[Australia] Big Business Warned About Underpayments

Experts cite under-resourced payroll offices and a lax approach to compliance as a driving force behind a series of multi-million dollar underpayments hitting big corporates, Financial Review reports.

At a conference held at the end of October, the Fair Work Ombudsman and payroll specialists gave employers a warning to pay attention or risk payroll errors accumulating over several years and across thousands of employees if they did not pay attention. Acknowledging that compliance was made more difficult by the complexity of the workplace system.

The regulators have noticed a change in the sectors making notable underpayments in the past couple of years  - a shift from small to medium businesses to major corporates - unpaid wage bills running into multi-million dollars have been reported at ABC, Qantas, Thales and Wesfarmers’ Bunnings.

Cletus Brown - FWO director of knowledge - said major companies had “taken their eye off the ball” by not investing in compliance or regular audits. “Quite often we’ll deal with businesses and we’re staggered there are only two or three people looking after the payroll for several thousand staff - that’s not sustainable,” Mr Brown said.

He added that around 30 businesses had self-disclosed their underpayments to the FWO in the past two years. Partially because of growing concern about the issue’s potential to damage brands.

“I think that has got the attention of directors and boards who are asking questions of businesses to make sure they are compliant so they can avoid being dragged through the headlines.”

Mr Brown addressed the issue at The Association of Payroll Specialists' (TAPS) conference, which set out to explore the reasons behind what it described as a "compliance crisis”.

Jason Low - Head of TAPS - said current payroll systems meant “one single problem could see you end up on the front page of the paper”. Mr Low raised one case in which someone “forgot to click the box” on a new payroll system, costing a business $350,000 because it led to superannuation going unpaid on bonuses.

Employers began self-disclosing underpayments to the FWO after laws introduced by the Coalition towards the end of 2017 raised fines and liability over underpayments significantly.

Recent underpayment disclosures reached totals as high as $40 million. This was the case for Super Retail Group, who experienced an almost 30 per cent cut to bottom-line profits as a result of such errors.

However, employers have managed to avoid prosecution through pledges to review and makeover compliance practices and a commitment to give “contrition payments” through arrangements with the FWO.

Cletus Brown said that although the majority of self-disclosed underpayments were “honest mistakes”, some companies had come to the FWO with explanations “we basically don’t believe”.

“They discover the problem 12 to 18 months ago and they have lawyers and the big four [professional services firms] in and they’ve buried all the bodies. They haven’t even left mounds in the lawn - it’s flat and smooth and there’s nothing to see here. As a regulator that pricks our ears and we want to know what happened.”

At Senate estimates last month, Sandra Parker - FWO - suggested the agency will seek higher contrition payments after criticism about the $200,000 paid by George Calombaris’ Made Establishment restaurant group following the company’s $7.8million underpayments.

"What I would say is that we will in future take into account the size of the underpayment as a major factor and we didn't. . . make it as perhaps as high a priority as we think, clearly, the public and others think we should,” Ms Parker said.

Richard Breden - the general manager of Ascendor payroll software - said although big business might be struggling with compliance, small businesses were without the resources to interpret industrial instruments “which equally apply to them and are incredibly complex”.

Additionally, there was “constant interpretation over what we thought was fairly settled”, Mr Breden reportedly said, after recent court rulings allowed regular casuals to claim annual leave and required sick leave to be accrued based on hours worked, which opposes FWO advice. (Links via original reporting)

Mr Low raised the question that if government agencies “find it hard, what hope do we have?”

Angela Lehmann - director of single-touch payroll at the ATO - said the agency understood it was “really hard” for business and reassured that it was revisiting its interpretations of workplace rules with the FWO.

“If you look at our laws they are quite old and were written a long time ago and the workplace environment has changed so much,” she said. “...maybe our initial interpretation was fit for purpose at the time but it’s not now.”

Mr Brown acknowledged it “wasn’t the easiest system to comply with” and remarked that the FWO had “constant feedback, particularly from small to medium-size businesses, that one of the challenges they find is the complexities of the way [awards] are written”.

Source: Financial Review