IBM back pays AU$12m to over 1,600 Australian employees

After Big Blue entered into an enforceable undertaking with the Fair Work Ombudsman.

IBM has back-paid more than AU$12 million to over 1,600 Australian employees, after entering into an enforceable undertaking with the Fair Work Ombudsman (FWO).

The FWO said Big Blue also failed to pay entitlements, such as superannuation and annual leave loading.

IBM Australia Limited and IBM Global Financing Australia Limited self-reported to the regulator last year that they underpaid employees after failing to apply the relevant awards.

A statement from the FWO said the Australian arm of the tech giant had failed to apply the award to most of its employees because they were salaried professionals earning significantly above minimum award wage rates.

"This led to IBM failing to provide employees with more than 15 different Award entitlements and conditions, with the most significant issues relating to vehicle allowances, superannuation entitlements, and annual leave loading," the ombudsman said.

The affected employees are located across all Australian states and territories, but the FWO said a significant number of casual staff at IBM's contact centre in Ballarat were paid the national minimum wage, as opposed to the higher rates and entitlements in the applicable award.

IBM had identified and back-paid 1,647 workers a total of AU$12.3 million as at 1 February 2020. The FWO said this included interest for underpayments that occurred between 2012 and 2020.

Individual back-payments range from less than AU$1 to over AU$145,000. IBM Australia told ZDNet that many of the payments were less than AU$1,000 and related mainly to motor vehicle usage. 

See also: IBM scores AU$1b for whole-of-government IT

Further underpayments to be made are expected by the FWO to be "significant in size". The ombudsman said the enforceable undertaking requires IBM to calculate and pay outstanding amounts to every affected employee by 16 October 2020.

"Under the enforceable undertaking, IBM has committed to stringent measures to comply with the law and protect its workforce. This includes engaging, at its own cost, an expert auditing firm to conduct an independent assessment of the outcomes of its rectification program and to audit its compliance with workplace laws over the next two to three years," ombudsman Sandra Parker said.

"This matter serves as a warning to all employers that if you don't prioritise workplace compliance, you risk underpaying staff on a large scale. Any employers who need help meeting their lawful workplace obligations should contact the Fair Work Ombudsman for free advice."

The undertaking, which Parker labelled "appropriate", commits IBM to make two contrition payments to the Commonwealth's Consolidated Revenue Fund by 27 November 2020. In total, the two contrition payments will be equal to 5.25% of the underpayments IBM identifies for all employees.

Under the agreement, an expert will conduct its own review of the underpayments identified by IBM, which is due to be completed next year. The FWO said any further underpayments identified by the expert will attract a higher contrition payment of 7%.

IBM must also fund an independent organisation to operate a hotline to assist its employees for the next 12 months. And lastly, the FWO said IBM is also required to display public, workplace, and online notices detailing its workplace law breaches, and must apologise to workers.

"This was a genuine error and we sincerely apologise to all current and former employees who have been affected," the company told ZDNet. "Our employees are critical to the success of IBM and our clients. We are fully committed to all compliance measures and corrective actions agreed with the Fair Work Ombudsman to ensure this does not happen again."  

For 2019, the Australian arm of IBM reported AU$109 million in net profit, on revenue of AU$2.6 billion.

In May, it was reported the global company was laying off staff, telling ZDNet that employees will have the opportunity to re-join Big Blue where roles are available.

"As part of IBM's regular assessment of how we work, we are simplifying how we operate to position our business for high value growth opportunities and better meet client demand," a spokesperson said. 

"Employees will have the opportunity to re-skill and compete for positions where roles are available."

As of December, IBM boasted having around 352,600 employees.

Updated 11 September 2020 at 11:58am AEST: Added comments from IBM Australia.

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