04
Feature Story
INTO THE BREACH
Why workplace compliance
matters
Last year there was a surge in cases of workplace
intimidation and wage fraud investigated by the Fair Work
Ombudsman. From legal action to bad publicity, we walk
through the impact of noncompliance – and how to make sure
it never happens to your business.
It’s the stuff of boardroom nightmares: social media
campaigns targeting your company and headlines
linking your brand with a barrage of human resources
violations ranging from rampant wage exploitation
to unchecked workplace harassment.
Growing businesses face common hazards, including
lack of staff visibility, manual workforce management
processes, outdated systems putting payroll
accuracy at risk, managers overburdened with
administration and complex scheduling. It is serious
issues like these that contribute to the estimated
29,000 instances of business non -compliance with
Australian workplace regulations that were reported
to the Fair Work Ombudsman (FWO) in 2015-16.
The most common enquiries to the Fair Work
Ombudsman that year were about underpayment of
hourly rates (26 per cent). Other commonly reported
breaches involved non-payment for time worked (23
per cent); annual leave (10 per cent); payment in lieu
of notice (5 per cent); and wages and conditions (4
per cent).
More than a third of these were resolved under the
FWO early intervention program, often with the
help of mediation assisted by dispute resolution
specialists.
Investigations on the
increase
But while formal allegations against employers have
dropped since the early intervention program began
in 2014, the FWO has stepped up investigations
into workplace breaches by Australian businesses
following a surge of workplace intimidation and
wage fraud.
“Vulnerable workers, including visa holders,
are overrepresented in our complaints data,” a
spokesperson on behalf of Fair Work Ombudsman
Natalie James, says. “Their complaints involve
the most serious examples of
exploitation. These workers are
often employed by an operator
who is part of a much bigger
supply chain or network.”
It’s a familiar story, with non-
law expert and
compliance not only attracting Employment
Baker McKenzie partner
legal action but also bad publicity. Briony Binns
Worst-case scenarios include major disruption to
the business, a serious knock to the brand image and,
ultimately, decreased profitability and shareholder
value.
The ugly, brand-damaging cases tend to arise
when supply chains fail their obligations, and
responsibility is extended to others involved in the
conduct through accessorial liability (this refers to
those who have been in any way, by act or omission,
directly or indirectly, knowingly concerned in or
party to the contravention).
Employment law expert and partner at Baker
McKenzie, Bryony Binns, identifies some dominant
patterns in compliance breaches:
Keep up with the rules
First is lack of awareness. “Australia’s industrial
relations system is quite complicated, and smaller
organisations can struggle to keep up with the
minimum terms and conditions and requirements,”
Binns says. It’s a situation that our regulatory agencies
are addressing through focused communication and
education, she adds.
Avoid keeping HR in a silo
The second issue: “silos of expertise.” Binns says that
there can be a tendency for organisations to expect
HR departments to handle HR compliance, but then
decisions get made outside of HR that impact on
compliance. Outside of HR, labour costs may be seen
as just another operating expense – and decisions
made to deliver particular financial outcomes may
neglect the implications from
“New technologies and
a compliance perspective.
disruptive business
models are driving a
desire to use an on-
demand workforce.
That’s sometimes
happening without
considering our
existing compliance
framework.”
“For example, a company
might
cut
headcount
and outsource part of its
operation. HR no longer has
oversight of the outsourced
workforce,”
Binns
says,
adding that regulators are currently interested in
the responsibility of large companies that outsource
functions to smaller providers, which then underpay
their staff.
“The Fair Work Ombudsman will consider whether a
large company might be an accessory to the conduct
of its outsource providers under the accessorial
liability provisions under the Fair Work Act,” Binns
says.
Large organisations know what their volume of
work is and they should know the minimum wage
rates that apply to work they previously managed
internally, Binns explains. “If operating costs drop
substantially as the result of an outsource, where
volume and output stay the same, that ought to set
off warning bells around potential underpayment
issues within the outsource provider.”
That’s where silos become problematic, she says.
“Often contracting is not done out of HR, it’s done
out of the finance function or procurement. There's
potential for a complete disconnect between existing
HR compliance knowledge within an organisation
and it’s indirect labour workforce.”
Stay on top of technology
The third key area testing compliance is innovation,
Binns says. “New technologies and disruptive
business models are driving a desire to use an on-
demand workforce. That’s sometimes happening
without considering our existing compliance
framework, or connecting with existing compliance
expertise within HR functions before deploying new
models".
Proactive partnerships and
productivity
“Most employers try to follow workplace laws,”
says the FWO’s spokesperson on behalf of James.
“Sometimes honest mistakes are made.”
The FWO is addressing systemic non-compliance,
looking at the drivers of behaviour in complex supply
chains.
“A number of companies have recognised that they
have a moral and ethical responsibility to ensure the
workers in their supply chains receive the lawful
rights and entitlements under Australian workplace
laws by entering into compliance partnerships with
the Fair Work Ombudsman,” the FWO says.
These compliance partnerships are formal
agreements between organisations and the FWO
that outline the steps a business need to take to make
sure it has a compliant and productive workplace.
“We work with businesses who value their reputation
and want to keep a positive relationship with their
employees, their customers and the Australian
community,” the FWO says.
Binns says there are signs compliance is taking off.
“Labour costs are now being understood as more
than just an operating cost,” she explains. "Companies
are investing in education on HR matters within
their HR functions, but also at a management and
board level. HR compliance is increasingly seen
as a strategic risk area that demands just as much
attention as other areas of risk".
“Embarking on a particular model without properly
understanding the risks can potentially incur a
massive organisational cost, particularly for a large
organisation. Getting a compliance issue wrong ca n
affect an organisation's brand as an employer, and
create a heavy burden to meet historical liabilities
together with the cost of future compliance. Cost
control and innovation are important, but so is
protecting your organisation from risk.”
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Workforce Life | ISSUE 03