Not-for-profits have been urged to take more care with their payment processes after a string of cases of underpayments stung organisations with penalties, public embarrassment, and repayments that in some cases cost many millions.
Maddocks associate Jessica Cirnigliaro told attendees at a recent not-for-profit human resources forum that organisations should pay closer attention to their payrolls.
“Underpayment of wages is a really serious issue, and employers that fail to pay minimum wages, allowances, leave loading or superannuation can face penalties and reputational damage,” Ms Cirnigliaro said.
She said organisations had been tripped up by:
- incorrectly applying awards
- failing to properly classify employees, sometimes as contractors
- payroll errors resulting from incorrect rules applied in HR software or manual systems
- payroll and HR staff failing to alert each other to changes to rates or agreements
- failing to accurately record work hours and breaks
- incorrect accrual of leave
- confusion over annualised salaries and what’s included
- superannuation payments.
The Fair Work Ombudsman has forced several organisations to repay staff large amounts in the past two years:
- $25 million by the Australian Red Cross Society after an internal review found it had applied the wrong award and enterprise agreement to more than 10,000 workers
- $3 million by Community Living & Respite Services Inc (CLRS) on the Victoria/NSW border, after it failed to properly implement an “equal remuneration order” that had lifted minimum rates in the industry
- $2 million by St Peter’s Lutheran College in Queensland, which tried to pay staff as volunteers
- $220,000 by RSPCA NSW, which made payroll and governance errors
- $200,000 by the Creche and Kindergarten Association, based in Queensland, which incorrectly interpreted the terms of an enterprise agreement.
Ms Cirnigliaro said not-for-profits were vulnerable to errors in a sector in which a variety of awards could apply to the multitude of sub-sectors and occupations. Some organisations faced having to apply multiple awards.
But while award coverage and entitlements formed a complicated landscape, there was help available. She advised organisations to use the free resources on the Fair Work Ombudsman website which could help organisations classify employees and use the right awards. Organisations should seek legal advice if they are concerned about running into trouble with proper interpretation of awards or any other issue.
She nominated some actions that NFPs should take now to ensure compliance:
- review current entitlements, track changes, and assess your payroll system
- train staff and encourage good communication between HR and payroll
- keep a close eye on annualised salaries, accrued leave, allowances and superannuation
- make it easy for staff to alert you to suspected underpayments
- keep good employee records.
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