Major corporations spend millions of dollars on plant and equipment and a host of sophisticated technologies in areas from point-of-sale to the internet-of-things. Yet, many seem incapable of paying their staff accurately.
What began with a series of revelations about underpayment in the restaurant industry has rapidly spread throughout corporate Australia, with a roll call of the biggest names self reporting that they have underpaid staff by millions of dollars over many years.
The shame file now includes the biggest two grocery chains Coles and Woolworths, retailer Target, the 7-Eleven convenience store and even the publicly owned Australian Broadcasting Corporation.
Some sums are staggering. Woolworths, for example, admitted to AUD 300 million in underpayments. Coles is expecting a hit of AUD 20 million after underpaying managers at its supermarkets and liquor division over the past six years.
The Super Retail group, a conglomerate which owns several retail chains spanning automotive and sporting goods, underpaid its workers by more than AUD 61 million.
Underpayment can impact as much as 13% of the Australian workforce this year.
Modeling released in late 2019 by accountancy group PwC estimated underpayment could impact as much as 13% of the Australian workforce this year, which translates to AUD 1.35 billion in underpaid wages. After announcing its modeling, PwC admitted that it too has underpaid staff.
In response to what seems to be a systemic problem, the Australian Government is now talking about legislating to make wage theft a crime, with responsibility sheeted back to company directors.
Blame game begins
Now that the whole saga has come to light, the questions to ask are “how” and “why”.
Was it underinvestment in payroll systems? Were the labor awards too intricate and complex for the systems to handle? Was it done by accident, or was it deliberate?
In cultivating a public face, most of these corporations invest significantly in managing their brands and extolling their virtues as employers who look after and nurture their people and develop talent.
When the scandal was limited to the restaurant industry, the issue was more easily explained.
Many of these businesses were founded by “celebrity chefs” who might have been brilliant in the kitchen, but had little time or talent to implement robust payroll systems.
Some blame software systems developed overseas and not configured properly for local use.
While it might be explicable, but not excusable, for this to occur in the high pressure environment of hospitality, where people work long hours and lines are often blurred, the same cannot be said for the other corporates which have come forward in the current wave of confessions.
Some corporates have blamed software systems developed overseas, which are not configured properly for local conditions and miss out on some details and nuances of pay agreements.
Australian businesses use solutions from global vendors such as SAP, Kronos, and Infor, buying them off the shelf. In their defence, many corporates say these solutions are not set up to interpret Australian awards.
Unions play a role
The other complaint from the corporate side is that the labor award systems which regulate salaries and conditions are far too complex, and as a result errors are common and easy to make.
“At the heart of a lot of the issues is whether the detail and specifics of various enterprise agreements are configured in the system the right way,” says Rob Scott, the managing director of Wesfarmers which owns several of the implicated retail brands.
The counter argument to this is that trade union-based awards have been progressively dismantled and simplified over the last two decades, with the number of different award structures reduced from thousands down to just over 100.
Unions say corporates can comply with tax and food safety regulations but fail when it comes to salaries.
Unions and academics critical of corporate behavior point out that while these businesses seem capable of complying with a host of other complex regulations in areas such as tax or food safety, they have allowed a massive fail to occur in paying their workers, one of the most fundamental business activities.
Academic Dr. Joanna Howe, an associate professor at the University of Adelaide Law School and an expert on labor law, made the point that it was hard to sympathize with the big grocery chains, in particular, as they had shown a long-standing ruthlessness towards smaller companies in their supply chain going back several years.
“Both Woolworths and Coles have been complicit in using their status as the lead firm in a supply chain to put enormous pressure on businesses which supply them,” Howe wrote in a commentary on the issue.
“Time and time again they have been complicit in driving down labor costs to maximize profits.”
Trust becomes extinct
One casualty of the scandal has been trust between employers and employees, and this may take some time to rebuild.
A sustainable business ecosystem needs a balance between both sides to build goodwill, motivation and respect, and that has been squandered along with millions of dollars in underpayment.
Organized labor has been on the retreat in Australia for all of this century, and the percentage of unionized workers has fallen from 40% in 1992 to 15% today.
This might have created labor market flexibility and productivity, and eliminated some anachronistic work practices but the wages scandal suggests that some employers have been taking advantage, and putting governance and compliance systems for employees well down their list of priorities. And that is not good HR practice, by any measure.
Photo credit: iStockphoto/bowie15