Underpayments & payroll reporting: A major challenge faced by Australian employers

Being one of the world’s largest and most lucrative economies, companies of all kinds are eager and invited to set up businesses in Australia.  This welcoming country is an exciting and opportunistic location for employers to do business owing to its close proximity to Asian and Pacific economies. With a strong period of economic growth, good support and advocacy from the Australian Government; it also has a promising approach and easy start-up culture. The forward thinking business environment, availability of Australian skilled workforce and virtually very less governmental interference in foreign investment adds to the merits of expanding your company's reach in the continent. However, it does have its own set of challenges when it comes to doing business in specific areas and one of the hidden issues often undermined is the challenge of Australian payroll and its governance. Most importantly, it brings attention to a major form of non-compliance.

In the year 2020, many cases of prosecution by the Fair Work Ombudsman (FWO) have been reported that included even high profile organisations. Self-reported instances of underpaying employees were quite prominently highlighted resulting in the issue of payroll reporting and governance. There are numerous instances in the country wherein companies are seen to underpay their staff while few employees were overpaid. In an instance, The Crown - a partner of the Heston Restaurant was dragged into a controversy by Heston Restaurant owners. The owners of the restaurant blamed their partner Crown for underpayment of workers. Finally, in the earlier months of 2020 the restaurant collapsed owing workers at least $4.5 million in underpayments. The casino giant Crown Resorts were in the news in the year 2018-19 too when it was exposed for breaching Australia’s workplace laws. Currently, Crown is undergoing a trial where Victoria’s royal commission is examining casino licence after an independent inquiry in NSW ruled in February 2020 which stated that it was unfit to run a casino in that state. However, the company’s Sydney casino opened in December 2020 with restaurants, bars, hotel rooms and luxury apartments but not with gambling since that state regulator suspended its licence due to the inquiry.

A quick look at cases of underpayment

In a prominent case of Qantas Airways in 2019, the company suffered an embarrassing situation where it underpaid a few staff while overpaying others. This error was detected by Qantas when it discovered that it had wrongly employed about 220 workers on individual contracts rather than under the relevant enterprise agreement. The error resulted in about 55 workers comprising majorly from the digital marketing and analytics team being underpaid by an average of $8,000 a year and because of the misclassification there were about 165 workers who had been overpaid by about an average $12,000 a year. The airline clarified later that there was never an intention to underpay people and the organisation has decided to pay back the affected workers. Contrary to the beliefs of many, there were questions raised on how Qantas being such a meticulous organisation could have made such unfathomed errors for the past several years without being noticed and the repercussions were seen when Qantas' shares started to tumble down.

In another case that happened two years back in 2018, the Super Retail Group - a business enterprise who takes pride in how they treat their team members were found underpaying their staff that came out during the release of their annual report. The company later clarified that this was a genuine mistake and they deeply regret the error caused. Even American Broadcasting Company (ABC) admitted that it underpaid around 2500 casual staff over the past six years and has commenced an urgent review in conjunction with the Fair Work Ombudsman and unions. The Australian Council of Trade Unions addressed this issue by calling out on ABC and said that an organisation that should have best-practices for its employees has performed a gruesome act of systematic wage theft. As a corrective measure, ABC later announced that payments of these employees were their top priority and these casual workers will be paid any back-payments that they are entitled to. Alongside, the organisation would try to secure permanent jobs for some of these people, who have been giving their services to ABC for many years. 

With all these cases posing as a challenge, it is still just the tip of the iceberg. The reasons for underpayments as well as over payments are farfetched and wide-ranging. These are difficult to simplistically categorise. However, it critically highlights the need for better payroll governance. On the other hand, there has been a constant stream of media releases published by the FWO about underpayment investigations and prosecutions. Now, the FWO is adopting a more aggressive approach against underpaying employers. Even in cases of self-reporting possible breaches to the regulator, it stresses that enterprise agreements and the Fair Work Act is not negotiable and if needed the FWO will begin pursuing penalties against individual directors and senior executives during such non compliance.