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With the flurry of public holidays we see in the first few months of the year here in Australia, we thought it would be of interest to delve more closely into the cost of public holidays from multiple perspectives.
It’s important to note here: we’re certainly not arguing against public holidays – especially when they give us a chance to pause and reflect on important times or people in our collective history, but, while they’re a welcome break for many, they come with financial implications that impact stakeholders in different ways.
From the viewpoint of business owners managing operational costs to employees benefiting from penalty rates, and even the broader impact on the Australian economy, the cost of public holidays is a multifaceted issue we think is worth exploring.
For business owners, public holidays can present a double-edged sword. While they provide an opportunity for employees to rest and recharge, they also come with increased operational costs. Businesses that remain open on public holidays often have to pay penalty rates to employees who work during these times, which can significantly inflate wage expenses.
Moreover, for industries like retail and hospitality, where public holidays often coincide with increased consumer spending, the pressure to remain open and capitalise on potential sales can be intense. However, staying open means incurring additional expenses such as overtime pay, increased staffing levels, and higher utility costs.
To be clear, all hours worked on a public holiday are typically “double time and a half” which is calculated at 250% of the normal hourly wage. For salaried staff, employees would generally be offered time in lieu for time worked on a public holiday which may have knock-on effects for future productivity.
As you can tell from a financial standpoint, the cost of public holidays can eat into profit margins, particularly for small businesses operating on tight budgets. Balancing the need to provide employees with fair compensation for working on public holidays while ensuring the business remains financially viable can be a challenging task.
On the flip side, public holidays offer employees the opportunity to earn extra income through penalty rates. For many workers, especially those in industries like hospitality and retail, penalty rates can significantly boost their earnings, making working on public holidays a lucrative option.
From a tax perspective, it's essential for employees to understand the treatment of penalty rates. In Australia, penalty rates are considered part of an employee's ordinary income and are subject to the same tax rates. However, depending on the individual's total income and tax bracket, penalty rates may push them into a higher tax bracket, resulting in a higher tax liability.
Additionally, for employees with families, public holidays can pose logistical challenges, particularly if they have to arrange childcare or take time off to care for children who are out of school. While some employers may offer flexibility or additional leave entitlements to accommodate these situations, for others, taking time off on public holidays may come at the expense of annual leave or unpaid leave.
Beyond the microeconomic impact on individual businesses and employees, the cost of public holidays also has broader implications for the Australian economy. While public holidays stimulate consumer spending in certain sectors, they can also disrupt productivity and economic activity in others.
Industries that rely on continuous operations, such as manufacturing and healthcare, may experience disruptions and increased costs associated with maintaining essential services during public holidays. Moreover, the cumulative effect of multiple public holidays throughout the year can lead to a loss of productivity and output for the economy as a whole. This can be especially true for businesses ‘running a tight ship’ when there are multiple public holidays that fall within a single trading quarter or even month.
If you’re a business owner or employee finding challenges with your public holiday operations or working hours, we get it. Although for the most part they’re an important part of the Australian identity, they can create difficult situations. So, of you’d like to discuss your strategy for approaching public holidays and ensure you’re making the most of what they can offer, get in touch with the Attune team today.
Call us on 1300 866 113 or send us an email to start the conversation. One piece of tailored advice could change your outcome for the better.
