Is your labour supply chain compliant?

The Fair Work Ombudsman (FWO) Natalie James has issued a very critical report on retail giant Woolworths’ failure to take responsibility for their labour supply chains.

The report should act as a clear warning to any business using contracting and subcontracting arrangements to engage workers without scrutinising and monitoring the supply chain to ensure compliance with workplace laws.

Overview of Inquiry

The Fair Work Ombudsman visited 130 Woolworths stores and found that 79% of them had some form of non-compliance with workplace laws. The inquiry determined that the company had adopted a business strategy which sought to transfer capital risk to labour through its procurement practices. The FWO did accept that Woolworths did have some governance systems in place; these had not been effective and therefore contributed to a culture of non-compliance.

Key Findings and recommendations

The inquiry determined that Woolworths procurement process had contributed to a culture of non-compliance by failing to monitor and enforce its own contractual terms, relying on sub-optimum governance systems and failing to adequately monitor who is performing the work.

Principal contractors interviewed by the FWO indicated that there was very little communication regarding the tender process and therefore the general assumption was that price was the primary factor in whether a tender was successful.

The FWO recommended Woolworths enter into a voluntary compliance agreement and review its current contracting arrangements to ensure the price permits employee entitlements to be met and to give preference to contractors who pay all entitlements including PAYG tax and superannuation.  The FWO also recommended a range of other system and process improvement’s including the need to conduct regular audits of contractors and sub-contractors. The final recommendation was the establishment of a $1 million fund to cover underpayments.

Concluding statements

Whilst the FWOI recognised the legitimacy of outsourcing she stated it does increase the risk that workers will be underpaid.  It was made very clear that the FWO would be looking to the top of the supply chain because it is the business at the top that is the price maker.

The Ombudsman issued a press release at the same time making damming statements like:

“Once again we find a big, established company at the top of a chain that involves worker exploitation, reaping the benefit of underpaid labour while failing to keep sufficient watch on what its contractors are paying the workers.”

“ The community is tiring of established businesses claiming they  ‘did not know’ what was going on in their networks and labour supply chains, while at the same time failing to put adequate governance arrangements in place.”

Need help?

Not knowing is not an excuse for non-compliance anymore, but that doesn’t mean you have to know everything. Bayside Group’s Workplace Relations team can assist you with the assessment and evaluation of your current approach to resourcing and labour supply chain, and advise you on the most effective way to move forward.

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