BHP wages hit: Miner may have uncovered a new wages time bomb
The miner has severely damaged calls for restraint around workplace rule changes and pay rises.
BHP’s massive $430m decades-long wages stuff-up couldn’t be worse timed.
The revelation comes on the eve of one of the most closely-watched minimum wages cases in recent years with business and the Reserve Bank calling for restraint in workers’ pay rises to prevent another damaging breakout of inflation.
Those calls have been significantly weakened and will only add to suspicion among unions that workers haven’t been getting a fair deal from bosses for a long time. Already mining unions have slammed the move as “wages theft”. It follows the first round where Australian companies have collectively paid hundreds of millions, if not billions, in historical wage underpayments.
It also blunts BHP’s charge against the Albanese government’s planned changes around labour hire companies. Just last week BHP warned the proposed “same job, same pay” laws will cost it up to $1.3bn annually.
The bigger issue with the BHP pay mess is that the miner may have just stumbled on a bigger problem that could be lurking in the background for all businesses with large complex workforces running a seven-days-a-week rostering cycle. The real world application from a recent Federal Court decision could be costly for many.
As BHP began reviewing historical wages problems inside its own vast Australian operations in recent months, it also started finding the same issue bubbling up for workers at the newly acquired copper miner OZ Minerals. BHP is continuing to review OZ’s payroll as well as its own, which could mean thousands of more staff impacted.
At the heart of the problems was the way that public holidays were treated following changes in 2010 designed to streamline workplace rules.
In BHP’s case employees rostered on a public holiday that elected to take the holiday had the day incorrectly deducted as annual leave. No one picked this up for 13 years and now the problem has ballooned to more than 28,500 current and former BHP workers. It’s a stunning situation that a company as well resourced as BHP didn’t find out about the fix earlier and allowed it to balloon to such a size.
The review has found the BHP workers have an average six leave days in total that need to be reimbursed. BHP also needs to reimburse superannuation and interest payments. But as other recent wage underpayments example show – such as at retailer Woolworths – the more they look the more they find.
Woolworths initially estimated it was facing a $200m-$300m bill for staff underpayments, but after launching a deeper review now faces in excess of $700m in historical payouts. BHP’s $430m number will most certainly move higher.
Holiday request
The issue was uncovered through a Full Federal Court decision in March that sought to clarify what a “request” to work on a public holiday must constitute. That case was brought by the Mining and Energy union against a captive BHP labour hire unit OS MCAP that had sought to secure penalty rates for around 85 mining workers in Queensland working a 12-hour shift on Christmas Day and Boxing Day. But the findings have a major implication that is still being worked through.
Here the court declared an employer must make a “request” of an employee in the form of a question, giving the employee a choice as to whether or not they will agree or decline to work on the public holiday.
The court held that simply rostering a worker to work on a public holiday is not a request from the employer, even when a public holiday may fall within the worker’s regular roster. It also found this position overrules any contracts in place or an enterprise agreement saying the employee may be required to work public holidays.
Hundreds of other big companies would be now reviewing where they stand on public holiday leave as well as the historical implications. Unless the ruling is reversed by the High Court or legislative intervention, employers would need to expressly “request” employees to work public holidays.
BHP’s recently appointed Australian boss Geraldine Slattery is now overseeing the remediation of botched leave payments and has launched an external review of payroll systems.
In a note to staff on Thursday she apologised saying the payroll stuff-up “is not good enough” and falls short of BHP’s standards.
The problem is it brings a bigger political headache for the Albanese government around wages, particularly if more companies come forward with similar public holiday losses. The RBA governor Philip Lowe has put on the record that interest rates may have to move higher if higher wages come about without improvements in productivity.
“We do need to pay attention to growth in unit labour costs … if we’re going to have two-and-a-half per cent inflation we cannot have unit labour costs persistently growing three-and-a-half or four per cent,” Lowe said in Canberra this week.
The benchmark for wage rises comes on Friday when the Fair Work Commission hands down its annual wage review.
AI’s rule book
Days after hundreds of US-based artificial intelligence researchers, engineers and tech executives warned of a threat to humanity from the fast-developing technology, the Australian government has released its own issues paper seeking to define the guardrails.
While Ed Husic’s Department of Industry stopped short of warning about the existential threat of the technology, it acknowledged AI and its variants will quickly go from developmental stage to day-to-day use in business. Indeed banks, retailers, healthcare and even miners are looking at how AI can be put to use in their business.
A position paper by the Industry Department says the new technology can bring about significant benefits but the speed of innovation in recent AI models are posing new and unknown risks. Threats from use of AI can cut across consumer, corporate, criminal, copyright, intellectual property and privacy laws. Financial regulators including ASIC are also mapping out legal and commercial implications.
There’s several layers of potential regulation – including general rules that seek to protect consumers and prevent criminal behaviour. Sector specific, that for example covers financial services or healthcare. And there’s self-regulation that potentially maps the broader ethical considerations of using AI.
It’s a balancing act, because at its most positive AI has the opportunity to significantly improve outcomes for customers and in areas of health research save lives. Fundamentally the application could be the spark to deliver a much-needed boost to productivity across the economy.
Since the launch of Microsoft-backed ChatGPT, tech executives in the US have called for greater regulation around AI, warning the technology has the potential to mislead, perpetuate racial and societal biases, as well as up-end the workplace. Australia has had a voluntary AI ethics framework in place for the past three years covering issues of fairness, privacy and transparency. However, where Canberra goes on AI is likely to be determined at a global level with the EU and US now working up regulation around AI.
Commonwealth Bank last week highlighted how it is using AI to help its frontline staff better answer complicated financial questions. Retailers too are already using it in their display and recommendation results.
CBA chief executive Matt Comyn last month was invited to attend an AI workshop at Microsoft’s headquarters in Redmond, Washington. His bank is thinking about the use of the technology at the highest levels, as it seeks to play a leadership role. However, he said AI also comes with risks and could “potentially be used against us”.
He too was shown the darker side of AI’s applications including the potential for generative AI to mimic voices or images representing a security risk for banks. There’s also the real potential for misinformation that has the potential to cause financial losses.
As AI is rolled out, one thing businesses and governments will need to improve on in the near term is transparency. Customers may not know they are using AI-enabled products or services, or that they have been affected by automated decision making. This means individuals can’t fully appreciate the potential risks or act to protect themselves. However, it can be mitigated by human oversight with clear lines of accountability.
johnstone@theaustralian.com.au
