Chris Power outlines how every HR department can learn some valuable lessons from 7-Eleven's 2015 employee underpayment crisis.
It was the wage scandal that sent shock waves through HR departments across Australia. Workers at our nation’s biggest convenience chain being paid as little as $10 per hour before tax - a collusion between franchisees known as the ‘half pay’ scam.
Staff at the franchises were allegedly being underpaid by half the award rate and foreign workers were threatened with deportation if they spoke up. Internal documents reveal that between July and August 2015, 7-Eleven head office reviewed the payroll compliance at 225 stores and found that 69 stores had ongoing payroll issues.
Of course 7-Eleven aren’t the only company in Australia found to be flouting the law and underpaying staff. Pizza Hut were accused of paying workers as contractors rather than full-time employees last month, depriving workers of income, penalty rates, superannuation and insurance.
So as a HR manager, how can you ensure your organisation doesn’t fall onto the wrong side of the law when it comes to employment contracts?
- Compliance is everyone's responsibility
Regardless of who's legally responsible, businesses brands are at risk when any related party has a public compliance breach. Having visibility of your entire workforce chain is critical and doing so in a way that's largely automated is key to removing huge administration overheads. HR needs to take the lead with the support of senior management to ensure ‘the house is in order’.
- Track labour like a retailer tracks inventory
If you’re working in HR for a business in the retail or hospitality industry, be careful when hiring casual workers or contractors. Consideration should be given to the reason for the arrangement, the length of time of the arrangement, the individual’s significance to the business, what the individual is doing; and who is getting the benefit from the arrangement. Labour is the largest or second largest cost in many businesses, but only a few forward thinking HR departments are using software to manage their workforce against benchmarks within their businesses and in their sector.
- Don’t let the business bury its head in the sand
If you’ve been campaigning for a workforce or optimisation project now is the perfect time to push the board and senior management for funding. The 7-Eleven scandal shows what can happen if they ignore the elephant in the room. The government will eventually catch up and start penalising. Now is the time to get ahead of the regulation wave and be proactive about removing any potential risks so your organisation can focus on growth.
- Compliance doesn't have to be a burden
Compliance for compliance sake is great, but not at the cost of your employees’ engagement. Many growing businesses and HR teams are already using software that's engaging at all levels of the business – ensuring the HR team can tick all the boxes, while providing employees with an experience that doesn't remind them of tax time.
In the past year alone, we’ve seen hundreds of thousands of dollars in penalties handed down by the Federal Court. 7-Eleven alone could face a $300 million compensation wages bill after the Allan Fels-chaired panel released the first tranche of payments to exploited workers a few weeks ago. These cases emphasise the willingness of courts to order harsh penalties to act as a deterrent to others.
So, before you get that call or visit from the Fair Work Ombudsman, consider the points above and invest in systems that enable you to see exactly what your obligations are with regards to your workforce. Check your sub-contractor agreements and review all terms and conditions that apply to an employee under legislation.
About the author
Chris Power, head of workforce management, Ento.com. For further information visit www.ento.com