Five ways to avoid a wage theft scandal of your own
Most businesses do not set out to deliberately short change their staff, but fall victim to misinterpreting the complex Australian awards structure.
It started with George Calombaris.
The well-known MasterChef judge was publicly named and shamed for underpaying his staff (despite self-reporting the error).
And then it was Heston Blumenthal. And Rockpool Dining.
At least, that was when the intense media scrutiny started. But so many more well-known businesses, beyond the hospitality industry, have been exposed in recent months for underpaying staff.
Major retailers such as Coles, Woolworths, Bunnings and Target have all been found to have underpaid staff to the tune of millions of dollars. Commonwealth Bank and ABC too, have admitted to staff payments falling short.
The ripple has become a tsunami.
The sums are quite staggering — in the millions for each business — and in George Colambaris’ case, has resulted in the liquidation of his company.
If these colossal businesses with resources, HR teams and accountants have fallen foul when it comes to staff wages, what hope is there for smaller businesses?
Smaller businesses need to ensure they are not guilty of the same behaviour because the cost to rectify might see them going into involuntary liquidation rapidly.
In many instances, companies have not set out to deliberately short change their staff, but have fallen victim to misinterpreting the complex Australian awards structure.
Herein lies the problem.
1. Get professional help
First and foremost, companies need to ensure their awards comply with the Fair Work Act, which outlines everything from wages to employment conditions, penalty rates, and shift-rostering.
It is a complex beast, so it pays to have an HR representative and accountant who are across the relevant award for your industry. While smaller businesses may have accountants, many don’t have in-house HR, however, external consultants are available and worth their weight in gold if it avoids underpaying staff.
If you don’t have an accountant, bookkeeper or CFO, look into it as a matter of urgency, especially if your business has applicable award rates for employees.
2. Invest in training
If you have an HR consultant in-house, ensure they are up-to-date with the relevant award for your industry, including applicable classifications for each award, and the minimum pay rates.
Invest in training if you have to. The consequences of being caught out in an investigation by the Fair Work Ombudsman may include back paying staff and civil penalties on top, which could cripple a small business.
3. Investigate superannuation and annual leave payments
Many companies have also been caught out not paying superannuation entitlements, long service leave and annual leave payments.
Luckily, the government has just passed the Superannuation Amnesty Bill which will give businesses six months to backpay any unpaid superannuation without penalty from the ATO (but with interest).
That will, of course, come as a relief to the approximately 7,000 companies which voluntarily reported historical unpaid super to the ATO in 2018, after the amnesty was announced.
4. Rectify the mistake as soon as you discover it
There’s no time like the present to self-audit your business. If you discover potential underpayments, you will need to identify how long it has been going on for, establish what the shortfall is and reimburse the employees.
5. Call in the experts if you find yourself in too deep
If you find yourself in a position where you owe more than you can afford, call in a restructuring expert as soon as possible.
They are there to try and help you salvage your business and get back on track, and to help you avoid the pain of involuntary administration. The sooner you call in the experts, the better your chances are.
Single touch payroll (STP) is providing the ATO with information about the tax and superannuation you have paid employees, giving them immediate oversight and power to act on non-compliance in those areas. Using STP-enabled software, companies are already sending employees’ salary and wage, tax withheld and super information to the ATO every payday. It is compatible with most payroll systems, but it doesn’t provide the correct award wage information you need to be paying.
By the recent publicised spate of underpayments, it’s clear that sourcing the correct award information is confusing or complicated for even the biggest of companies, particularly in industries such as hospitality, retail, trades and construction. What hope do smaller and less-resourced businesses have?
With frequent changes to award conditions and rates, companies are grappling with staying up to date, which begs the question: ‘Can the government do better when communicating changes and making information accessible?’
I think there is a real opportunity for the government to provide leadership through the provisions of an up-to-date portal that links seamlessly with STP and ensures employers can easily access all their relevant and latest award information in a single location. Linking it to existing systems like the ATO’s STP system seems like an obvious place to start.
In the meantime, all businesses should be self-auditing to the best of their ability, to identify any mistakes, and move to rectify them before the cost to their business costs them their business.
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