Woolworths are estimating they will have to pay out up to $300m to underpaid staff. Here’s what you can do to avoid being the next ‘wage theft’ headline.
This week, Woolworths joined a growing list of prominent businesses in Australia labelled with “wage theft” from underpaying staff. Woolworths have admitted to underpaying 5,700 staff, with an expected bill of up to $300m to fix an issue that could date back to 2010. That’s a terrifying set of numbers.
While many may dismiss risks of underpayment as only impacting big corporates, this limited thinking means a higher chance of being the next headline and seeing their business destroyed. If these big corporates with large teams of payroll staff can face issues, imagine the risk to smaller businesses.
At FastTrack we have been helping staffing businesses pay high volumes of workers accurately and efficiently against the numerous highly complex pay conditions for over 25 years. Here’s what you need to know to avoid your business becoming the next news story, or even worse you and your fellow directors ending up in jail.
So why should investing in your back office be your first thought, not your last?
Last year roughly one in five Australians were underpaid, costing employees almost $1.8 billion in cumulative wages. There are 3 key things that put businesses like yours at risk of ‘wage theft’ that you need to start thinking about today – staff risks, process risks and interpretation risks.
Staff risks relate to the capabilities of the people you hire to manage your back office. In many staffing businesses front office consultants are the priority for many owners, as they engage clients, who pay the bills, and recruit candidates, who do the work. But as critical is finding capable back office staff who ensure your cash flow is healthy and your business remains compliant. They ensure your candidates are paid what they are legally entitled to.
Process risks is the steps your staff complete to capture the time candidates work, interpret against modern awards to calculate candidate payroll, add the correct and relevant accruals and on-costs, such as Superannuation and leave, and then invoice clients. If any of these steps are managed manually, particularly with using paper timesheets or excel calculations for candidate payroll, this puts an unfair chance of errors in the hands of your back office staff. If data needs to be manually captured or entered even once by a human, that means even your highly capable staff could make mistakes and put your whole business at risk.
Interpretation risks is how your team convert what the relevant modern awards state into specific pay conditions. A modern award is defined by the Fair Work Ombudsman as the “minimum wages and conditions an employee is entitled to”. There are 120+ modern awards that apply to every single employee within the national workplace relation system in Australia, to which every employer must comply. Modern awards are divided into five sections – Application and Operation; Consultation and Dispute Resolution; Types of Employment and Termination of Employment; Classification and Minimum Wage Rates; Hours of Works and Related Matters – and can have around 30 clauses per award. The important part is translating this into a wage for a worker, which can depend on their age, if they are employed casual, part-time or full-time, and what time of day they are working for example. There are also requirements around shifts with minimum and maximum lengths, gaps between shifts and notices before shifts start. Not to mention accrual of leave entitlements such as annual leave, sick leave and carers leave, and other entitlements such as travel expenses. Plus, most businesses are subject to multiple awards. So you can see why interpreting awards can be a challenge.
To help mitigate the risk for your business here are five big tips you and your team can use to remain compliant.
- Hire the right people – Ensure your staff have the appropriate qualifications and are members of industry bodies such as the Australian Payroll Association. Qualifications ensure your staff have the appropriate knowledge and training to correctly interpret awards and manage the payroll process. Industry memberships empower your team with the best resources and ongoing training to stay up-to-date with any compliance changes. It also pays to use a staffing provider who can complete all the pre-work checks to ensure your future payroll staff member has the appropriate qualifications, reference checks and knowledge to support your business.
- Fully understand your payroll process – take the time to review your business and understand the payroll process from hiring through to accurately paying candidates. In doing this you will have a clearer idea of what risks your current processes pose to your business. For example, if you are not managing timesheets online, if you’re data is not flowing automatically from timesheet through interpretation to payroll and billing, if your interpretation is not done automatically against pre-configured awards then your business is at risk. Knowing this process is the first important step to getting it fixed.
- Invest in the right tools to reduce chances of errors – the complexity of payroll has led to the creation of some smart, automated tools to simplify processes. Tools to automate timesheet capture, standardise award-based wage conditions, and automate the interpretation are a no-brainer given the risk of getting this wrong. Investing in the right payroll software for your business also ensures you are protecting your back office team. They also help you easily update the award rates each year efficiently and accurately so that not only do you stay compliant but remain compliant each and every year. Plus, you can deliver efficiency gains by streamlining processes and grow.
- Regularly review the risks in your business – in step 2 you reviewed your payroll process to identify risks. It’s important to review this again regularly and ensure you and your team are in-line with the latest compliance requirements. This is critical as legislation constantly changes, as demonstrated by the introduction of Single Touch Payroll in Australia and Payday filing in New Zealand. A good provider will keep you updated and train you on legislation changes as well as ensure your tools remain compliant.
- Get independent advice –it pays to get independent advice to verify that your interpretation of the award clauses is correctly translating into staff and worker wages.
- The best option is to sanity check your interpretation directly with the Fair Work Ombudsman.
- Make sure you have a copy of the Australia Wide Taxation & Payroll Training’s Taxation Manual (also known as the ‘Blue Book’). It’s the ultimate guide on all thing’s taxation and payroll.
- It’s also beneficial to get independent legal advice
- Ensure you are members of staffing industry bodies such as RCSA, who provide a Work Info Line, and APSCo, who provide Advice Line.
- Test your knowledge with the Fair Work Workplace basics quiz
How we can help
At FastTrack we have been helping staffing businesses streamline the entire recruit, time, pay and bill process with a single end-to-end platform solution. Beyond fast and accurate payroll, the FastTrack360 end-to-end platform helps staffing businesses seamlessly capture timesheets online, interpret that time against modern awards to accurately and efficiently calculate candidates pay, and easily add on-costs to invoice clients. If you want a 90% reduction in payroll errors, 85% reduction in time spent on award interpretation and to only pay for what you need, chat to us today about getting a free personalise demonstration of FastTrack360.