Insurance Australia Group backpays more than $21 million

Insurance Australia Group (IAG) entities have back-paid thousands of underpaid employees more than $21 million as a disappointed Fair Work Ombudsman (FWO) called for a culture of compliance among large employers.

More than 19,000 current and former employees of IAG entities were paid back wages and entitlements that were owed to them between 2013 and 2023.

The average back-payment is just over $1,000, though 14 workers have been back-pair more than $200,000, according to the FWO.

IAG also back-paid its employees a total of $16.2 million in long-service leave entitlements that weren't given to them between 2013 and 2022, as part of the organisation's remediation programme.

Affected employees were in every state and territory in Australia, according to the FWO, with the most underpaid staff being IT professionals, IT support workers, frontline claims staff, and call centre employees.

Other impacted employees were administration, customer service and sales staff, as well as various consultants, assessors, underwriters, analysts, sales, and mid-level managers.

IAG underpayments

The IAG first identified the underpayments when it carried out an internal review.

According to the organisation, employees were underpaid overtime, weekend, public holiday, and shift-work entitlements. They were also underpaid in minimum wages, leave entitlements, and other allowances and entitlements.

The organisation attributed underpayments to "basic shortcomings" in its entities' processes, including not having time and attendance system, which left employees unpaid for actual hours of work.

The company also said it failed to perform reconciliations and top-up payments to ensure that employees were paid appropriately.

IAG self-reported the non-compliance issues to the regular in December 2020.

"IAG had substantial, long-running compliance breaches underpinned by flawed processes," said Fair Work Ombudsman Anna Booth in a statement. "Once identified however, IAG responded strongly and invested heavily to fix those problems, including through new measures to ensure all its workers are paid correctly in future."

Among the steps it took included an overhaul of its compliance and governance systems, as well as the implementation of a remediation programme that covered underpayments beyond the six-year statute of limitations.

IAG subsidiaries, Insurance Australia Group Services Pty Limited and Insurance Manufacturers of Australia Pty, Limited, have also entered an Enforceable Undertaking with the FWO.

"I commend IAG for committing to amending its governance processes to ensure IAG's Board of Directors has significantly better awareness of potential non-compliance issues," Booth said. "IAG have made the most significant commitment for Board oversight we've seen in any EU entered into with the FWO to date."

Fair Work Ombudsman disappointed

The Fair Work Ombudsman, however, expressed disappointment that large employers continue to fall short in meeting their legal obligations to employees.

"Large corporate employers need to place a much higher priority on having systems and governance in place that ensure employees' full lawful entitlements are paid, year-in, year-out," Booth said.

According to the FWO, boards of large employers must set a culture of compliance within their organisations.

"Corporate compliance culture starts with the Board, including how it sets its risk appetite, performance measures, and reporting. Many Boards need to do better, particularly with increased penalties and criminal offence provisions that commence in January 2025," Booth said.

"Every Director needs to ensure that the company they are responsible for has systems in place that prioritise compliance. By doing this they also reduce risks and costs for the business associated with non-compliance."