Warning HR leaders could be risking underpayment claims
New research from global payroll provider ADP has revealed 70% of Australians are working for free – putting businesses at serious risk of costly underpayment claims.
The survey of almost 2,000 Australian workers found levels of unpaid overtime are on the rise, with workers giving away an average of 7.3 unpaid hours each week. Elsewhere in APAC, the statistics are even more worrying. According to ADP, Singaporeans are working an average of 9.4 unpaid hours per week, a rise on 7.3 hours pre-pandemic. One in ten workers clock more than twenty hours of unpaid overtime each week and more than half of employers are now more closely monitoring timekeeping and attendance.
Speaking to HRD, Kylie Baullo, ADP’s VP client services APAC, said businesses may be at risk of reputational and commercial damage if they fail to take the issue seriously. So how can HR leaders avoid breaching the law?
“Firstly, it’s about your employees and the contracts that you have with your employees, understanding how the work is done, and ensuring that you have the right contracts in place. Then, whether it be a small or a large company, it's about putting systems in place so you can capture and record as much data as you possibly can,” she said.
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The pandemic and the current lockdowns in parts of Australia have altered working patterns for many employees, especially those who are also juggling caring responsibilities. It’s become common for employees to work later or earlier in a way that suits their situation but this trend could be opening businesses up to the risk of underpayment.
“With all of these changes to how work is done, more than ever you need to have simple ways of recording the time spent on tasks,” she said. “I think that's the clincher. It's about being organised and having the ability to assess how much more is an employee working compared to what they’re being paid for.”
Last year, Australia’s Fair Work Commission brought in new rules for annualised salaries, requiring businesses to carry out a yearly reconciliation process and pay employees the difference if they receive less than the award payments they would have received. The law change also forced employers to record the employee’s annual wage arrangement, including how it has been calculated and the outer limit of penalty hours and overtime they can work without extra payment. The new compliance rules, which came into force this year, combined with the blurred office/home boundary of remote working, means underpayment risks are everpresent.
The consequences of underpaying employees range from financial penalty to criminal conviction, depending on which state the employer is based in. But the new annual reconciliation process also carries the risk of potentially owing thousands of dollars to employees who have been underpaid.
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Baullo said business leaders can avoid being caught up in underpayment scandals by being proactive and putting systems in place to accurately record employee data. Leading employers are using technology to carry out regular checks and balances on renumeration, ensuring that any reconciliation is being done regularly to avoid a hefty bill every 12 months.
The ADP data shows a quarter of the Australian workforce is putting in more than 11 hours of unpaid overtime per week, a 10% rise from pre-pandemic. The proportion of workers doing an excess of 20 hours per week has also risen by two per cent. Globally, Australians fared slightly better than the global average at 9.2 hours of unpaid overtime per week.
