Ner & Siemsen, 2017, p. 13). With the help of the theory of standard human capital, KFC will have to recruit more workers, increase compensations, and create incentives that would encourage overtime and holiday workers to have positive attitudes when working. However, to recover lost surplus, KFC will have to provide free training processes for its workers. However, research outcomes also show that the situation will affect production cost and efficiency. Therefore, on efficiency, lack of employee morale and positive engagement – of a larger percentage of the workforce, will be tackled by improving work culture to incorporate flexibility for workers (Beck & Cowan, 2014). Apart from that, KFC- in as much as it advocates for scrapping-off of the implemented changes, will react to penalty changes by slightly increasing its minimum wages for its workers while maintaining its performance standards for those within the awards and those that are not affected. As mentioned before, KFC understands that with an increase in wages will result into increase in its production costs for every employee. Therefore, the management will cut working hours, recruit more employees, as well as slightly increase its purchase prices within Australia (Dezsö & Ross, 2012, p. 1077). However, an alternative strategy that KFC will employ is estimating and reducing costs of error corrections in production that unskilled workers create – including costs of lost production time. Concerning the identified strategies, the management understands that the best way to breach the gap between minimum wages for workers and higher production costs offer recruits minimum wages while ensuring that they get periodic performance-based wage increment (Angier & Axelrod, 2014, p. 111). The management of KFC Australia, through its policymakers and strategists, will also:

• Create a system that is effective enough to monitor a minimum increment of wages within every organizational level
• Employ the wage management models effective enough to ensure that workers that are non-exempt— whether non-tipped or tipped, get at least the stipulated minimum wage. KFC Australia is keen in ensuring that the minimum worker wages are met as an effective management objective
• Ensuring that the employees’ minimum wages are separately paid for every hour that they work within their job areas – and strict compliance to the same principle is needed (Allio, 2011, p. 6)
• Updating memos and posters regarding minimum wages
• Informing workers about new wage rates whenever changes occur
• Training employees working within payroll systems, HR, as well as other managerial employees on the importance of posting, increasing, and providing notice – as well as responding to inquiries of workers on changes regarding wage rates and penalties
• When employing a third-party payroll processor, confirming if it is capable of detecting changes and that its system is properly updated is necessary (Albanesi & Olivetti, 2009, p. 87)

Conclusion

With the massive growth of the Australian fast food industry, consumers are becoming more aware of the importance of healthy fast food and takeaway services. However, the industry in which KFC Australia is part faces many legal, environmental challenges (Dawlabani, 2013). One of such challenges, as mentioned before, is the fact that the government – through its mandated stakeholders, decreed a cut of the penalty rates for overtime and public holiday workers. The activity has then identified that such changes on the penalty rates have detrimental effects on KFC’s casual and permanent workers. Most importantly, the affected workers are those who work during public holidays, in the evenings and night hours, as well as on Sundays (Ahern & Dittmar, 2012, p. 141). Concerning the imposed charges and changes made in the industry’s legal framework, this paper has highlighted the impacts of such legal, environmental factors on:

• KFC’s HR planning
• Job design
• The quality of organization work practices

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