With governments getting tough, it’s high-time to fix payroll

It defies belief that large corporations with armies of HR staff and sophisticated computer systems can screw up their payrolls.

Complicated workplace agreements, complex and frequently changing staff rosters and computer errors are more likely to be at fault than any deliberate attempt to shortchange staff.

However, it is baffling how these errors can run for years with underpayments to staff totalling many millions of dollars.

Given the spotlight on inquiries into the underpayment of employees in the franchise sector, it would have been expected that all retailers would have examined their workplace agreements and award provisions very carefully to ensure they were meeting all of their obligations.

But the fact is that large retailers and industry leaders like Woolworths, Coles, Super Retail Group, Target, Bunnings and Michael Hill have all revealed in the past year that they had underpaid staff entitlements.

The revelations are timely, with governments now moving to introduce legislation to penalise companies underpaying staff, regulatory action that might have been avoided if not for continuing mea culpas over what has been dubbed wage theft.

The reality is that many of the corporate failures on staff entitlements are more likely to be due to system errors rather than the deliberate and unconscionable underpayments of employees by some franchisees.

However, the fact that the largest retailers can’t get it right should reduce some of the odium around smaller independent retailers and some of the franchise systems which have also been in breach of workplace laws.

Payroll systems are obviously in need of attention because the Australian Payroll Association claims that audits it conducted have also revealed overpayments to employees.

Retailers have blamed the complexity of the workplace system for the payroll problems but the large retailers have negotiated enterprise bargaining agreements directly with the Shop Distributive and Allied Employees Association, defining their own obligations and flexibility on workforce management.

In some instances, the Fair Work Commission has found that those EBAs were unacceptable because they did not meet a required test that no employee should be worse off under a revised or new agreement.

Both Woolworths and Coles were found to have offended the no-worse-off requirement for some staff under agreements struck with the union and since amended.

While the payroll problems frequently involve casual and part-time staff, issues have also been identified in management ranks, with the back-to-the-future introduction of clock-on and clock-off records.

A lot of the management underpayment issues highlighted by Coles this month involved managers working for unpaid overtime hours and over penalty rate hours and not receiving their full entitlement under the General Retail Industry Award.

Coles made a $20 million provision in its half-year accounts to cover $15 million in underpayments to salaried supermarket and liquor store managers over a six-year period and $5 million in interest.

It commissioned an audit of its payroll systems last November after supermarket rival Woolworths revealed it had underpaid salaried staff by as much as $300 million dating back to 2010.

The Coles admission did not impress Fair Work Ombudsman Sandra Parker, who has ordered an investigation into the breaches of workplace laws.

Parker said it was disappointing to see another large listed Australian company underpaying employees and only advising the Fair Work Ombudsman of the multimillion-dollar breach of workplace laws “moments before their financial results announcement”.

Coles has indicated its review of the payroll systems is continuing but has already implemented improvements in its systems and processes.

Its former stablemate, Target, also announced this month that it had discovered errors in its payroll systems resulting in estimated underpayments to employees of around $9 million.

Wesfarmers, which owns Target, said it had uncovered errors in its payroll system totalling $24 million.

Super Retail Group was another major retailer admitting last week that it has yet to resolve all of the issues with its payroll systems. The business announced last year that it had made a provision of $53.2 million after discovering underpayments to staff across its retail brands but last week said a further $8 million is required to rectify the problems.

The Victorian government has drafted the Wages Theft Bill 2020 that includes a corporate liability provision that could see a director of a company penalised even if they had no direct responsibility for the payroll function.

The Victorian legislation addresses breaches of obligations on wages, penalty rates, superannuation and leave entitlements and includes offences for falsification of records and failure to keep records of employee entitlements.

The federal government is also considering legislation to deal with the underpayment of entitlements to employees, legislation which could include jail terms, fines and naming and shaming of offending companies.

The federal government and Fair Work Commission are also mulling over possible action to tackle the so-called zombie workplace agreements which date back more than 10 years and include conditions and wage rates that have been overtaken by contemporary awards.