HR Management Case Study on Employment Relations


Employment relations can be a source of great conflict in any industry. Working within the expected employment relations requires in depth consideration of all employee ratings in a work place, the legislations on labor relations and the availability of a focused and supportive management system. Different theories can be used to explain employment relations and how changes in legislation can affect them. For instance, the Fair Work Commission (FWC) provides stipulations on pay rates and penalty rates as well as the expected work conditions for different industries (Rawling, 2015). The recent reduction in penalty rates is one such activity through which the commission regulates the industry, and which has the objective of balancing between the interests of the employers and those of the employees. Failure of any employer to fulfill the requirements of the FWC and the general work place relations can result in a variety of issues for the employers and the employees. Part of the major challenges in such an environment is centered on the sustainability of employment tenures.

Every employer desires to have long term employees, reduce employee turnover and thus reduce expenses on employee training. In the Krusty Krab bar and restaurant, various issues can be identified in relation to the reduction of penalty rates for various industries. The most affected parties in the facility are the employers and employees who work under the hospitality industry award 2010. The most probable concerns that would arise at Krusty Krab are those around employee sustainability and the need for remuneration review. These concerns arise due to a combination of factors namely the reduction of the penalty rates and reduction of employee number at the facility due to Krusty’s illness. To get a better understanding of the conditions and concerns for Krusty Krab, the ensuing paper will analyze the case from the perspective of the FWC’s reduction in penalty rates and its implications on the affected industries and that of the theories of employment relations. In particular, Dunlop’s theory of employment relations and Fox’s taxonomy of values will be the core theoretical perspectives under consideration. The objective of the paper is to provide recommendations for implementation by Krusty Krab bar and restaurant, based on the perspectives of analysis.

The paper runs in three major sections which are the introduction, the critical analysis section, recommendations and the conclusion. The critical analysis section is further divided into the FWC’s penalty rates and employment models. The objective of this subdivision is to provide a clear distinction between the two analyses. Next, the recommendations are provided. For instance, the facility is advised to clearly analyze the work conditions and the remunerations of workers in various positions and to come up with a work plan that will foster active participation of all employees and employers. According to Barry & You (2018) the FWC awards and stipulations on penalty rates were initially intended to boost the efficiency of employees in their roles. This has however failed to be the case as employee turnover has increased significantly in the award categories in which penalties were reduced. Krusty Krab therefore has to find alternative processes for boosting employee morale, especially now that they are short of employees. The paper ends with a conclusion which is a recap of all that is presented in the body.

Critical Analysis

Krusty Krab bar and restaurant poses a challenge to the management in terms of how well to balance between the needs of the employees and those of the employers. With a strong and motivated work force, the facility needs to constantly keep the team interested in the dealings of the business and to ensure that all the activities in which they are engaged are fruitful to the organization. The work place is reviewed based on two different perspectives, which are presented to assist in effective decision making.

Fair Work Commission’s Penalty Reduction

Various industry associations applied for the change of penalty provisions during the recent work place review by the FWC. In the past, there had been concerns raised by the employers’ associations regarding the potential of the FWC conditions to favor only the employees at the expense of employers. Through the requested changes, the industry associations intended to accomplish an increase in work durations among all employees. The specific industries affected were the hospitality industry, the retail industry, fast food and pharmacy awards industries (Barry & You, 2018). Each of these industries had its own concerns regarding the profitability of workers based on their existing work conditions. According to Wright (2018), the industries reported an increasing number of employees who worked on weekends, such as 41% of employees in retail and 61% of the employees in the hospitality industry. The evidence for this is observable even in the case of Krusty Krab bar and restaurant where the casuals who have no clear employment terms prefer to work on weekends. This has become somewhat like the norm in the restaurant, where permanent and contract employees work through regular hours on Monday to Friday while the casuals work over the weekends. With such an increasing rate of weekend labor, the employers incurred high costs in sustaining operations hence the complaints. With most of their employees in the hospitality industry, the penalty rate reduction seemed to have favored the employers at Krusty Krab. The reported outcomes of the rate reductions as given by Belardi (2017), however indicate that the restaurant may have greater difficulties in retaining and recruiting workers for lower wage Sunday employment. This implies that with the reported reduction in their work force, the restaurant is at an even greater challenge of retaining the existing employees, especially with a more attractive venture just across the road.

The Krusty Krab bar and restaurant is already facing a challenge in terms of reduced income due to the existing competition, yet Koukoulas et al. (2017) reported that the reduced penalty rates would result in further declines in the income level. This is also based on the fact that the decline in penalty rates resulted in lower consumer spending, an outcome which would be experienced across all sectors. The combination of lower spending and greater competition should be addressed by the restaurant through development of different approaches for sustainability and their evaluation for feasibility. This is an indication that the restaurant should be prepared for more challenging outcomes in the near future. The theory that Sunday work results in lower inconvenience and disutility of workers can only be said to be relevant where the number of employees is sufficient for the work to be done (Oliver & Yu, 2018). In cases where there is understaffing and great competition, employers should find strategies for sustaining their operations effectively. Krusty Krab should particularly focus on the hospitality industry employees, to find approaches for better communication and effective employee management. Dunlop’s theory of employment relations and the Fox’s taxonomy of values can help foster communication between employers and employees in the facility.

Theoretical Perspectives

The Krusty Krab case study can be examined in the context of industrial labor relations theory as it has been done in the context of the FWC rules on penalty rates. According to Dunlop’s model of industrial relations, employment relations consist of three agents namely the management organizations, the government agencies and the workers and their organization clusters. The actors and their organizations are available within specific contexts defined through technologies, the product and labor markets and the power distribution in the environment. Interactions exist between the actors in any industry, which impact on the workplace and individuals in it. Negotiations that occur around economic and political power have the capacity to determine the rules that define the industrial relations systems (The Australian Workers’ Union, 2016). While the institutions that comprise an industrial system can act independently, the overall attributes of the system are defined by the technological, market and political systems in which they exist.

A consideration of Krusty Krab’s in the context of Dunlop’s model was based on the three factors to be considered for the description of management- labor relationships. The first factor is the impacts of external factors such as technological, environmental, political and legal systems on the employment relationships. In the present case, this aspect is observable through the new legislation that has been enacted on the reduction of penalty rates (Rawling & Schofield-Georgeson, 2018). Initially, the workers at Krusty Krab were comfortable working on Sundays due to the penalty rates that they earned. With a reduction in the rates, most of the workers may not be willing to work on Sundays, which may result in the need for compulsive work and subsequently strained relationship between the employers and the employees. Similarly, the second factor is the relationship between the labor management and the government such as that between the Krusty Krab management and the FWC. The rules derived from this relationship, such as that on penalty reduction, govern the relationships between the employers and employees. These rules imply that industrial relations should be described in the context of a system rather than the individual participants.

Besides Dunlop’s model of industrial relations, the Fox’s taxonomy of values also provides frames, values and ideologies for defining industrial relations. Budd and Bhave (2006), describes the Fox’s perspective based on the concept of different frames of reference. In this regard, the frames of reference can be described as Marxist, pluralist or unitarist depending on the attributes associated with each outcome. Fox (1974) described employment as multifaceted and with different perspectives depending on the frames of reference adopted by an industrial system. The perspectives developed by the employer would be different from those of the employees and third party industry participants depending on the general frame of reference adopted. The differences in perspectives due to the multifaceted industrial relations system, can result in conflicts as described by Gahan, Pekarek & Nicholson (2018). In the context of Krusty Krabs, this perspectives can be described based on the differences between the employers, who see the penalty reductions as a source of relief and the employees, who are disgruntled by the potential reduction in wages.


Based on the analysis of the existing conditions and the labor relations linked to Krusty Krab, the following recommendations can be made to help the management accomplish its goals of sustainable profitability while still maintaining effective relations with all actors in the system.

Developing new employee agreements for those affected by the FWC penalty rate reductions – with the differences in award systems for the company, it is clear that implementation of the penalty rate reductions as recommended by the FWC will increase remuneration gaps in the restaurant. Given that the facility has both covered and uncovered employees in terms of the penalty rate reductions, implementation will see those in the restaurant award earning more than those in the hospitality award for equal work done on Sundays. The facility should therefore work out a new employment agreement for those covered by the penalty rate reductions that will foster equitable pay.

The second recommendation is that Krusty Krab management should work on a strategy that will ensure there is better work stratification. One of the concerns for the business is that the employees in the restaurant award are most likely to be affected negatively by the shortage of staffs. There should thus be a cover up agreement where the remaining employees will either be remunerated for the extra work done or additional, staffs hired.


Krusty Krab, like every other business with employees under the hospitality and retail industries, is affected by the reduction in penalty rates. With the current trends in the business, Krusty Krab has to take some critical measures to ensure that its profitability is sustainability. With the currently existing competition in the industry, the business should be focusing on strategies that will foster better relationships between the management and the employees. The recommended approaches include developing a new agreement for the employees under the penalty rate reduction law and to either hire new employees for the restaurant or increase the pay rate for the existing employees to cover for Krusty’s absence.




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