ANTHONY FORSYTH. No, a ‘complex’ system is not to blame for corporate wage theft (The Conversation 11-11-19)

Is Australia’s award system so complex major corporations capable of handling millions of customers and billions of dollars can’t manage to pay employees properly?

That’s the spin flowing freely in the wake of Australian supermarket behemoth Woolworths admitting it had underpaid about 5,700 staff by up to A$300 million.

Woolies joins a conga line of companies this year admitting to shortchanging employees, from household brands Qantas, Commonwealth Bank, Bunnings and the ABC to the fine-dining empires of celebrity chefs Neil Perry and George Calombaris.

The head of the Business Council of Australia has suggested these “inadvertent payroll mistakes” are due to an overly complex industrial relations system, with “122 awards, multiple agreements, multiple clauses”.

The head of the Australian Retailers Association agrees there’s a need to “simplify the system”. Woolworths’ chief executive, Brad Banducci, has chimed in with his desire “to come back and talk about the lack of flexibility in awards when interpreted literally”.

Woolworths CEO Brad Banducci. The average Woolworths supermarket stocks more than 20,000 different products but the company has had problems tracking employee entitlements. David Moir/AAP

Here’s why this blame-shifting is wrong.

The system is not as complex as employers claim

Australia’s workplace relations system has already been significantly simplified in the past 15 years.

We used to have an interlocking web of federal and state industrial relations laws and tribunals. The system had evolved without much logic over a century, from the creation of the Commonwealth Court of Conciliation and Arbitration in 1904. For a national company, it meant workers in some states might be covered by state awards and others by federal awards, with differing pay rates and conditions.

In 2005, however, the Coalition government of John Howard tackled this problem with its Workplace Relations Amendment (Work Choices) Act. The Work Choices “flexibility” agenda was bad news for workers, but it did implement a national workplace relations system.

The benefit of this was recognised when the Labor government of Kevin Rudd repealed Work Choices but kept the national system with the Fair Work Act in 2009.

The national system covers companies around the country. State industrial relations laws now mostly cover state public-sector workers. Several thousand federal and state awards have been reduced to just 122 federal awards applying to specific industries and occupations.

Businesses have made things more complex for themselves

The real problem highlighted by a lot of these cases isn’t that there are so many awards with different allowances that it’s hard for someone in the payroll office to keep track. Rather it’s a problem of employers’ own making: the use of annualised salary arrangements.

Neil Perry’s Rockpool restaurant chain has been accused of cheating workers out of A$10 million through tampering with time sheets. Daniel Pockett/AAP

Annualised salaries roll up the overtime and penalty rates workers are entitled to under an award into an annual sum. This is often done for convenience. It’s lawful only if employees are paid the same or more than their award entitlements. So it requires regular checking and monitoring.

It is now clear many businesses caught underpaying employers were not doing this.

In the case of Woolworths, the 5,700 underpaid staff were mostly department managers placed on annualised salaries (of about A$73,000). Their salaries were supposed to cover their ordinary working hours, overtime and any other payments they were entitled to under the General Retail Industry Award. But when the actual hours being worked were calculated, it turned out the salaries amounted to less, not more, than the award.

Paying workers properly not a top priority

The central problem is that, despite all the talk of how much “we pride ourselves on putting our team first”, the need to ensure staff are paid what they are owed apparently just didn’t rate highly enough.

I’m not saying the system is devoid of intricacies. But there are many other “complex” dimensions to running a large business. Woolworths, for example, encompasses a thousand supermarkets and about 30 million customer transactions a week. The logistics of procurement, distribution and storage are immense. Imagine what it takes to keep track of use-by dates to comply with food safety regulations.

If Woolworths can do that, it’s hard to believe, with all the lawyers, accountants and professional advisers at its disposal, it couldn’t ensure it complied with industrial relations laws.

Read more: How to stop businesses stealing from their employees

The fact the federal attorney general, Christian Porter, hasn’t shied away from describing these underpayments as wage theftindicates how flimsy he thinks the case is for blaming underpayments on award complexity.

Accusing corporate Australia of being “asleep at the wheel”, he has suggested directors of companies that underpay workers might be disqualified from sitting on boards. His department has also released a discussion paper about criminal penalties for the most egregious forms of underpayment.

Clearly there is an insufficient level of deterrence. Too many businesses think they can underpay with impunity.

When a chief executive complains about having to interpret awards (which are legal documents) “literally”, it’s clear we also need a major shift in corporate culture.

This article was published by The Conversation on the  11th of Novemebr 2019. 


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3 Responses to ANTHONY FORSYTH. No, a ‘complex’ system is not to blame for corporate wage theft (The Conversation 11-11-19)

  1. Malcolm Crout says:

    Having been involved in finance and administration for most of my 50 years of working life, I have been involved with payroll departments in both the private and public sectors in large and small organisations. It was always a priority for me to conduct early in my tenure, informal internal audits whenever I joined a new organisation or changed roles.
    In my experience, the large organisations generally have payroll reporting to Human Resources. In small organisations the accountant or senior manager/owner is involved in payroll. Sometimes payroll is outsourced to contractors. In most cases I’ve found my audit outcomes unsatisfactory, particularly where complex awards or agreements require interpretation. I have noted that many of those in control of payroll are not experienced in payroll functions, which lies at the root of the issue.
    In my view, the external auditors where appointed, should have a mandatory legislated responsibility to test the payroll system by way of interpretation of agreements/awards and test thoroughly to ensure nothing is slipping through the cracks. Currently, auditors have a get out of jail card as they only provide an opinion which they call a “fair view” so the burden of responsibility falls on the management. Currently, unions have been emasculated to the point that bold employers refuse access to their payroll records. This should change and unions be permitted to examine payroll systems to ensure their members are payed correctly. Smart employers will recognise this would actually benefit them as the burden is then shared between auditor, union and management. When managers/owners realise that another party is checking out their payrolls, they are more likely to ensure the proper function of payroll, by ensuring qualified, trained staff are in the process. At the moment, faults are discovered too late and correction is costly. Sometimes, the business fails because the accumulated debt is unable to be paid. This is another example of the stealthy reduction of employee rights by both sides of government in the name of efficiency and red tape reduction. The blame lies with Government Industrial Legislation which favors the employer at the expense of the employer. We have never needed unions more in the last forty years and yet Governments continue their manic attack on unions. Appalling!

  2. Rob Stewart says:

    Yes, other complexities seem manageable but not paying people correctly. What fascinates me about this is that if it has all been an “inadvertent honest mistake” time and time and time again….why does it seem to be that the mistakes result in gross underpayments almost always, and rarely if ever over payments? That’s because it’s not inadvertent. It’s generally systemic, arrogant wage theft!

    The idea that wage theft is an honest mistake(s) has about as much credibility as the CEO of Westpac (or was it ANZ) who when asked why he went into banking as a career, said it was because he “wanted to help people”. He didn’t even crack a smile when he said it. Presumably, there weren’t any vacancies at Vinnies when he started his career.

  3. Catherine Crittenden says:

    Yes. If it was caused by complexity, one would expect about the same occurrence of ‘accidental’ overpayments.But we’ve not been hearing about these.

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