As the list of large, sophisticated businesses (including the Reserve Bank of Australia) that have demonstrated significant underpayments continues to grow the outgoing Fair Work Ombudsman Sandra Parker has issued a strong warning to all employers that it is time to meaningfully invest in building compliant systems which means “regular auditing, proper calibrated payroll and record keeping, and supporting the teams [payroll] who use them”.
Addressing the Australian Labour Law Association this week Parker explored the recent history of significant underpayments dating back to the 2018 Calombaris Underpayments, which at $7.8m were considered large at the time and stretched the Fair Work Ombudsman in terms of responding and addressing the underpayment, right up to the current spate of self identified underpayments including ; $571m Woolworths, $430m BHP, $173m 7-Eleven, $130m Merivale, $100m+ Coles, $75m BUPA, $32m Super Retail Group, $25m Red Cross, $22m Melbourne University, $16.4m Commonwealth Bank, $13m Star Entertainment, $10m Aldi, $10m Rockpool, $8m Westpac, $7.3m Australian Unity, $5.7m Ampol, $2m Uniting Communities, $1.5m RBA, $1m Rebel, $1m Maurice Blackburn, which represent only a sample of the underpayments identified in recent years.
While admitting that the Fair Work Ombudsman had to scramble in 2018 to ‘gear up’ to respond, Parker also identified clearly that the identified underpayments highlight that the size and sophistication of the employer is not a guarantee of compliance and that the message all employers should take from this is that serious investment in systems is needed as is support and skilling for the people that participate in those systems.
“Systems are only as good as the information entered into them. Often it’s the human decision-making and actions that sit around those processes, which can have a huge impact on whether a business is compliant or is contravening its obligations”, explained Parker.
Parker noted that most of the recently identified large scale underpayments could have been avoided with proper independent auditing, and that while it is disappointing to see the sheer volume of underpayments, it was heartening and indicative of “signs of improvement” that businesses of all sizes are engaging in structured auditing programs to identify and rectify issues sooner rather than later. Parker noted that if this commitment to ongoing auditing is maintained broadly the systemic issues that have appeared in some payroll systems will be identified and phased out before they can reach such staggering levels, which is both good for employers and for employees.
“The employment compliance landscape in Australia is constantly evolving and can be difficult to navigate, which is clear by the number of large, sophisticated employers that have identified significant underpayments and non compliances. This complexity is felt even more keenly by smaller and medium employers who are often working at the coal face, serving customers and handling product, as well as managing the business”, explains ACAPMAs Elisha Radwanowski.
“The complexity and change are pressures that are real, but they are no excuse for non compliance. Like any risk in the business the risk of employment non compliance needs to be well understood by the business and appropriate controls put into place to mitigate those risks, regular independent auditing is a key control businesses of all sizes should be utilising”, continues Elisha.
“The support in establishing and working towards compliance that small and medium businesses need is different than those larger businesses who have teams of payroll, HR and legal staff onhand. SMEs need assistance with identifying actual and potential non-compliances, but they also need assistance in addressing those non-compliances and correcting systems to ensure they do not occur again”, Elisha added.
“It is hard enough for a business owner who is working behind the counter 40h a week to get the time to do the payroll, let alone assess the systems against rapidly changing legislative and case law, industry and labour market best practice. In the event that owners identify issues themselves fixing those issues and the systems that led to them often needs external assistance”, Elisha notes.
There are levels of business operation and there are levels of independent auditing, support and guidance that are available and appropriate to businesses. A full forensic accounting and compliance audit from a top tier accounting or law firm is likely to be ‘overkill’ in terms of cost and response for a small business employing 3 people, especially in the initial stages of an audit program. What is more likely to be appropriate for the smaller businesses is an industry specific Health Check or Assisted Audit.
“Independent is a key here. In the past members have had their bookkeeper do audits and considered this to be sufficient. While in the main this may have been the case it is hard to ‘see’ your own issues, and if the person auditing the system has been the one doing the transactions, or checking the transactions it is very likely that issues can be overlooked as they are then seen as ‘routine’. That’s not to say that a bookkeeper or accountant can not identify issues, rather that for peace of mind members should be having a completely different bookkeeper, accountant or other professional review their systems and outcomes”, continues Elisha.
The Fair Work Ombudsman has made it clear that all employers, of all sizes, should be utilising structured audit programs to address and avoid underpayments. ACAPMA strongly encourages all members to take this call to heart and ensure that they are having a professional, independent and industry specific audit of compliance done regularly.
“ACAPMA offers members the ability to access fuel transport and fuel retail specific Assisted Compliance Audits, where ACAPMAs in house employment professionals review systems and outputs. The ACAPMA Assisted Compliance Audits provide members with more than just a list of non-compliances, these audits provide members with ‘assistance’ in the form of templates, resources and guidance, to address the non-compliances and to ‘fix’ the systems to avoid future non-compliances”, explains Elisha.
For more on the ACAPMA Assisted Compliance Audits see;
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HR Highlights are things to consider, implement and watch out for in your business. They are provided as general information for you to consider and do not constitute advice. You should seek further advice on your situation by contacting your legal advisor. ACAPMA members can access resources and receive advice, guidance and support from the ACAPMA employment professionals via firstname.lastname@example.org , it is free for members. ACAPMA Membership delivers this and more benefits, see; https://acapma.com.au/membership/ for more information.
Elisha Radwanowski BCom(HRM&IR)