Why unethical business is bad for the strata industry

Employers who deliberately underpay employees not only deny Australian workers a fair day's pay, but also undercut employers who are doing the right thing, writes Frank Boross.

Employers who deliberately underpay employees not only deny Australian workers a fair day’s pay for a fair day’s work, but also undercut employers who are doing the right thing for their workforce, writes Havencab managing director Frank Boross.

From a business perspective, a direct competitor who pays $5 an hour less than the minimum wage is unfairly and unlawfully obtaining a financial advantage over a business that pays award or above award wages.

This means that for one employee working 38 hours a week there is a $190 advantage. Taken over 10 staff annually and the deficit is $98,880. The business that is paying correct hourly rates is disadvantaged in any tender process.

To add to this the employee misses out an additional 9.5 per cent super contribution, 1.7 per cent transferable long service leave, holiday pay entitlements of 15.4 per cent adding roughly another $27,000 that the employees should have received.

The government also misses out on additional Payroll Tax, PAYG Tax that could assist with funding hospitals and schools. The insurance companies miss out on 5.147 per cent for workers’ compensation premiums that they pass onto consumers through other insurance mechanisms. At the very least it is not healthy competition at worst it’s exploitation and human rights violations. In one way or another, all Australians are affected.

From an employers’ perspective, Havencab knows that paying the right amount to your employees is not only the right thing to do, but also helps to attract and retain valuable staff, but from a worker’s perspective, job satisfaction is critical and equity in pay is important for workers to perform well and meet customers’ needs.

In 2016, IBISWorld estimated the cleaning industry was worth $9 billion, and that one in every 11 workers are employed by the sector. There are more than 270,000 strata schemes in Australia that all require cleaning. The strata industry is a huge employer through contracting and has a moral and ethical obligation to ensure owner corporations are protected and the sector does not contribute to the exploitation that is occurring.

The 2010 Cleaning Services Award sets the minimum hourly rate for a Level 1 full-time cleaner at $18.91. It is not a lot for such a vital service. Imagine what our public health would be like without cleaners? Yet, it seems too hard for some cleaning contract companies to provide appropriate wages and work conditions.

The cleaning industry is being brought into disrepute

It is unprofessional that some companies are undermining the good reputation of the industry as a whole, and in particular reflecting poorly on those companies that do adhere to ethical and socially sustainable business principles.

Cases of unfair dismissal and underpayment now routinely emerge from the industry. Sham contracting – when bosses misrepresent employees as independent contractors in order to avoid paying standard entitlements – appears to be common.

Last year, one of Sydney’s largest cleaning companies, which holds around 35 per cent market share of the cleaning contracts in Sydney’s CBD, has been accused of systematically underpaying its cleaners by almost half a million dollars.

The problem is systemic. Investigations by the Fair Work Ombudsman (FWO) have found a non-compliance rate of 37.1 per cent in an audit of 315 cleaning companies.

More than half of those contraventions related to underpayment. At the time of the investigation, there were 15,000 cleaning entities on the Australian Business Register. Calculation of the non-compliance rate then yields an impact of 5565 cases!

The latest FWO annual report does nothing to dispel the issue, noting that the majority of litigations (42 per cent) concerned wages and conditions, with cleaning services featuring prominently in these cases.

Such exploitation may be explained in part by tendering processes that award cleaning contracts to the lowest bidder. This is, after all, how the free market works: minimum outlay for maximum benefit. It is a reasonable business focus.

This is highly relevant to the strata management industry because without any burden on strata managers and property owners to ensure the cleaning company they contracted is providing appropriate wages and conditions, workers – real human beings – end up bearing the brunt of these arrangements.

The fact is, these corporations are cheating the Australian public by cheating their workers. The current arrangement isn’t fair to workers or to taxpayers – nor is it equitable to employers who play by the rules, pay family-supporting wages and contribute their fair share of taxes. Clearly there’s nothing wrong with being a profitable corporation, but that success shouldn’t come at the expense of workers, communities and the economy.

The FWO is acting to punish offenders. Fair Work Australia is spot checking and fining cleaning contractors who illegally underpay workers and the government is now acting constructively to bring about legislation to enable prosecution of wrong doers. The FWO will enter into an Enforceable Undertaking with any employers who are non-compliant.

The FWO is instigating litigations that include action against both an employing entity and any third party who is involved in an alleged contravention of the Fair Work Act.

Under section 550 of the Act any person involved in a contravention of the Act is held responsible. Involvement in a contravention includes having been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention.

What does this mean for the strata industry?

Anyone who is found to be involved in a contravention of the Act can be personally liable for compensating employees and paying any penalties imposed by the court.

Of course, company directors can be held personally accountable for the actions of their companies. An important point to note is Section 550 can extend to anyone involved in a contravention.

This can include human resources, payroll officers, line managers, accountants and advisors, strata and building managers and even Owners Corporations. Section 550 has broad implications for businesses that use any sort of outsourcing.

This is important for Owners Corporations and strata companies to consider, especially in their supply-chain and procurement processes. Effectively it means that companies cannot outsource their non-compliance.

What can we do?

The best way to safeguard the industry is to educate. Strata Community Australia (SCA) has a significant role to play in educating the strata community, its members, its Owners Corporations the public and all contractors supplying services to the strata industry, with immediate termination of membership and reporting of contravention to the FWO by any stakeholder.

Contracting a cleaning company that employs workers directly is a powerful safeguard for companies that need to outsource cleaning contracts. Request a free transparent pricing model from Havencab, which tells you whether the tendered price is compliant or not by entering minimal data, some strata companies are already using this.

Speak to the Ombudsman to get further information. They provide a range of tools and wages information that can assist you with advising your owners with the right information. They can be contacted on 13 13 94.

No worker in Australia should be treated poorly. It is unjust. Employers who deliberately underpay employees not only deny Australian workers a fair day’s pay for a fair day’s work, but also undercut employers who are doing the right thing for their workforce. It’s a distortion of the market that drags down Australian business.

This first appeared in the September/October issue of INCLEAN magazine. 

2 thoughts on “Why unethical business is bad for the strata industry

  1. I agree with whats happening in todays cleaning industry.

    personally i have a passion for cleaning, – perfection to detail.

    The mentality of today’s people is disgusting and sure enough morals n ethics are no were to be found.
    A wise person said
    ” repeating the same action n expecting a different result = Insanity. ”

    People who actually say they care – they dont. It wouldn’t need to be said, different outcomes would take place but there not.

    if you want to see change – well change the formula, change it the way it needs to be change it properly to avoid all these endless wasted opportunity for our cleaners in all sectors.

    Everyone deserves an opportunity, Big players are just taking everything not cause they need it – Its cause they want it and they will offer it underpriced so sure enough the other cleaner doesnt get it and he may have none.. Its war and unfortuently they are doing it to each other. how smart is that.

    Service should not be under priced – No it should be given at right price so its valued. Building managers will strive, the panel will want to voice to feel they have a purpose but whom ever is gonna agree to there service maintenance is only looking at a Quote on paper – that means Nothing.

    Strata manager – Body corporates, Residents, Owners.
    Money Pool – Is exactly how its spent!! So considering there is so much in the pool then as a starting point cleaners should be one of the highest paying salaries true?? good cleaner is same as a good doctor – but when others dont value the trade as yourself(cleaner) its not going to work.


  2. in a building one of the most used components would be an elevator. The amount of service call charges you could easily replace new elevators every year in a building and still be in front.

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