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How IR Complexity Is the Biggest Factor in the Underpayment Issue

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January 13 2020

By Nicholas Hartman

How IR Complexity Is the Biggest Factor in the Underpayment Issue

2019 was the year of underpayments. Seemingly, every couple of weeks another big brand found itself in the underpayment spotlight.

In June, MAdE Establishment was revealed to have made a $200,000 contrition payment to the Commonwealth Consolidated Fund after self-reporting an 8-year, $7.8 million underpayment.

Since then, the likes of Bunnings, Super Retail Group (the owner of big name retailers including Rebel Sport, BCF and Super Cheap Auto), Wesfarmers (the owners of Blackwoods, Workwear Group, Coregas and Greencap), Michael Hill Jewellers, Top Juice, and Sunglass Hut have also come under fire for underpayments.

The ongoing scandal was topped off when Woolworths admitted it had underpaid nearly 6000 staff as much as $300 million.

The subsequent national conversation around underpayments has spawned its own buzzword:  wage theft.

The Federal Government has publicly backed stronger action on underpayment: ‘10 years’ jail for wage theft: (Attorney General Christian) Porter puts hefty penalties on the table’, read one headline in the Sydney Morning Herald in late September.

Interestingly, that article is also tagged with the term ‘Wage Scandal’ and has its own subsequent news category – apparently the Australian media is recognising the resonance the issue is having with the broader Australian public.

Perhaps unsurprisingly, unions have come out swinging against big business for ’wage theft’, as it were. Sally McManus, secretary of the Australian Council of Trade Unions – the peak worker representative body – described ‘wage theft’ as a ‘business model’ as result of workplace laws becoming “weaker and weaker since 1996”, referring to the Workplace Relations Act 1996 and the ‘WorkChoices’ amendments, which were passed in 2006.

However, Ed Mallett, Managing Director of Employsure, says, in many cases, underpayment is attributable to the complexity of the workplace relations system itself – and not necessarily the product of any malicious intent.

“We do not believe the majority of hard-working small business owners are ‘thieves’. Instead, they are stuck on a regulation merry-go-round and they can find it hard to navigate,” Mr Mallett says.

“There are more than 120 Modern Awards in the Australian workplace relations system. For some businesses, even small ones, they may have to comply with more than one Award.

“It’s not just the minimum wage or award rate that’s the most difficult part, but many employers struggle with the myriad entitlements, and varying rates throughout the time of week and time of day.

The public struggles many large brands, who have dedicated HR departments, had last with underpayments drives home to Mr Mallett the extra difficulties small businesses face with complying with workplace relations regulations.

“Many large companies were reported to have underpaid their staff last year, The businesses would have dedicated HR departments, and they are still making these errors.

“Imagine, what this system is like for a small business owner. Not only do they have to deal with day to day business, they also have to juggle pay rates, stock, inventory, supply chain, rostering, marketing, and customer service.”

“It’s honest errors and a lack of understanding of entitlements that puts smaller businesses at risk.

“According to our own research, the overwhelming view from small businesses owners is that the legislation is far too complicated.

“Just think about this – if big businesses struggle to understand the Fair Work Act with their well-resourced HR departments, how could anyone expect small businesses to get it right?”

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