Significant fines were recently imposed against a 7-Eleven franchisor Mai Pty Ltd and its director ($340,290 and $68,058 respectively) for systematically underpaying employees and concealing more than $82,000 in underpayments from Fair Work investigators.
More recently the Turnbull government announced a Black Economy Taskforce to target illegal cash payments while celebrity chef George Calombaris reimbursed 200 staff $2.6 million for inadvertent underpayments over the past six years. The noise is enough to strike fear into small business owners around Australia.
The ABS estimates that the ‘black economy’, generally referring to businesses operating outside the tax system, is worth close to $21 billion annually. Under-the-table cash payments are the most common variant. About $15 billion is lost from the budget to tax avoidance and fraudulently claimed welfare payments.
While a few businesses are outright tax dodgers, many are innocent parties who are unable to understand our complex laws. This was the case for Mr Calombaris. Board of Taxation chairman Michael Andrew identified the complex modern award conditions and a lack of coherence between national and state regulation as major contributing factors.
“The system is beyond the capability of the average person”
– Michael Andrew, Board of Taxation chairman
“You have to fill out 48 different government forms and have 72 licences just to set up a restaurant in NSW… that’s causing people to lose confidence in the system,” Mr Andrew said and similar hurdles are observed in other states and territories.
A single breach of the Fair Work Act attract penalties of up to $54,000 for a body corporate and $10,800 for an individual per breach. Micro-enterprises (1-4 employees) are the most common form of employer and these fines would be potentially crippling.
Balancing strategic business goals and meeting regulatory requirements is a challenge faced by all businesses. The legislation governing employee remuneration is complex, with more than 120 modern awards and a range of industry and company-specific agreements to comply with.
Australian workforces are also changing; the workplace is becoming more casual, flexible working arrangements are more common and the traditional places for employment are evolving. Employers need to pay employees properly regardless of how, when and where employees work.
Close enough is not acceptable and the Government is getting serious. Both major political parties have shown support for increased Fair Work funding and powers, and increased corporate responsibility. The Labor Party endorsed creating a criminal offence for intentional or reckless contraventions of the Fair Work Act as part of its election campaign.
In June 2016 Fair Work Ombudsman Natalie James released an open letter warning companies and their directors that ‘escape routes of sending a company into liquidation to avoid penalties and having to back-pay workers…are now being shut down’.
Crack down efforts
The Black Economy Taskforce will utilise technology to catch employers. The ATO is already using data-matching in attempts to punish wrongdoers. There has also been talk of limiting cash transactions, and the possibility of removing the $100 note from circulation altogether. The introduction of deeper Standard Business Reporting requirements by the ATO will also have an impact.
Two solutions present themselves – either become an employment law expert or find a tool or service that does it for you. Most employers don’t have the time to pour over awards and agreements and calculate shift allowances. What they are looking for is a system that does it for them.
Complex workplace regulatory requirements are a reality that all employers need to grapple with and adopting software systems can help you sleep at night knowing you are compliant. With Standard Business Reporting capabilities and other stringent measures foundU’s workforce management Platform, will help you rest assured that you are operating in line with overwhelming State and Commonwealth legislation.