Deducting wages for breakages in a hospitality business

  • Broken plates

Few hospitality business can take the cost of breakages out of an employee’s wages.

Even then, the conduct must be “wilful misconduct”. As a bit of a guide, wilful misconduct can be seen as something serious enough to justify immediate termination.

When deductions from wages are permitted

A hospitality business can only deduct money for breakages from an employee’s pay if:

  • it’s permitted under a modern award, a pre-modern award or by the Fair Work Commission;
  • it’s permitted under an enterprise agreement; or
  • there’s legislation which permits it.

Under a modern award

Only some of the usual hospitality awards permits deductions for breakages and even then, the circumstances are limited.

Restaurant Industry Award 2010 and Hospitality Industry (General) Award 2010 each permit deductions for breakages only “in the case of wilful misconduct“.

Deductions for breakages aren’t permitted under the Registered and Licensed Clubs Award 2010Fast Food Industry Award 2010 or Wine Industry Award 2010 and can’t make deductions.

Under an enterprise agreement

The other option is an enterprise agreement. There are hundreds of enterprise agreements in the hospitality industry. You should know if your business is covered by an enterprise agreement. Otherwise, use FWC’s enterprise agreement search.

Wilful misconduct

Under the Restaurant Industry Award 2010 or the Hospitality Industry (General) Award 2010, you’re looking at “wilful misconduct”.

Whether an employee’s conduct is wilful misconduct will depend on the exact circumstances. Wilful misconduct is seen as being something which is inconsistent with the relationship between the business and the employee. Accidental breakages won’t count. It’s unlikely carelessness will count either.

As a bit of a guide, we’re talking around the level of sacking someone without notice. The National Employment Standards say an employee can be terminated without notice if he or she has engaged in “serious misconduct”. There is a technical distinction. That’s why we recommend you get legal advice on the particular circumstances before making a deduction. Making a deduction for breakages is the kind of thing that might be coupled with termination without notice.

What can hospitality businesses do?

Restaurants and hospitality businesses

If you run a restaurant or hospitality business which is covered by the Restaurant Industry Award 2010 or the Hospitality Industry (General) Award 2010 and you really want to make deductions from an employee’s wages on account of breakages, here’s a guide on what you should consider doing:

  • Document everything. Write detailed notes of each instance where there has been a breakage, what happened and the employee’s response. That written information will be available to establish why you say the employee engaged in wilful misconduct.
  • Do a cost/benefit analysis of deducting wages for breakages. Consider the cost of breakages against things like getting legal advice and dealing with a jilted ex-employee at Fair Work.
  • Get legal advice on whether or not the conduct justifies deducting wages or dismissal.
  • If the employee is acting that badly, it’s also likely they can be sacked without for serious misconduct.

For all hospitality businesses

  • If the employee is acting that badly, there may be grounds for sacking them for serious misconduct. You won’t be able to deduct for breakages unless it’s permitted, but at least you’ll be rid of them. If it’s a casual employee, there’s no notice of termination required.

More practical steps to consider

  • Educate your employees on what happens when there’s breakages: it’s an increase in costs, which needs to be recouped from an increased revenue, which means extra sales based on the margins.
  • Create policies and procedures which are directed at minimising breakages and train the staff.

Contact Whites Legal with any questions. We’re happy to have a chat on (08) 6188 3340.



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