Australia’s strong economic recovery has led to a significant increase in demand for workers, causing a labour shortage. The departure of thousands of visa workers throughout the Covid-19 pandemic has only made matters worse, and the nation is now facing labour force issues, in what’s been dubbed the “Great Resignation”. Australia’s borders have reopened since the peak of the pandemic, however it could take years for enough workers to migrate to fill the skills shortage.
The phenomenon has caused chaos for businesses across many different industries. Tanda has already discussed ways to manage the shortage from a staffing perspective. However, one aspect of the Great Resignation which has been overlooked is its impact on compliance.
Tanda’s Head of Product Compliance Andrew Stirling recently hosted a PaySure episode discussing the compliance and legal risks the Great Resignation poses to businesses. Andrew hosted Charles Power, Partner at Holding Redlich and Editor of the Employment Law Handbook.
Charles and Andrew identified four key risks areas: high turnover, existing staff working long hours, shutdowns and stand-downs, and the use of visa workers. Each of these could impact how your business operates and come with serious compliance problems.
1. High Turnover
The first risk from the Great Resignation is turnover. Labour shortages give employees more choice for where they work and make them far more likely to resign. This means your organisation’s lineup could undergo radical change. Up to 50% or more of your staff could change jobs in the next 12 months. Losing this amount of expertise can be devastating.
It also means many of your employees will be heading to competitors and could take confidential information with them. To avoid this issue, you should pay close attention to confidentiality and post-employment restraint clauses in your contracts. It’s important that you consider these clauses on an employee by employee basis because if they go beyond what is reasonable to protect your legitimate business interests, the courts will not enforce them.
High turnover also means you’ll be recruiting and onboarding a lot of people. Most of the focus during labour shortages has been on how to recruit these new employees. This ignores the fact that there are major risks to quickly recruiting a lot of people. For example, if you use a template contract for most of your employees and it’s poorly worded, every new employee will be covered by the same flawed contract. It’s essential to have a proper approval process in place for any amendments made to key employment documents.
Baking in High Pay
Many organisations are offering higher pay to recruit people throughout the labour shortage. Some are even offering rates far and away above what the Award specifies. This is fine, but you should be careful of baking into these contracts, which could permanently increase the cost base for your business.
2. Existing Staff Working Long Hours
High turnover often leads to the second risk, staff getting overworked. Throughout the Great Resignation, when team members leave, the remaining employees often need to cover some of their work until they’re replaced. This can lead to longer hours, which are risky.
Many contracts and awards will mandate overtime pay rates for employees, which you need to pay or risk fines and legal action. Offering a higher rate of pay doesn’t exempt the business from other Award entitlements like overtime. You need to be careful that the employee is paid more under their contractual pay than they must be paid under the award. When employees work longer hours than normal to cover staff shortages, they may end up working more overtime than you anticipated when you set their salary or loaded hourly rate. Regularly checking the contractual pay against the employee’s award entitlements is a must.
There is also the issue of whether the request to do extra hours is reasonable. The request is more likely to be reasonable if:
- The Employee was given fair notice they’ll need to work overtime
- The Employee didn’t have a reasonable excuse not to work overtime
- They’re fairly compensated
Just because an employee is salaried, doesn’t mean you can make them work extra hours without extra pay. If they’re covered by an award or enterprise agreement, their pay can’t be below the annualised hourly salary. This has led to legal action in the past, and is something you should keep a close eye on.
3. Shutdowns and Stand-downs
Some businesses have shut down altogether because they don’t have enough employees from the great resignation, or they have struggled to stay open from Covid related complications. The issue is that employers have very limited rights to stand-down workers without pay under Australian law.
In the first stages of the Covid-pandemic, Jobkeeper allowed employers to stand down employees and the government would cover their pay. The program has since been wound-up, but some shutdowns have continued. This means that some workers have been stood down without pay – which may be illegal. Fair Work provides very limited rights to stand down employees. Usually, a very direct interruption to workflow is needed.
Generally speaking, a shutdown enforced by the government is likely to be legal reason to stand employees down. These typically come in the form of public health orders and force businesses to take action. Other shutdowns and stand downs are a major risk. For example, if a hospitality business decides to close because of slow trading alone, standing down full-time and part-time employees is likely to be illegal. These employees are contracted to a certain amount of hours per week and have a right to work.
Andrew Stirling says people should think very seriously about the issue. “Stand-downs are one of the biggest sleeper issues for businesses from Covid, and could see major litigation and class actions over the next few years”.
4. Issues With Visas
Many businesses use visa workers in line with Australian Government rules as part of their operations. The Covid pandemic saw many of these workers return to their country of origin, but some are now coming back to Australia. The Great Resignation has made recruiting visa workers a priority for many companies, as they struggle to fill roles. However, it comes with risks. There are strict rules for hiring people on visas. They need to have a right to work in Australia and often have a maximum number of hours they can work per week. Some visas also have separate wage requirements, like minimum salaries or market rates. You should comply with these requirements. Failing to do so could see you face a comprehensive, time-consuming audit on your use of visas.
One way to manage visa regulations is to use digital time and attendance software. Qualification tracking will allow you to mark a worker as a visa holder, and limit the maximum number of hours they can work per week. This simplifies compliance, saving time adding up the hours you give to visa workers each week.