Carnell: How single touch payroll could help solve Australia’s wage theft crisis

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Small business ombudsman Kate Carnell. Source: AAP/Mick Tsikas.

The Morrison government should embrace single touch payroll (STP) as a tech-based solution to Australia’s burgeoning wage theft problem, small business ombudsman Kate Carnell says.

In comments which come in the wake of two fresh underpayment penalties in the small business sector this week, the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) says the federal government has an “obligation” to simplify compliance with wage laws.

“Small businesses are really struggling with a very complex system,” Carnell tells SmartCompany.

“The current environment shows that even really big organisations like the ABC … and Woolworths, have made mistakes.”

The latest in a long line of small firms failing to pay workers, a Victorian plumber was yesterday fined over $150,000 by the Federal Circuit Court for underpaying an apprentice.

The penalty came only a day after the Fair Work Ombudsman (FWO) successfully prosecuted a former Crust Pizza franchisee in Melbourne over about $35,000 in stolen wages.

Last week the Senate voted to establish an inquiry into wage theft in Australia, which will examine whether new laws are needed to crack down on businesses, large and small, underpaying workers.

It comes amid mounting backlash against business lobbyist arguments for workplace laws to be simplified as a way to address worker underpayment.

Academic Anthony Forsyth of RMIT University rubbished the claim in a recent article, arguing large firms trying to annualise wages for convenience sake is the source of many issues.

But Carnell says STP reporting provides an opportunity to simplify the system without legislative change, using technology which already exists to boost ease of compliance rather than winding back red tape.

“Virtually all small businesses have to have some wage software solution … that sort of changes the game a bit,” Carnell says.

The ombudsman wants the federal government and Fair Work Commission (FWC) to explore how the reams of payroll data flowing into the ATO could be harnessed for workplace compliance.

“The rollout of single touch payroll provides an opportunity to calculate award wages and entitlements through an algorithm integrated into accounting software such as Xero, MYOB, Quicken and other software systems,” Carnell said in a statement circulated Wednesday.

“This payment algorithm could be owned and updated by the Fair Work Commission to ensure wages and entitlements are correct and up-to-date.”

Carnell says up-to-date information about correct wages worked into software systems could provide firms with a “safe harbour” of confidence that they were paying employees correctly.

The small business ombudsman isn’t the only one considering whether real-time payroll data could be used to boost workplace compliance.

As SmartCompany reported last week, wage theft inquiry chair Alex Gallacher plans to call tax office officials in to give evidence about how an inter-agency approach, which could include the FWO, could be implemented.

“Payroll data just provides so much clarity,” Gallacher said.

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Matthew J Doyle
Matthew J Doyle
11 months ago

Seems like a wise solution, to at least part of the problem.

If we already have real-time reporting and monitoring via STP, why not leverage that data for payment compliance.

Using a fair work data source would ensure everyone has the correct, up-to-date pay rates.

Where this would not solve the issue is when employees are, deliberately or otherwise, classified incorrectly. In this case, the wage rate may well be correct for the level they are employed on, but still result in underpayment due to being on the wrong classification.

Digital Service Provider
Digital Service Provider
10 months ago

STP isn’t just for small business – it’s for EVERY business: big or small, simple or complex, local or multi-national. Workers may have a single job with the employer or engage in concurrent employment (more than one contract of employment) with many conditions, industrial instruments and pay rates with the SAME employer. You won’t be able to “calculate” anything, but you can compare across industry to find anomalies.

It’s more complex than this very simple suggestion would imply. That said, the software industry could absolutely benefit from digitally consuming industrial instruments. But it’s more than just an award from FWO: there are state awards (not under the FWO jurisdiction), Enterprise Agreements (FWC), individual agreements and business policy that dictate conditions. Then there’s all the state Long Service Leave acts…For non-payroll professionals, it all sounds so “easy”.