Are we still the land of the fair go?
Underpayment of wages has been a prolific topic in the franchise sector, with investigations of big name brands uncovering cases of franchisees underpaying employees. However, for many business owners, understanding the wage system in Australia is fraught with complexities.
When it comes to employment agreements, confusion remains. Moreover, the difficult question of whether franchisor’s need to be responsible still looms. Franchise Buyer magazine spoke to five people to get their take on this issue.
The Employee – Sam Kurikawa (Founder, GiveGet)
After securing a client job with an online labour hire company, Sam Kurikawa reveals, ‘I quickly discovered I hadn’t been told all the information.’ Initial advice was weekly payments tracked through the system. But, she soon uncovered the client paid monthly – with no tracking through the platform.
When she asked to see a copy of the contract with the client, ‘they would push it aside.’ A similar response ensued from the client, ‘I was told, “oh no, you have to go to the labour hire company.” So, it was back and forth, back and forth.’ With no-one to advocate for her, ‘my values are important enough to follow up on’; Sam ‘ended up having to do all the research myself and then found out I was employed under a specific award and I am expected to get paid weekly. At the most, fortnightly.’ Escalation to both parties resulted in resolution for Sam, but not the other four employees. ‘So, they shut me up about it, but none of the others’ got their pays fixed.
The next week I wasn’t on the roster at all – [I] lost all my shifts.’ She explains the whole experience has left a bitter taste and that ‘hyper-competitiveness’ is driving businesses to do the wrong thing to get ahead. ‘At the end of the day that’s how it goes. It costs more to pay employees properly, you make less profit, so it doesn’t look as good. People just take the shortcuts they need to take to get to where they want to be.’
Business Law – Colin Revelman (Employment Lawyer, Revelman Legal)
According to employment lawyer Colin Revelman, ‘the first thing – from the elementary beginnings – is there should always be a written employment agreement.’ He says it is an issue where businesses show reticence. ‘as they may find it find it difficult to pay legal fees to get a lawyer, or specialist employer lawyer, to have the correct contracts in place.’
Colin says many employers at the coalface set up agreements as word documents; ‘which are drafted well at the very start for their intended purpose, but, inevitably get ignored.’ And, even with complex interplay between ‘the employment agreement and industrial award’ he advises they have to be kept up-to-date. This ‘risk prevention measure’ he advises is, ‘ultimately what it is about. Other than the business wanting to have a profitable workplace, they do need to be able to protect themselves from potential liabilities.’
Setting up structure through a management system – ‘with the main aim of adhering to laws, particularly wage rates’ – is up to the individual companies, but he says this is crucial to understanding and acting on the risk of liability. ‘This will lead to better business management which should lead to more successful smaller businesses.’
Fair Work Ombudsman – Spokesperson According to The Fair Work Ombudsman spokesperson, the canary in the coalmine is, ‘when we discover there is no monitoring of workplace compliance in a network, and employee concerns are referred straight to the regulator rather than acted on by the business.’ Where most problems raised by employees ‘can be resolved quickly and easily by conversations in the workplace, franchisors should encourage an environment where employees approach their franchisees first.’
However, it is noted franchisors do have an important responsibility ‘to help ensure the franchisees in their network comply with workplace laws. The consequences of noncompliance by franchisees can be significant, including reputational and brand damage.’
There are a range of actions franchisors can take, and systems they can put in place, to encourage compliance:
- franchisors should make it clear to all those in their system, through inclusion in franchise agreements, that compliance with workplace laws is expected
- franchisors should check that the franchise’s business model considers the costs of lawfully employing adequate numbers of staff.
- support franchisees in their network by helping them become fully informed about what their wage and other workplace obligations are
Employment Law – Trent Hancock (Senior Associate – McDonald Murholme)
While not a substitute for legal advice, senior associate Trent Hancock agrees ‘the Fair Work Commission and the Fair Work Ombudsman can also provide guidance on award rates and other entitlements.’ For him, ‘regular audits of payslips and other payroll records to ensure that franchisees are also complying with their obligations to employees’ is critical, alongside seeing a lawyer to ‘provide advice about the possibility of preparing an enterprise agreement to govern the entitlements of employees on a more collective basis.’
He says, based on his experience, ‘unfortunately, the number of employees being underpaid is considerable.’ A culture of fear
among employees who are being underpaid is brewing, and they are often told by clients ‘co-workers are in the same position; however, they are too scared to come forward.’ To remedy this, a ‘culture of compliance’ – advocated by Fair Work, could be championed by increasing statutory penalty rates, which will act as a deterrent to the underpayment of employees.
‘The current maximum penalty for a contravention of a civil remedy provision of the Fair Work Act 2009 (Cth), which includes the failure to pay an employee in accordance with the minimum wage set out in an award, is $54,000 for a corporation and $10,800 for an individual.’
Where complexities exist within the award system, Trent advises it’s ‘not an excuse that franchisees can rely upon to avoid the imposition of a pecuniary penalty.
Industrial Relations – Cameron Blewett (IR Simplified)
Speaking to small business owners on a weekly basis about the complexities of Fair Work, modern awards and wage payments is something industrial relations expert Cameron Blewett does on a weekly basis. But, the difference is – he is focused on demystifying and simplifying the process.
‘They do accept it is confusing … tax legislation is confusing, putting Lego together is confusing, Ikea furniture is confusing …!’ Businesses believe there is no use complaining, because things aren’t going to change. ‘My approach is, I sit down and sort the wheat from the chaff and say “yes, it is confusing – I think you have 130 to 140 modern awards now? You don’t have to look at all of them”.’
Starting with a step-by-step process, ‘same as you do with Lego, same as you do with Ikea,’ he is focused on making it easier – why? ‘Because for me, it’s about going into a small business, developing relationships with them, getting past the old adversarial management-employee thing and viewing it as, “hey, you are all in this together.”
He explains industrial relations as ‘the relationship. Yes, you can argue employment law – but industrial relations are won in the workplace. It’s not won in the Fair Work Commission, it t is not won in the federal court, it is not won in the newspapers. It is won in the workplace.’ For Cameron, businesses need to remember the value of employees – ‘[they] spend 8-9 hours of their day in your business. This is where industrial relations are won, it is not won anywhere else.’ His belief is, when something is taken to Fair Work the business loses.
‘It doesn’t matter if the business wins, they’ve lost the PR battle. When the union takes them to Fair Work if the union wins – they can say, “we’ve stuck up for your rights; this is what we’ve done.” [If ] the business wins in Fair Work and the union loses; “hey, we’ve done it, we’ve held them accountable.’
His advice: ‘often, the person has put the Fair Work submission in because they want to vent. Give them a chance to vent. Say to them, “okay, what can we do to solve it?” Instead of turning around and saying “Nup, we’re right, we sacked you fairly and we are going to fight it”.
If people are still confused and don’t know what they are doing, he says just pick up the phone. ‘As much as everyone bags them out, talk to the Ombudsman. Go through their online pay calculator. But, before you even do that – have a position description.’ He says once these are in place for employees, ‘then you can find out what award applies to them and then you can find out the process.’
