The Fair Work Ombudsman (‘the FWO’) is the national regulatory body that assists employees and employers understand their entitlements and obligations under the Fair Work Act and Regulations. As part of this, the FWO regularly completes compliance inspections on businesses where they ascertain whether the business is operating in compliance with relevant workplace legislation and employees are receiving the correct entitlements. These assist in guiding the FWO on where to focus their compliance efforts and specific areas or industries they will be targeting in order to improve the conditions for employees.
Although many employers operate unaware of the potential to have their business randomly audited by Fair Work, or perhaps consider this may be a matter of ‘bad luck’ to be included in a surprise inspection, a recent media release by the FWO highlights the risk in taking a less proactive approach in maintaining compliance with your employer obligations. The recent report outlined the results of surprise inspections undertaken on a staggering 84 businesses throughout Melbourne CBD and Inner West food precincts – which showed 86% of these employers were in breach of workplace laws.
What businesses were included in the inspections?
Fair Work selected businesses for surprise inspections based on their risk of breaching workplace laws. They outlined several factors they considered including businesses that were historically non-compliant, businesses that they were anonymously tipped off about and/or businesses known to hire vulnerable migrant workers.
The surprise inspections revealed a collective of over $684,000 in wages owed to underpaid workers.
What are the most common breaches?
The Ombudsman stated that the most common breach of the 86 businesses audited was underpayment of penalty rates and casual loading with the most significant financial recuperation of $83,272 for 170 employees in one St Kilda business. The investigation also revealed common breaches involving failure to keep records such as pay and hours of work records which resulted in penalties against the business.
For a small-business, paying correct minimum wages the first time (including all penalties, loadings and allowances, etc) can appear a significant cost to cover each pay cycle, particularly during hard financial times such as recessions. However, when you stack up the cost of penalties and back-payment lump sum requirements resulting from non-compliance, these can often have more serious impacts on profit margins and the financial position of a business.
What happens if my business is caught operating non-compliantly?
The Ombudsman has authority to issue compliance notices to businesses which generally require action to be taken to correct compliance issues – such as rectifying underpayments to employees/former employees or providing certain records. Failure to comply with a compliance notice will generally then result in some form of penalty from the Ombudsman for not complying.
In this recent investigation, 32 infringement notices were issued for pay slip and record-keeping breaches and the Ombudsman secured over $50,000 from fines from this. Collectively with additional underpayment orders, and any additional legal costs or fines, the cost of non-compliance can stack up to be surprisingly damaging for a business. Non-compliance can also have impacts on the workforce in other ways, such as if the business attracts a public reputation for not treating workers well and finds it difficult to attract and retain talented workers.
We encourage businesses to review their obligations under the Fair Work Regulations. For example, records around pay under Regulation 3.3 which can be found here. If you are unsure how the full Regulations apply to your business, we recommend speaking to a professional for further advice.
If you are a small business in the restaurant or hospitality industry in Australia:
- be wary of: audits, inspections and investigations that Fair Work Inspectors have the authority to impose at any time, and more importantly:
- be aware of: and comply with your obligations under the Fair Work Act and relevant Modern Awards to avoid breaking the law and becoming subject to penalties.
Need further help?
If you need further guidance on understanding your obligations as an employers, including navigating the minimum entitlements for your employees, reach out to our advisory team today to understand how we can assist. The HR Connect team is dedicated to breaking down Fair Work Act and Modern Award compliance into easily understandable recommendations. HR Connect clients receive a compliance audit which assists in understanding Award and NES obligations. You can read our previous article we published on Why Does Every Business Need an HR Compliance Audit?
The information provided in these blog articles is general in nature and is not intended to substitute for professional advice. If you are unsure about how this information applies to your specific situation we recommend you contact HR Connect for advice.