The Fair Work Act has been described as one of the most complicated pieces of workplace legislation in the world — and the fact that it’s cost Australian businesses more than $161 million in back pay alone since it was passed suggests many would agree with this.
If you think it’s byzantine now, consider that there were once more than 1,500 workplace “awards” for employers to comply with, compared to just 122 today.
Some say this is still too many. The Council of Small Business of Australia, for example, has long argued for a single “small business award” to make compliance easier. There’s no sign of this yet, and for the foreseeable future it seems the modern awards system — which sets minimum employment conditions for different industries and occupations — is here to stay.
You’re probably already familiar with Fair Work, but how well do you know what’s actually needed to comply? And what happens when you don’t?
These are important questions. So to help you break it down and get the answers you need, over the next few weeks we’re going to publish a series of blog posts that look more closely at the Fair Work regulations, how modern awards apply, and at what you can do to keep your employees happy and the ombudsman twiddling his thumbs.
But before we get into the details, this week we’re going to dive into the numbers. What’s the real cost of Fair Work? And can you afford to ignore it?
$27 million a year in back pay
TSheets’ research has found that Australian businesses have been forced to repay more than $161,700,000 to their employees since 2009, when the Act was introduced, as a result of Fair Work Ombudsman investigations. This figure, however, excludes spot fines, court penalties, and legal fees — so the real cost will be significantly higher.
In 2014-15 — the last year in which full data is available — the ombudsman collected more than $22 million in back pay and more than $3 million in court penalties. The back pay figure was below the six-year average of almost $27 million, and down further still on the 2011-12 peak of almost $40 million (when several high profile cases lead to some big clawbacks), but with the well-publicised 7-Eleven inquiry hitting the news this year, it’s possible the 2015-16 figure will be higher.
88% of prosecutions are for wage and hour violations
As ABC reported in June, the owner of a single 7-Eleven store in Brisbane was recently handed a record fine of more than $400,000 after he was found personally liable for Fair Work violations. It’s one of several higher profile prosecutions that have gone through the courts and when they do, TSheets has found that the overwhelming majority (68% so far this year and 88% in 2014-15) result from employers who have underpaid employees or not kept proper records, such as timesheets (which must be kept for seven years).
Fines are up to $54,000 per violation
While the ombudsman admits it needs sufficient evidence and a high level of public interest to bring these cases to court, when it does it’s not just the company owners and directors who are prosecuted but anyone who has been “involved in the company’s contravention”. This places HR managers and even bookkeepers and accountants in the firing line — something we’ll return to in subsequent blog posts. For anyone found responsible, the fines are up to $10,800 per person per violation, while for corporations the fines jump up to $54,000 for every violation. And this quickly adds up. In 2014-15 there were 34 successful prosecutions which the Fair Work Ombudsman pursued through the courts.
In one industry, two-thirds of businesses are non-compliant
Judging by a recent inquiry, one of the worst-affected industries is hospitality. Spot checks on more than 500 takeaway restaurants found that only a third were fully compliant. Only half were paying their employees correctly and those that weren’t owed a total of 926 employees a hair-thinning $582,410 in back pay — which averages out at more than $2,000 per business and more than $600 per employee. One restaurant owed more than $35,000.
(Source: Fair Work Inquiry, March 2016)
If you’re thinking it’s time to give Fair Work another look, you’ll want to check out our next article in this series when we’ll be speaking to some Fair Work experts who know the legislation inside out to reveal what you can do to ensure your business is protected.