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Failure to comply: endemic underpayment

Australia’s largest retailers have led the list of retailers caught up in recent backpay fiascos – to the tune of hundreds of millions of dollars.

There are now almost daily reports from Fair Work Ombudsman about a retailer’s failure to comply with industry award regulations. But is the issue a case of retailers purposely underpaying staff? Or is the recurrent issue, emblematic of companies failing to correctly interpret and accurately determine standard award rates, from increasingly complex regulations?

And the issue has embroiled organisations of all sizes Down Under. From small-to-medium sized businesses, through to large organisations, underpayment has become endemic. Perhaps this isn’t so surprising – particularly as outdated processes, compounded by everchanging regulations and a lack of infrastructure to keep up, all contribute to the headline figures. And these figures can be rather high, given one wrong interpretation of an award, may mean underpayment for thousands of employees for a company.

According to Ashik Ahmed, co-founder and CEO at global software firm, Deputy, there are many stakeholders and points-of-view in the wage award compliance story, with many high profile employers punished for wage theft – yet complaining that regulations are too complicated.

“Some employers are lobbying governments to simplify the system and, in some cases, to eliminate benefits,” he says.

“On the other side of the debate, some employees inform of exploitation, underpayment and fear. Advocates for employees argue rules must be enforced, companies must be punished, and institutions must do a better job of enforcing the law.”

Ashik Ahmed, Deputy co-founder and CEO

And while the media is actively covering the issue attentively – with 7-Eleven and Domino’s some of the most high profile cases of non-compliance – the coverage often fails to mention alternative solutions, like using technology to reduce issues.

Under the current system, factors such as age, experience, time of day and public holiday rates are required for consideration in determining the appropriate wage. At present, there are over 100 unique industry awards.

And while there have been a number of hearings and conferences held to find solutions for overhauling the complex system and helping businesses interpret wages correctly, there’s still much to be done. 

“Blaming the complexity of the Australian system for underpayment is a strategy often adopted by businesses but isn’t a valid legal defence and can be harmful to an organisation’s reputation,” says Ahmed. 

“It is incomprehensible to me that the issue has been on the radar of regulators for years yet there is still no solution imminently in sight.”

Failure to comply

Having spent the past 15 years building technology to help businesses navigate Australia’s complex Fair Work Industry Awards, Ahmed has seen the crippling effect that fines for underpayment can have on businesses, from small to large organisations.

“This is particularly unfair when you consider that many small businesses only find out they are in breach when audited, by then it’s too late,” says Ahmed. “They’re slapped with a huge fine and, under proposed laws, they could soon be jailed.”

There is also an increasingly dangerous knowledge gap among both employers and employees, with the Fair Work Industry award guide over 100 pages long, which is not forgiving to the time poor and non-legally trained.

“Some shifts can transition through four or five awards in the space of a few hours, it’s no wonder employers not using the right technologies within their business get it wrong,” says Ahmed.

Enter the employee

But for all the widespread problems that organisations have in complying with the industry award, there’s one key voice missing from the debate – the employee.

Perhaps if one employee had the confidence and knowledge to question their pay packet in any of the high-profile cases above, the time taken to notice the error could be significantly mitigated.

“What more could we be doing, to empower employees to help them understand when they’ve not been accurately paid? Giving more power to the employee will mean the responsibility of an accurate wage packet is not solely sitting on the shoulders of the employer,” adds Ahmed.

“Employees too, are victims of an overly complex system and it’s impossible for them to understand their own worth.

“If the majority of businesses struggle to decipher Fair Work Industry awards, expecting employees to understand them is then a tough, if not impossible, task.”

For Ahmed, the industry must take complex, mathematical decision making, like wages and awards out of the hands of humans and place it safely in the hands of technology.

Automated technology is taking away the risk of human error in many industries, deploying tools that calculate time and hours worked accurately.

In turn, the employer is empowered with understanding their wage rights and businesses are relieved of the pressure of calculating tricky awards and wage scenarios.

 “With constantly evolving workplace relations laws, having access to tools to help navigate these systems should not just be considered a luxury for business, but a must-have in order to adapt where modern workforce practices are heading, says Ahmed.” 

“It automates the heavy lifting by calculating the rates of pay based across a shift – applying the correct penalty rates based on the specific industry award that covers a particular individual.”

Find out more about technologies retailers are using to do the heavy lifting of payment compliance – and keep your brand out of the headlines.

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