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PKF Australia

Accountants and Business Advisers

Wage Theft Isn't About Good vs Evil: It's About A Fair Go

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Baidy Laffan

Partner

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Wage Theft Isn't About Good vs Evil: It's About A Fair Go

I generally like to think that people are fundamentally good. That they are doing the best they can with the resources they have and don’t seek to do any harm.

I believe that people genuinely believe that they are fundamentally good, regardless of whether we perceive them to be otherwise. In the context of wage theft, no individual or company views their own wage theft as malicious. It is often this nuance that gets left out of public debate in a world of outrage-fuelled media.

But noble intentions do not excuse businesses from the result and all businesses are treated the same in the eyes of the regulator.

Let’s take the recent example of Woolworths. The company underpaid some of their 5,700 department managers across their retail network dating back to 2010. The $300 million underpayment arose from differences in the employee’s salary under an Enterprise Agreement and what they would have otherwise earned under the Award. It is fair to say, Woolworths did not intentionally set out to underpay their employees, and it is equally fair to say that this error resulted from (a) someone not reading the Agreement closely enough nor ever bothering to check and (b) poor systems and monitoring.

If it wasn’t intentional, is it acceptable? No, culturally and legally Australians believe in a “fair go” and the truth of the matter is that dollars and cents matter to the employees affected no matter how small.

Woolworths joins a growing list of Australia’s most recognisable brands that are being caught out by wage underpayment including Wesfarmers, Qantas, the Commonwealth Bank, Super Retail Group. Wage underpayment is no longer the domain of gritty corner shops or service stations. Many of these brands have been caught out by complex issues stemming from a handful of clauses in the Agreements and Awards.

Now, I hear you, how do you get it wrong when you have hundreds of people in your Human Resources and Payroll team?

The answer is more nuanced than the regulator and media like us to believe. The truth that ties all of the factors together is that payroll is not simple; it is complex, dynamic and fluid. Let me give you a rundown of some of the nuances:

  • The legacy of state-based Award system. A centralised national employment award framework was not introduced in Australia until 2010, with many of the new national awards not fully implemented until 2014. Australia went from having over 1,500 different state-based awards to 122 national industry awards. There were bound to be teething problems identified in the decade after a complete overhaul of our national award framework.
  • Limitations of technology. Technology has greatly improved the life of payroll clerks across Australia; however, we place more trust in technology than we do ourselves and forget that humans are responsible for coding the rules into the software to begin with. If your Agreement has a unique clause – it is not going to be in your payroll system unless you have it coded in.
  • Complexity of Awards. Awards contemplate many different scenarios that could arise, not just the stock standard. For example, under some Awards, if you work only night shifts you would get 30% loading, however, if you worked alternating day and night shifts, you would only get 12.5% loading for the night shift only. This means you need many more unique rules written into your payroll system to make sure these items are picked up.
  • Regulators. Both the Fair Work Ombudsman (FWO) and Australian Taxation Office (ATO) share responsibility for workplace compliance meaning there are two independent stakeholders making decisions and changes to the framework, which means businesses need to keep abreast of the actions of both!
  • Complacency. Let’s face it, payroll is boring, management and boards are focused on the ‘big ticket’ items like merger and acquisitions, profit, competition and disruption. We take payroll for granted and focus our attention elsewhere.
  • Payroll is dynamic. We all know that award rates typically change each financial year, however, changes to awards and workplace obligations are no longer predictable annual events. We are seeing changes to leave; penalty rates and entitlements change throughout the year with little predictability and there is a need for businesses to be alert throughout the year.

This means all businesses need to be considering these nuances when looking at their own recruitment and payroll systems. The best way to get comfort over your compliance with workplace obligations and your interpretation with Awards and Agreements is through an audit that contemplates and responds to these nuances. The investment in a workplace compliance audit can save you millions in future underpayment and protect your biggest asset: your reputation.

We continue to support Australia’s high-profile brand with their workplace compliance and protect their brands. Get your New Year off to the right start and get in touch with PKF to see how we can provide you comfort and clarity in your compliance.


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