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What is Reasonable to Expect of Leaders?

26/03/2020 1:23 PM

Mar 20 News What is reasonable to expect of leaders?

WHAT IS REASONABLE TO EXPECT OF LEADERS?

Our Introduction raises the issue of ‘Under’ payments to employees. Yet we all know of other areas where there is an ‘Under’ operating. Various commissions, journalist investigations and revelations continuously spotlight the numerous achievements of organisations having ‘Under’ outcomes or outputs.

As a community, we need to ask some fundamental questions:

  1. Why can an ‘Under’ happen?
  2. How can leaders ‘allow an Under’ to happen on their watch?
  3. What has contributed to each ‘Under’?
  4. Who is responsible for an ‘Under’?
  5. Who is accountable for an ‘Under’?
  6. Is it possible that no-one ought to be either responsible or accountable for an ‘Under’ happening?
  7. Is it reasonable to argue that the system is too complex for any one to be responsible for an ‘Under’?
  8. Can we, as a community, reasonably accept the principle that no-one is responsible?

Deliberate or Accidental ‘Under’?

Some ask, particularly in the area of the underpayments, whether these corporate underpayments are accidental or deliberate.

The consulting firm PwC estimated in late 2019, that as much as 13 per cent of the Australian workforce could be affected by underpayments each year. This assessment potentially means a total of $1.35 billion in underpaid wages.

The irony in all this was that PwC admitted it may itself have underpaid employees in administrative positions.

The obvious, but maybe not a fully legitimate defence, is that Australia’s industrial relations system is too complex. However underpayment has also occurred in those instances where the corporates involved in discussions to plan and deliver the Award and/or EBA.

So this inevitably mean we should consider the following:

  • What ‘slack needs to be cut for medium and smaller organisations?
  • What ‘hope for medium and smaller operators?

Fair Work Ombudsman spokesperson Sandra Parker recently mentioned that there is a flood of companies rushing to declare underpayments.

“Speaking to Guardian Australia this week after supermarket giant Woolworths admitted to underpaying staff by as much as $300m over almost a decade, Parker says it felt like big companies were coming forward almost weekly to declare their wrongdoing. …. I don’t accept the word crisis,” she says. “I am pleased companies are coming forward and are willing to rectify this issue.”

There has also emerged this sense that, in Australia wage theft is simply the way we do business. It’s an acceptable practice for corporates and others who are in business.

But is the answer more monitoring of what corporates or leaders are doing in business?

Could it be a symptom of the sort of culture that the Hayne Royal Commission revealed?

Of course, the community can blame the regulator for not doing enough as part of their role in the financial services sector; but, is blaming the regulator the answer?

Maybe it can assist but this requires a multi-pronged approach, not just a ‘look and point’ to one source for a cure.

Sally McManus, ACTU President commented that: “Many businesses make the calculation that ripping off workers and getting caught will still be cheaper than paying them correctly in the first place.”

Whether this is correct or not, it does highlight other key aspects to all of this:

  • How many others have viewed what is going on and turned a blind eye, or somehow missed it altogether? And
  • What are the consequences if employers breach the standard?

Parker is reported as saying – “They have been lax and lazy and just let somebody else do it.”

After the Hayne sage ASIC moved to “why not litigate” approach when confronting breaches.

Certainly, regulators can do more to step up, but it is necessary to have additional stakeholders who can play a key role in this area.

If this was an approach, then it opens up the broader opportunity of inclusiveness by potentially including auditors, legal advisors, and external advisors / consultants as having a contributory responsibility, particularly if the identified breaches are continuing practice.

Former Australian Competition and Consumer Commission chairman Allan Fels said in an article – “There is this view that the award system is too complicated, but while that’s true the cases I’ve seen involved people deliberately underpaying people,” he says.

“There is a widespread culture of substantial underpayment of temporary migrant workers – that is, students and backpackers – and that culture has nothing to do with awards being complex. They’re a simple decision by business to underpay.”

The Australasian Centre for Corporate Responsibility (ACCR) raised a similar issue concerning auditors.  “We would raise questions about what the auditors are actually looking for and whether they are actually properly investigating the company”.(Katie Hepworth, ACCR’s head of workers’ rights)

The government introduced The Fair Work Amendment (Protecting Vulnerable Workers) Act 2017 with an intention to address at least in part, the instances where business deliberate underpay employees.

What are your strategies?

The first question you need to ask is:  how can you prevent this happening within your organisation?

It is necessary to develop a sound compliance framework that ensures clear communication of the message to everyone. Leaders need to set out the organisation’s broad obligations under law and outline the arrangements in place to ensure that all employees are receiving their proper wages and entitlements.

Of course, it is reasonable to anticipate that errors may occur from time to time so in such instances there needs to be avenues available to resolve such an occurrence.

And what is your resolution?

If leaders do not consider underpayment is an important issue, then what messages are they sending to employees? It may come down to how strong is your organisation’s culture.

Finally, whether leaders and their advisors directly, or unknowingly became aware, it is now the time to pursue a standard of governance practice that meet  these fundamental obligations.

It is not too much to now expect that organisations and their leaders can oversee and ensure that there is the establishment of a strong governance framework which is designed for the 21st century.

This means that the culture will be clear that underpaying employees is not acceptable. Leaders also need to use the right tools and processes to flag and expose ‘wrong-doing’. And if wrong-doing does occur then there is in place the right mechanisms to detect and address in a timely and effective manner.

Anything less ought to be considered negligence.

 

DISCLAIMER: This article is general ONLY in nature and is not advice
For more information contact Damien Smith on smithdj@enterprisecare.com.au or 0418 325 781.

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