2. Worker Centred Design

The Fair Work Ombudsmen (FWO) recently outlined eight elements for payroll remediation success. These elements provide organisations with clear guidance as to the FWO's expectations of employers when undertaking payroll remediation programs. This week we explore the concept of Worker Centred Design, define the concept and detail what employers need to consider when addressing this element of payroll remediation.

What is Worker Centred Design?

The FWO wants to see that employers take responsibility and apply assumptions that benefit employees where:

1. data gaps exist;
2. there is a lack of record keeping; and/or
3. there is ambiguity / contention in specific entitlements that have been paid, and that are owed (e.g. offsetting).

At its core, in the absence of certainty, calculation assumptions should always benefit employees that have been underpaid, not the employer. Data gaps and the absence of relevant records are quite common occurrences when managing payroll remediations. It is likely back payment calculations can span multiple years (6+) with multiple systems are involved (HRIS, WFM, Payroll) and each of these systems may have been replaced during the in-scope period. Integration issues may have required manual data entry resulting in data entry errors and synchronisation issues between dependent systems.

Worker Centered Design Examples

Let's take a look closer look at a couple of examples of Worker Centred Design.

Example A: Company XYZ identified that some employees were not paid overtime entitlements when working more than a specific number of hours in a day. On further investigation it was also discovered that a meal allowance entitlement had not been paid when overtime was worked after 7pm. Once the relevant time and attendance and payroll data was extracted it was found that some shifts did not have a a start time or an end time, i.e. there was a data gap.

Rather than assume that shifts with no time data were worked prior to 7pm (favorable to the employer), Company XYZ chose to assume that all shifts with no time data were completed after 7pm, triggering the meal allowance entitlement.

Example B: Casual employees at Company ABC are entitled to a penalty payment where their roster is changed and they are provided with 24 hours notice of the change and they accept the change, i.e. by agreement. Company ABC did not traditionally pay the penalty payment, where (frequent) roster changes were made.

Whilst some departments kept records of the roster changes and employees agreeing to the changes, not all departments kept written records. In this example, following the principal of worker centered design, Company ABC chose to calculate the penalty payments for impacted casual employees where the relevant records did not exist.

Offsetting Considerations

Offsetting occurs when an underpayment is effectively offset against an overpayment, resulting in a reduction in the total amount owed to an employee. As a general principal only like payments are able to be offset against each other (e.g. daily overtime and weekly overtime), however different types of payments are not able to be offset (e.g. where an employer has paid not paid a penalty payment and also overpaid superannuation, those two payments are not able to be offset).

Offsetting one payment against another should also only occur where these payments occur in the same pay period. Hence an employer cannot simply aggregate all underpayments over an in scope period (i.e. daily overtime) and offset these payments against overtime overpayments during the same period.

For example, overtime underpayments regularly feature in payroll remediation programs with ordinary hours (plus super) typically being paid instead. Where overtime is payable (and super is not applicable), the overtime payments are not able to be offset against the superannuation payments already made.

Practical Tips

1. Create a calculation methodology document that clearly details the background to the underpayments, the relevant Award and/or Enterprise Agreements and the relevant clauses, the scope of the back payments including the employee types, classifications etc., assumptions made, any valid offsetting that has been applied, data approach and considerations and where practical some calculation examples. Such a document (where comprehensive and considered) demonstrates to the FWO that an employer has planned their remediation program well.
2. Always keep the principle of worker centred design top of mind to ensure all assumptions favor the employee in the absence of perfect data and/or records.
3. Seek advice from an employment lawyer with specific payroll remediation experience (preferably in your industry) where any ambiguity exists. They have experience managing communications with the FWO and protecting your interests.
4. Talk to us - Impact HRT. We have extensive experience managing large payroll remediation programs including preparing all documents and data requested by the FWO, planning your payroll remediation program, managing back payment calculations, and remediating processes, strengthening governance, building internal capability and overseeing integration and systems updates to resolve your payroll compliance issues.

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The information provided in this article is general in nature and should not be relied upon for any specific or individual scenario. Always seek qualified assistance in navigating employment and labor law.