Australian Fair Work Laws: How strategic contractor management outsourcing could have protected universities from millions of dollars in underpayment

The underpayment crisis in Australian universities

In December 2023, the National Tertiary Education Union (NTEU) reported almost $159m of unpaid wages across the sector nationally, where 97,000 employees had been underpaid. And with the recent introduction of the Albanese government’s new wage theft legislation that aims to criminalise wage theft, a review of how this practice came to be so widespread in the sector seems timely.

According to the report, Melbourne University topped the list for underpayments, with over 30,000 workers losing $45 million in wages. Following closely was the University of Wollongong, with underpayments amounting to $18 million.

This is a damning indictment on the sector and shows evidence of two main facts:

• The workforce in Australian universities is overly contractual or non-employee in nature
• There’s a systemic dearth of compliance and governance in the engagement and management of contractual or casual workers in Australian universities.

Although the report found that underpayment of workers has been a common practice in the tertiary education sector since 2014, the COVID crisis saw the problem amplified. During the COVID years, the over-reliance on casual and non-permanent labour was highlighted across the economy, with Australian universities being one of the leading examples.

Within universities, the business model was simple: to optimise income, universities would rely on the income of international students from a revenue standpoint, and on casual and non-employee labour from a cost standpoint. So, when the international students stopped coming during COVID, non-permanent university staff lost their jobs. The NTEU estimates the proportion of casual or non-employee workers in Australian public universities is about 45%. This estimate aligns closely with the information shared by universities with the Workplace Gender Equality Agency. This agency is unique in its mandate, as it requires all Australian universities to disclose their overall staff figures based on job categories. According to the agency’s findings, the percentage of casual and non-permanent staff can reach as high as 58% at certain universities.

Cause of underpayments at universities

The main causes of workforce underpayments at universities in Australia, is three-fold.

Firstly, there’s the classification issue. Some workers have been misclassified and have hence attracted the incorrect pay scale leading to underpayments.

Secondly, as we mentioned earlier, is the issue of governance. With in-house teams managing non-employee university workers at scale, it’s easy to see how non-compliance became so widespread. The changes to workplace laws and Fair Work Ombudsman rules, can be frequent and nuanced.

And finally, akin to misclassification yet quite separate, is the issue of casual or temp workers being asked to perform duties that are not within the realm of their specific contract. This issue has resulted in workers ending up performing duties, essentially for free.

How could the underpayment crisis in Australian universities have been avoided?

There are a host of strategic initiative universities can adopt to avoid this crisis of underpaying labour from continuing or reoccurring. These include:

• The abolition of piece rates. Many universities mandate that casual employees submit regular timesheets detailing the tasks performed and their duration. Casual contracts in universities predefine the maximum hours for different tasks, often compensated at varying rates. In other sectors, this practice is commonly referred to as piecework.
• Inclusion of tertiary industry expertise on governing bodies. The overly-corporatised nature of governing bodies at universities is having a detrimental impact. On the back of the 2003 amendments to the ‘Higher Education Support Act’ which rationalised the size of university governing bodies and required that at least two members have financial advisory expertise and at least one with commercial expertise, it’s claimed this change has produced an overly corporate mandate ill-suited to the sector.
• Regular review and auditing of payroll configurations. The payroll system will ideally have been developed and implemented for the university, to meet its human resource operational needs, and is consistent with all applicable industrial instruments. If this isn’t regularly updated to reflect industry regulations and standards, non-compliance will eventuate.
• Review of record keeping systems. Record keeping systems need to be kept up-to-date, accurate and reliable. In universities, time and attendance records are crucial. So, ensuring accurate recording, including breaks, will safeguard against underpayments.
• Provision of regular legislative and industry training for staff tasked with ensuring wage compliance, including an understanding of entitlements and required payments for all categories of workers.

Contractor Management Outsourcing: A windfall for universities

With the prevalence of engaging non-employee labour in the tertiary industry, an alternative and more simplistic solution is available to the industry: Contractor Management Outsourcing (CMO).

What is Contractor Management Outsourcing?

In the tertiary education sector, Contractor Management Outsourcing would be the process whereby the university engaged an external organisation to manage, pay and ensure compliance of all workers that are not permanent or on the fixed payroll.

The CMO provider acts as the ‘employer’ effectively: that is, as the intermediary between the university and their non-employee labour force. The CMO would take care of the entire process – from hiring to offboarding – keeping the university compliant and focused on their unique mandate. Not on workforce legislation, compliance or payroll auditing.

How can Contractor Management Outsourcing assist universities?

The CMO provider would offer the university an end-to-end solution for the management of their non-employee workforce, effectively mitigating any risk of legislative non-compliance – and underpayments. Here are the main categories of service offered by a quality CMO (like CXC), that would vastly help the human resource operations of Australia’s universities:

1. Mitigation of risk and compliance: large institutions like universities, have multiple faculties and departments that tend to operate as isolated entities. This means there would likely be inconsistencies when it comes to pay scales, worker classifications and worker contracts. And maintaining knowledge of legislative changes and statutory obligations across all these faculties and departments becomes costly and time intensive. By engaging a CMO, the universities can be assured of an institution-wide level of compliance of ALL non-employee workers in their charter. The CMO enables the university to engage non-employee workers legally and compliantly, from the get-go. (Check out our workforce risk report here, which covers the changing landscape of industrial relations in Australia).
2. Onboarding and offboarding: by engaging a CMO, universities can expect new contract workers to be engaged and onboarded quickly, effectively and compliantly. Time-to-productivity is particularly fast for contractors when onboarded by an experienced CMO: usually faster than what most in-house teams achieve. And when the worker’s contract is up, the CMO will help the university redeploy the worker, or offboard them with all benefits paid accurately and contracts concluded legally.
3. Invoicing and payroll: the CMO provider can manage all payroll, time sheeting and invoicing for the university’s non-employee workforce. This means, the university no longer needs to worry if their payroll configuration is up-to-date and compliant with legislation changes. It also means the university doesn’t have to worry about extraneous payments or underpayments of their non-employee workforce. The CMO’s reliable payroll technology will have it covered.
4. Reporting: the CMO can provide reporting to the universities across multiple variables. These include spend by worker type, contract durations, contract renewals and worker type comparisons, amongst many others. Data insights provided by the CMO can help the universities to mitigate worker misclassifications, keep workers engaged in suitable contracts and ensure payrates and benefits are dispersed accurately.
5. Contractor benefits: the CMO will act as the go-to for the non-employee workers in tertiary institutions. So, when they have questions about their contract, their tenure, their pay, leave or other entitlements, the CMO will handle it all. Through this quality standard of contractor care, the universities can actually turn the experience of their contractors into one that is positive, fruitful and sought-after: a complete 180 from the experience of some university non-employee workers, as reported in the media recently.
6. Workplace health and safety: the CMO engaged by the university will ensure the contract workers on-site have access to a safe, compliant and risk-free working environment. Organisations that engage non-employee workers often tend to omit workplace safety from their approach when managing these workers which of itself, can become a major risk.

There are many benefits of partnering with a CMO for universities. These include:

• Simplification of management of a disparate group of workers, many of whom can fall under the radar if their time with the university has been extensive. These workers can quickly become non-compliant, at which point the university falls foul of fair work rules. The CMO will prevent this scenario from ever transpiring.
• Universities will vastly reduce their workforce management costs. Housed under one system, the management of all non-employee workers across all faculties and departments becomes streamlined, where accurate, insightful data and reporting ensures the right workers are engaged in the right roles at the right time.
• All non-employee workers are correctly classified at all times. So, the CMO avoids any risk of legislative non-compliance.
• The university has complete visibility of the roster of non-employee workers engaged at the institution. This visibility ensures full compliance with workplace and fair work laws.

And finally…

By engaging a CMO, universities in Australia place themselves in a strong position as an employer: they maintain regulatory compliance while ensuring their non-permanent workforce is optimised by paying them correctly, and managing them with strategic prowess, suited to their individual contract and their workplace culture. It’s a win-win.

In addition, by engaging an external CMO, the universities have a much-needed opportunity to replenish and reinvigorate their reputations as employers.

If your university is looking for a better way of operating in today’s complex industrial relations framework, check out CXC’s contractor payroll and CMO services. We can save you an incredible amount of time, money, and pain by simply ensuring your non-employee workers are always 100% compliant. It’s what we do. Give us a call to find out more.

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