Staff ripped off on pay low on firms’ priorities

EWIN HANNAN

FEBRUARY 22, 2020

The Australian

Christian Porter, chief law officer in a Coalition government that traditionally is sympathetic to busi­ness, is not ­impressed by employer excuses that large wage under­payments by some of our biggest companies are the fault of the workplace system’s complexity. Following Coles and Target this week joining a conga line of household brands confessing to multi-million-dollar underpayments of employees, the Attorney-General says the government is frustrated and disappointed by corporate Australia’s failings.

“It is endemic and, to me at least, is representative of the fact that large sophisticated organisations who have big tax compliance divisions, big HR divisions, spend enormous amounts of money on PR and social issues, they just have not invested anywhere near enough time, effort and resources in one of the most basic aspects of any business, which is payroll,” he tells Inquirer.

Data compiled by the Australian Payroll Association supports Porter’s point. Its recent survey of 1831 organisations — collectively employing 1.578 million workers and producing 49 million pay slips a year — found 83 per cent had not updated their payroll software since 2000.

Of the 17 per cent of companies that had updated in the past 20 years, 72 per cent are using products mostly suited for small businesses, despite only half having fewer than 100 employees.

Association chief executive Tracy Angwin says the award complexity cited by employer groups is not a legitimate reason for underpaying staff as hundreds of thousands of companies across the country manage to pay their workers correctly every week. “It is two things: it is the ‘set and forget’ of payroll technology, and under-investment in the training of payroll staff,” she says.

Angwin rejects company claims that incorrectly configured software bought from offshore companies can be blamed for ­underpayments. “It doesn’t matter where the software is from, someone has to set them up and the company has to sign off on the configuration before it goes live.

“When you buy a piece of payroll technology you have to configure it to meet your require­ments. It doesn’t come fully con­figured. I use Microsoft Excel and if I can’t get my formulas right, my calculations will be wrong and Bill Gates is not going to take responsibility for that. Nor should he. It’s the user’s problem. It’s a user error, I haven’t been trained in Excel to the extent I should be that I can make sure my formulas are correct. It’s exactly the same with payroll software.”

University of Adelaide law professor Andrew Stewart says major companies that underpay workers have reaped the benefits of simplified pay structures such as annualised structures while under­-investing in payroll systems and not ensuring employees are paid their legal entitlements. “What we have seen is really significant shortfalls. How can that be anything other than negligence? At the very least, you’d say the concern for saving money on payroll systems by having simpler pay structures has been achieved at the expense of meeting their oblig­ations to their workers.”

Anthony Forsyth, professor at the Graduate School of Business and Law at RMIT University, says rather than being too complex, the workplace system has become simpler. “If you go back to the days of overlapping federal and state coverage, whereas that’s been pretty much clarified with the move to a national system covering most of the private sector,” he says. “Many thousands of awards, federal and state, have been ­reduced down to 122 modern awards. So, to me, it’s the problem of under-investment on the part of big corporations in compliance. ”

In the aftermath of the collapse of George Calombaris restaurant empire, Australian Industry Group chief executive Innes Willox says unions should “bear much of the opprobrium” for the demise as they relentlessly over-inflated employee underpayments and branded companies as “thieves”.

Accusing the Morrison government and the states of backing a divisive agenda by “parroting” union terms such as wage theft, Willox claims the Calombaris ­empire’s $7.8m in underpayments to more than 500 workers was ­reportedly “genuinely in error, and then self-reported and all employees back-paid in full”.

But by its own admission, the companies did not have adequate systems in place to ensure workers were not underpaid.

Radek Sali, the former chief executive and part-owner of the Swisse vitamins business before its $1.67bn sale in 2015, has conceded that such was the lack of financial oversight and rigour in the business in 2017 that it had only one bookkeeper.

The underpayments were all the more galling to the public and, evidently, to potential customers given Calombaris had used his profile to support the national ­employer campaign to cut staff ­entitlements.

In 2012 he said penalty rates faced by restaurateurs under Labor’s Fair Work Act were uneconomical and that employees at his new pasta bar would have to be paid $40 an hour on Sundays, “and it’s not like they’ve had to go to uni for 15 years”.

His knowledge of pay rates would suggest a detailed knowledge of his compliance obligations. But his company’s enforce­able undertaking with the Fair Work Ombudsman shows staff were underpaid from 2011 to 2017, meaning Calombaris was underpaying them at the same time he was complaining the legal minimum rate was too high.

In contrast to Willox, Porter has called the Calombaris underpayments ­“deplorable” and a “theft of wages”, language not dissimilar to union commentary.

As well as imminent legislation criminalising serious forms of wage theft, the government will examine banning directors from boards of companies that underpay workers. Companies ripping off workers could be stopped from employing migrant workers and required to display a notice ­admitting underpayments.

ACTU secretary Sally Mc­Manus says unions have been campaigning against “wage theft” for years.

“The word wage theft wasn’t used six years ago,” she says. “Now they should put it in the Urban Dictionary if it’s not already there. They (the government) are responding to that.

“They see the public don’t like the fact it seems to be totally fine for employers to get away with stealing from people.”

Porter says “penalties will be ­inescapable, whether they are civil, criminal or of the type that we are now proposing with ­respect to directorships, banning and publicity”. “More than one type of those penalties might apply,” he says. “But corporate Australia surely now has got the message that they need to get their house in order.”

While Porter takes a hard line on underpayments by large companies, he is responsive to some complaints from representatives of small and medium-sized businesses about the award system’s operation, especially in the hospitality, tourism and retail sectors.

As part of the government’s planned review of the award system this year, Porter will seek submissions on whether there could be an expanded role (and funding) for the Fair Work Ombudsman to provide more targeted payroll compliance advice to small businesses that do not have access to large HR departments.

That said, he is not buying ­attempts by chief executives and industry groups to excuse the conduct of major companies by linking massive underpayments with the award system’s operation.

“To say that there are complexities with awards isn’t an excuse to not obey the law and the awards represent what people are lawfully to be paid,” he says.