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Eight essential features of good wage remediation
12 July 2024
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Wage remediations in Australia have become a focal point for large employers over the last few years, as employers proactively review their payroll processes and seek to remediate identified underpayments. This is likely to involve engagement with the Fair Work Ombudsman (FWO), given the size and complexity of most remediations.
So, when it comes to wage remediations, what, in the FWO’s view, makes a “good remediation”?
At PwC’s recent Workforce Leaders Forum, Deputy Ombudsman Michelle Carey outlined what the FWO expects and considers from employers throughout the remediation process, calling it the Essential 8 Features of Good Remediation. Understanding these factors, and considering how one’s behaviour and decisions may be interpreted regarding these factors, is important as it will influence the FWO when determining compliance and enforcement outcomes.
The FWO’s essential eight features of good remediation are:
- Comprehensive time and scope – The program design should assess the maximum period that data and records allow, not just the statutory limitation period, and should extensively review payroll across the business. Preparing a remediation which is limited to “targeted” or “sampled” reviews is considered by the FWO (unless the decision is explainable) to be an indicator of poor remediation program design.
- Worker-centred design – Remediation programs will often require some level of assumptions to be made, for example due to data gaps. The FWO wants to see employers taking responsibility for failures to maintain records by applying worker-favourable assumptions to the design of the remediation. Where there are interpretations of contentious positions (such as set-off of entitlements), these positions should be clearly set out in an assumptions document to provide visibility to the FWO.
- Pay interest / uplifts – Interest should be paid on any underpayments, and uplifts applied to top-up payments or buffers. Where underpayments are significant, employers should also pay for the employee to seek independent tax and financial advice.
- Consult and communicate – Employers should consult and communicate with both workers and unions (where relevant) about entitlement reviews and future processes being implemented to resolve issues and achieve compliance. This should allow workers access to sufficient information about how their entitlements are calculated and an opportunity to request a more detailed review.
- Implement full, integrated corrective actions – The FWO expects employers to be able to show that they are investing in payroll and compliance capability and training, as well as in systems, processes and technology to support this capability. They also expect that the employer will establish a program of detailed and regular analytics and auditing of payroll variances and testing of risk controls.
- Future corporate governance – Creation of an environment that provides rigorous accountability for compliance, set at a senior level. This environment would include close alignment between actual payroll operations and organisational risk frameworks, and regular reporting to Boards or executive bodies in relation to workplace relations compliance. As an example, the FWO points to the recent enforceable undertaking given to the Ombudsman by IAG which included a commitment to regular reporting to the Board on the implementation of a new time & attendance system and compliance monitoring.
- Frank and transparent disclosure – A good remediation submission will provide the FWO with extensive detail on how underpayments are calculated, including pay rules, assumptions, methodology information and models. Running calculations in a ‘black box’ and presenting the outcomes will not suffice.
- Respond to regulator concerns – The FWO expects employers to make reasonable adjustments to their remediation approach and to respond to concerns the FWO raises during the remediation.
The Ombudsman is expected to formally publish these expectations in its Remediation Guide in due course. However, the expectations are already being applied, and, accordingly, should be considered when commencing, or progressing, any payroll remediations.
If you missed the Workforce Leaders’ Forum and would like to catch up on the full conversation with Fair Work Ombudsman Anna Booth and Deputy Ombudsman Michelle Carey, you can watch on demand via this link.
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