In the latest staggering underpayment, Insurance Australia Group have rectified $21 million in underpaid wages and $16 million in underpaid long service leave entitlements effecting 19,000 current and former staff over the decade to 2023.
In what the Fair Work Ombudsman has categorised as underpayments due to “basic shortcomings” in the entities processes, including a lack of appropriate time and attendance systems, the underpayments were broad and amounted to an average payment of $1,000 to most employees, but with at least 14 employees were underpaid $200,000 each.
The underpayments were self identified as part of an internal review and reported to the regulator as impacting base rates, penalties, loadings, allowances and entitlements.
The “basic shortcomings” in processes, including not having time and attendance system, which left employees unpaid for actual hours of work. Which were compounded by the fact that the entities also failed to perform reconciliations and top-up payments to ensure that employees were paid appropriately.
“IAG had substantial, long-running compliance breaches underpinned by flawed processes,” said Fair Work Ombudsman Anna Booth in a statement. “Once identified however, IAG responded strongly and invested heavily to fix those problems, including through new measures to ensure all its workers are paid correctly in future.”
Among the steps it took included an overhaul of its compliance and governance systems, as well as the implementation of a remediation programme that covered underpayments beyond the six-year statute of limitations.
“I commend IAG for committing to amending its governance processes to ensure IAG’s Board of Directors has significantly better awareness of potential non-compliance issues,” Booth said. “IAG have made the most significant commitment for Board oversight we’ve seen in any EU entered into with the FWO to date.”
The Fair Work Ombudsman, however, expressed disappointment that large employers continue to fall short in meeting their legal obligations to employees.
“Large corporate employers need to place a much higher priority on having systems and governance in place that ensure employees’ full lawful entitlements are paid, year-in, year-out,” Booth said.
According to the FWO, boards of large employers must set a culture of compliance within their organisations.
“Corporate compliance culture starts with the Board, including how it sets its risk appetite, performance measures, and reporting. Many Boards need to do better, particularly with increased penalties and criminal offence provisions that commence in January 2025,” Booth said.
“Every Director needs to ensure that the company they are responsible for has systems in place that prioritise compliance. By doing this they also reduce risks and costs for the business associated with non-compliance.”
Checking your own compliance
ACAPMA members are reminded that the ACAPMA Assisted Compliance Audits are available as a resource to not only have an external professional ‘check in’ on employment compliance, but also get the help needed to ensure the documents, records and systems are not only ensuring compliance but can demonstrate it. For more information see; https://acapma.com.au/our-services/compliance-and-auditing/ or email employment@acapma.com.au
Here to Help
HR Highlights are things to consider, implement and watch out for in your business. They are provided as general advice and you should seek further advice on your situation by emailing employment@acapma.com.au its free for members. ACAPMA membership is affordable at only $860 per year for a single site and valuable with sites gaining access to all the ACAPMA Guides as well as HR and IR advice support and representation and a raft of other benefits and discounts.
Elisha Radwanowski BCom(HRM & IR)
ACAPMA
