We’ve all read about the 7-Eleven wage scandal that involved workers at Australia’s biggest convenience chain allegedly being paid as little as $10 an hour before tax in what has become known as the ‘half-pay’ scam.
Staff at 7-Eleven franchises were allegedly being underpaid half the award rate and some foreign workers claimed they were threatened with deportation if they spoke up.
Indeed, according to a joint investigation by the ABC and Fairfax, internal documents reveal that between July and August this year, 7-Eleven head office reviewed the payroll compliance at 225 stores and found that 69 stores had ongoing payroll issues.
Of course 7-Eleven is not the only company in Australia accused of flouting the law and underpaying staff. Myer and two contractors were recently hit with claims that cleaners working in the retailer’s stores have been underpaid and incorrectly treated as contractors instead of employees, while the Fair Work Ombudsman continues to take action against businesses that do not pay workers correct wages and entitlements.
So as business owners and senior managers, what can you do to avoid the same fate?
Whether it’s staff in your business, a sub-contractor or franchisee, it’s easy to turn a blind eye to a few bad actors and say ‘it’s their problem, my house is in order’. Regardless of who’s legally responsible, businesses brands are at risk when any related party has a public compliance breach. Having visibility of your entire workforce chain and doing so in a way that’s largely automated to remove huge administration overheads is critical.
Imagine running a retail chain with zero inventory management systems – crazy, right? Labour is the largest or second largest cost to businesses, but only a few forward-thinking companies are using software to manage their workforce against benchmarks within their businesses and in their sector. A franchisee whose inventory slippage is 5% higher than the average would be picked up immediately and the same rigor should be applied to labour.
If you’re running a business in the retail or hospitality industry, be careful when hiring casual workers or contractors. Consideration should be given to the reason for the arrangement, the length of time of the arrangement, the individual’s significance to the business, what the individual is doing; and who is getting the benefit from the arrangement.
Just like the bookkeeping that hasn’t been done in years, or the warehouse that hasn’t been audited since last Christmas, tackling a workforce compliance or optimisation project can be the elephant in the room.
The government will eventually catch up and start penalising bad actors. Now is the time to get ahead of the regulation wave and be proactive about removing any potential risks so your business can focus on growth. Looking over your shoulder and waiting for a call from the Ombudsman is no way to run a business.
Compliance for compliance sake is great, but not at the cost of your employees’ engagement. Many growing businesses are already using software that’s engaging at all levels of the business – ensuring head office can tick all the boxes, while providing their employees with an experience that doesn’t remind them of tax time.
In the past year alone, we’ve seen hundreds of thousands of dollars in penalties handed down by the Federal Court. 7-Eleven alone could face a $300 million compensation wages bill after the Allan
Fels-chaired panel released the first tranche of payments to underpaid workers a few weeks ago. These cases emphasise the willingness to use harsh penalties to act as a deterrent to others.
So, before you get that call or visit from the Fair Work Ombudsman, consider the points above and invest in systems that enable you to see exactly what your obligations are with regards to your workforce. Check your sub-contractor agreements and review all terms and conditions that apply to an employee under legislation. Today, it’s not good enough to just have a plan for when the Fair Work Ombudsman knocks on your door. By the time that happens you face the real probability of expensive fines and large litigation costs. And it’s just not worth the risk.
Chris Power is head of workforce management at Ento.com.
Smart Company is a sister publication to The Mandarin, catering to Australia’s entrepreneurs, small and medium business owners and business managers.
