Why is it so hard to stay compliant in Australia? And what happens if you don’t?

Jessica Genio-Ignacio

19 February 2020    |   

Australia has one of the most complex labour regulations in the world. Of all its industries, the hospitality sector consistently receives the highest Fair Work Ombudsman disputes annually. In the 2018-2019 financial year, 36% of all anonymous reports were made in the industry. Data reflects trouble as well. The fast food, restaurants, and cafes are leading the way in noncompliance rates. One surprise audit in 2018 netted $471,904 unpaid wages from businesses in Melbourne, Sydney, and Brisbane. Compliance issues harm business. There’s the issue of litigation, as well as the direct blows to brand value. For the workforce, it’s disheartening to learn you may have been ill-compensated for your hours. One survey by hospitality job platform Barcats found of participating hospitality professionals, 40% suspected pay shortages in packets, with 33% of that number discovering suspicions were true.  How non-compliance harms business In our study conducted in partnership with Workforce, we found two of the most prominent concerns organisations have about compliance is damage to employee morale (mentioned by 58.1% of respondents) and damage to brand equity (44.2%).  Morale is key to engagement. According to Gallup’s State of the Global Workplace study, engaged employees consistently produce better business outcomes: 10% higher customer ratings, 20% higher sales, and 21% higher profitability. Research also says that highly engaged business units reported a 24% lower turnover in high-turnover organisations. And the hospitality industry has a problem with turnover. High competition, low barriers to entry, and casual employment are major contributing factors.  Hiring replacements is expensive. In one case study on four and five-star hotels, researchers from Griffith University found that the average replacement cost was $9,591 per employee. That figure rises to $109,909 per annum per employee for executive, managerial and supervisory staff.  It doesn’t stop at that. The Fair Work Ombudsman imposes a strict set of penalties on those who fail to adhere to workplace laws, each misstep potentially costing businesses millions of dollars if they aren’t careful. Sanctions include: On-the-spot fines  Court appearances Money paid per infringement, amounts varying by severity Paying back employee entitlements plus interest Mandatory training and audits Compensation payments Some cases can go back decades. One such high-profile case is that of George Calombaris’ (of MasterChef Australia fame) MAdE Establishment group. In 2017, the group backpaid $2.6 million to 162 affected workers from three Melbourne restaurants. Two years later, that figure grew to $7.8 million and more than 500 employees. They attributed the errors to lapses in annualised salary arrangements, resulting in mistakes in overtime and penalty rates.  Watch ASBFEO Ombudsman Kate Carnell on Governance and Compliance There’s even talk of the government drafting laws to criminalise intentional wage theft. Groups believe such rulings merits greater consequences, but it remains to be seen whether harsher penalties make it into law. Why non-compliance happens With these risks, why do most businesses only learn of errors through employee complaints? The same thing that prevents hospitality businesses from correcting compliance inaccuracies immediately, and the first sentence of our article. Australia has one of the most complex labour regulations in the world. Fair Work also makes periodic amendments to industry award rules, which results in the need for detailed reviews lest an employer be liable for violations.  A payroll officer needs to take all that into account for calculations. That requires accurate timesheet and attendance records and onboarding documents, including employee information such as birthdays and qualifications. Human resource professionals have their hands full with running the daily operations, but also recruitment and processes to reduce turnover.  Less breathing room means payroll officers may not catch errors on time. According to our Workforce Management Trends study, 46.1% of HR professionals say manual errors are a challenge they regularly face with time and attendance.  How successful businesses navigate complex regulatory changes Technology helps. Hundreds of workforce software solutions exist in the market aiming to reduce this complexity. Effective solutions consider compliance as central to their system. Such systems should have an award interpretation engine that: Automatically updates base rates according to age and Fair Work standards Applies prepared allowances directly into staff wage calculations Calculates higher duty rates Provides detailed timesheet breakdowns that summarise all applicable modifiers to an employee’s wage for easy double-checking  Investing in automated solutions cuts downtime, and provides accurate employee clock-ins. That simplifies the double-checking process and can export directly to payroll as well. That puts the future of your workforce firmly in your control: as technology develops, so can the scale of your operations. Employers use Tanda to help navigate Australia’s complex system. Its powerful award interpreter, automatically-updating award templates, and other compliance features make it faster to stay compliant. Get started with a free 14-day trial account.

Australia has one of the most complex labour regulations in the world.

Of all its industries, the hospitality sector consistently receives the highest Fair Work Ombudsman disputes annually. In the 2018-2019 financial year, 36% of all anonymous reports were made in the industry. Data reflects trouble as well. The fast food, restaurants, and cafes are leading the way in noncompliance rates. One surprise audit in 2018 netted $471,904 unpaid wages from businesses in Melbourne, Sydney, and Brisbane.

Compliance issues harm business. There’s the issue of litigation, as well as the direct blows to brand value. For the workforce, it’s disheartening to learn you may have been ill-compensated for your hours. One survey by hospitality job platform Barcats found of participating hospitality professionals, 40% suspected pay shortages in packets, with 33% of that number discovering suspicions were true. 

How non-compliance harms business

In our study conducted in partnership with Workforce, we found two of the most prominent concerns organisations have about compliance is damage to employee morale (mentioned by 58.1% of respondents) and damage to brand equity (44.2%)

Morale is key to engagement. According to Gallup’s State of the Global Workplace study, engaged employees consistently produce better business outcomes: 10% higher customer ratings, 20% higher sales, and 21% higher profitability. Research also says that highly engaged business units reported a 24% lower turnover in high-turnover organisations.

And the hospitality industry has a problem with turnover. High competition, low barriers to entry, and casual employment are major contributing factors. 

Hiring replacements is expensive. In one case study on four and five-star hotels, researchers from Griffith University found that the average replacement cost was $9,591 per employee. That figure rises to $109,909 per annum per employee for executive, managerial and supervisory staff. 

It doesn’t stop at that. The Fair Work Ombudsman imposes a strict set of penalties on those who fail to adhere to workplace laws, each misstep potentially costing businesses millions of dollars if they aren’t careful. Sanctions include:

  • On-the-spot fines 
  • Court appearances
  • Money paid per infringement, amounts varying by severity
  • Paying back employee entitlements plus interest
  • Mandatory training and audits
  • Compensation payments

Some cases can go back decades. One such high-profile case is that of George Calombaris’ (of MasterChef Australia fame) MAdE Establishment group. In 2017, the group backpaid $2.6 million to 162 affected workers from three Melbourne restaurants. Two years later, that figure grew to $7.8 million and more than 500 employees. They attributed the errors to lapses in annualised salary arrangements, resulting in mistakes in overtime and penalty rates. 

Watch ASBFEO Ombudsman Kate Carnell on Governance and Compliance

There’s even talk of the government drafting laws to criminalise intentional wage theft. Groups believe such rulings merits greater consequences, but it remains to be seen whether harsher penalties make it into law.

Why non-compliance happens

With these risks, why do most businesses only learn of errors through employee complaints? The same thing that prevents hospitality businesses from correcting compliance inaccuracies immediately, and the first sentence of our article.

Australia has one of the most complex labour regulations in the world.

Fair Work also makes periodic amendments to industry award rules, which results in the need for detailed reviews lest an employer be liable for violations. 

A payroll officer needs to take all that into account for calculations. That requires accurate timesheet and attendance records and onboarding documents, including employee information such as birthdays and qualifications. Human resource professionals have their hands full with running the daily operations, but also recruitment and processes to reduce turnover. 

Less breathing room means payroll officers may not catch errors on time. According to our Workforce Management Trends study, 46.1% of HR professionals say manual errors are a challenge they regularly face with time and attendance. 

How successful businesses navigate complex regulatory changes

Technology helps. Hundreds of workforce software solutions exist in the market aiming to reduce this complexity. Effective solutions consider compliance as central to their system. Such systems should have an award interpretation engine that:

  • Automatically updates base rates according to age and Fair Work standards
  • Applies prepared allowances directly into staff wage calculations
  • Calculates higher duty rates
  • Provides detailed timesheet breakdowns that summarise all applicable modifiers to an employee’s wage for easy double-checking 

Investing in automated solutions cuts downtime, and provides accurate employee clock-ins. That simplifies the double-checking process and can export directly to payroll as well. That puts the future of your workforce firmly in your control: as technology develops, so can the scale of your operations.


Employers use Tanda to help navigate Australia’s complex system. Its powerful award interpreter, automatically-updating award templates, and other compliance features make it faster to stay compliant. Get started with a free 14-day trial account.

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Sunday Penalty Rates: What’s really happening?

The national debate on penalty rates is quickly shaping up to become a defining issue of the Turnbull government and the next Federal election. The debate on penalty rates cuts straight to the bone of modern political disagreement and draws a line straight down one of the most fundamental differentiators of right wing vs. left wing economics. One side of the debate (the left) believes that the Government should regulate labour markets to ensure that the most vulnerable workers in our society are protected against greedy employers, and this will lead to a long term more equitable society. The other side of the debate (the right) believes the best path is to trust the power of the market to set labour rates, the argument is that the hardest workers will naturally attract the highest pay rates and encourage the labour force as a whole to be more productive. At a more practical level, the debate in Australia is concentrated on what to do about Sunday penalty rates which are paid at double time in some industries and whether to reduce those rates to be the same as Saturday rates. There are many institutional, practical and political factors at play which we will try to summarise in this article. Arguments for reducing Sunday penalty rates The argument goes that a reduction in cost of employment on Sundays will simultaneously lift productivity and improve unemployment rates in Australia. Many businesses remain closed on Sunday, because opening is unprofitable. Advocates of the rate cut argue that although some employees would see less money in their take-home pay packet, the overall result will be lower unemployment; not only because more business will trade on Sunday, but because many businesses will choose to increase their service levels (by employing more people) when margins aren’t quite so slim. Arguments against reducing Sunday penalty rates This side of the debate worries that reducing penalty rates will be hurting those in society who need the money the most and should be rewarded at higher rates due to working more ‘unsociable’ hours. Those against penalty rate cuts are generally very sceptical that business owners will create more jobs through the pay rate cuts, and see the proposed cut as a transfer of money from employee’s back-pockets into business owners’ wallets. What about the politics? Not too long ago, specific pay rates for industries were regulated at a State, rather than a Federal level. The move to shift powers of overall rate-setting to the confines of Canberra means that this debate is now being played out on the national stage. The problem for Turnbull and the Coalition is their track-record on labour market reform. As soon as the debate shifts to penalty rates, Turnbull runs the risk of resurfacing some of the toxic politics from the WorkChoices legislation. The problem for the Labour party and particularly Shorten, is how much this fight relies on support from the Union movement. As the political mudslinging begins, this could prove to be particularly bad timing for Shorten following the damning finding of the Royal Commission into Unions. All of this is mixed in with an unpredictable cross-bench, who Turnbull will need to win the support of to push through any change. There is far more at play for both sides than the practical changes to paychecks on Sunday. For both sides this argument flares deeply held ideological principles and is seen as a skirmish on the much larger war on our nation’s attitude towards labour laws, the free-market and the role of government. Get ready for the s**tfight.   At Tanda, our Award Interpretation software helps businesses ensure they are paying their staff correct penalty rates at different times throughout the week.

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About the author

Jessica Genio-Ignacio

Jessie is a PR and Content Writer interested in the impact of tech and digital on people and businesses.

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