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Economics References Committee
Superannuation guarantee non-payment

ANGRISANO, Ms Julia, National Secretary, Finance Sector Union of Australia

CLANCY, Ms Alicia, National Industrial Officer, Finance Sector Union of Australia

CHAIR: Welcome. Thank you for appearing before the committee today. I invite you to make a brief opening statement, should you wish to do so, and then we will open it up for questions.

Ms Angrisano : Thank you to the committee members for the opportunity to appear today. Since we wrote to you on Monday, 27 February regarding the Commonwealth Bank's practice of not paying the superannuation guarantee on additional ordinary hours of work for part-time employees, we can advise the committee that, on 2 March, the Commonwealth Bank wrote to the union and stated that the advice that they were relying upon in 2009 was that, while super was payable on ordinary hours worked, it was not payable on additional hours. However, they stated that, when the FSU raised this issue again most recently, they were not comfortable with the view that they had taken and that they were now agreeing with the position outlined by the union—that is, that superannuation should be paid on additional single-time hours worked by part-time employees. The CBA also advised that they have commenced a thorough review of additional hours worked and are reviewing their pay records of all current and former part-time employees for the past eight years to identify other instances of unpaid superannuation. Where unpaid super is identified, the CBA have stated that they will reimburse and make other adjustments to leave. The CBA's letter to us did not refer to the issue of interest. However, we note that the CBA's submission to this inquiry, dated 7 March, states that they will pay unpaid superannuation and interest.

By way of background, the Commonwealth Bank employs 7,000 part-time employees; an estimated 89 per cent of those are women. The majority of these workers are engaged in clerical graded work. The Finance Sector Union surveyed 155 CBA workers about their experience regarding this issue. The response included the following: they are typically low-paid workers, with 92 per cent earning less than $50,000 per annum; they are typically long-serving, loyal employees, with 37 per cent having more than 10 years of service with the bank; and they frequently work additional hours above those originally agreed with by the Commonwealth Bank.

The Commonwealth Bank part-time employees are covered by the Commonwealth Bank's enterprise agreement 2016. While hours of work are regulated by the EBA, most CBA workers have signed an individual flexibility arrangement, otherwise known as an IFA, that exempts them from the EBA hours of work clauses; rather, the IFA typically obliges the worker to work those hours required by the CBA from time to time. The IFA typically has an initial agreed number of hours and an initial two-week roster. The IFA, and the EBA where relevant, provides capacity for part-time employees to work additional hours above the contracted hours at ordinary rates of pay. The following is an extract from the hours of work clause, which we believe is common to all IFAs across the Commonwealth Bank:

You will work such hours as are reasonably necessary for the full and proper performance of your duties. We will inform you of the hours we need you to work from time to time and these may change with our business needs.

You acknowledge and agree that any hours you are required to work in excess of 38 hours per week … are reasonable so far as they are necessary for the full and proper performance of your duties. The base remuneration we pay you incorporates a component to compensate you for any additional hours you may work.

You may, from time to time, be required to work on a public holiday. Where this occurs we will provide you with a day in lieu at a time agreed with your manager.

On the issue of gender pay equity, we note with interest that the Commonwealth Bank's submission states that the principle of 'like pay for like work' is a commitment adopted by the Commonwealth Bank in its quest to address the gender pay gap and that the remuneration policy is to have pay structures that are 'transparent' and rewards people in a 'consistent, fair and equitable manner'. This certainly has not been the experience of our members across the Commonwealth Bank. Our experience of the way in which the IFAs operate across the CBA is that there is a high level of secrecy and little transparency around the pay outcomes for workers on such arrangements. The IFA itself states that 'the terms and conditions of your employment, including your remuneration arrangements, are strictly confidential. It is a condition of your employment that you do not discuss these matters with any person other than your legal representative or family members.'

In summing up, the Commonwealth Bank is a large, strong, profitable corporation that has been systemically underpaying superannuation to some of its lowest paid employees for years. Most of the employees in question are women. It is acknowledged that women have substantially lower superannuation balances than their male counterparts and therefore are more likely to have insufficient funds to sustain a comfortable lifestyle in retirement. The FSU is proud to have pursued this issue on behalf of our members and CBA workers as a matter of equity and justice in order to recover the amounts of unpaid superannuation and outstanding entitlements. The FSU is committed to working with the Commonwealth Bank throughout this process and in the representation of our members to ensure that their entitlements are paid in full. We are keen to assist the committee to ensure that this type of underpayment cannot happen again. Thank you.

CHAIR: Turning firstly to your submission, I note that in your opening statement you referred to the hours of work provision, which you believe is common to all the IFAs that Commonwealth Bank employees agree to. I have just noticed the second paragraph of that, which says that:

You acknowledge and agree that any hours you are required to work in excess of 38 hours per week (averaged over a six-month period) are reasonable so far as they are necessary for the full and proper performance of your duties.

Then it goes on to say that:

The base remuneration we pay you incorporates a component to compensate you for any additional hours you may work.

Does that mean that the concept of a 38-hour week for CBA employees is a thing of the past if they sign these IFAs?

Ms Clancy : Yes, that is our experience—that a large number of employees not only work in excess of a 38-hour week, but they are rostered for an additional two hours every week. That is deemed to be reasonable, so therefore they work a 40-hour week, week in week out.

CHAIR: So the additional remuneration is—presumably they receive something that compensates them for those additional hours of work.

Ms Clancy : Their base amount that is included in their flexibility arrangement includes a compensation, notably for any of those hours to be worked.

CHAIR: So it is a 40-hour week. Is it your view that 40 hours per week is regularly worked?

Ms Clancy : It is.

CHAIR: Could you take us through the structure of these IFAs, in particular for the part-time workers who were affected by the unpaid super.

Ms Angrisano : Sure. The Commonwealth bank uses the individual flexibility arrangements across their business to alter the terms of the enterprise agreement. These particular agreements remove the effect of clauses including the salaries clause, the hours of work clause, the shiftwork clause and allowances clauses, and these arrangements provide a higher rate of pay and potential access to a higher bonus in exchange for the removal of these clauses. These individual arrangements are largely templates and, for the most part, the only element that differs is the employee's salary, their super and their potential bonus arrangement, along with the initially agreed hours that they have been engaged to work.

Each individual arrangement details an employee's full-time equivalent salary for both full-time and part-time employees, with part-time employees receiving the pro rata amount. If I can pick up from my opening statement, the hours of work for the part-timers are included in the arrangement. They state:

You will work such hours as are reasonably necessary for the full and proper performance of your duties. We will inform you of the hours we need you to work from time to time and these may change with our business needs.

That certainly is the experience of part-time workers across the Commonwealth Bank, many of whom tell us that it is a fairly common occurrence that they would be asked to work additional hours to cover staff shortages or other business requirements. The acknowledgement on these arrangements is that they agree to these hours and they are required, as Alicia has just pointed out, in excess of 38 hours per week. The arrangements says: 'This is reasonable so far as they are necessary for the full and proper performance of your duties.'

On specifically a part-time provision, the IFAs typically have an annexure that are marked 'Hours of work' and that provides the fortnightly roster within the preamble of the contract. Based on the IFA, it is clear that Commonwealth Bank part-time employees can work ordinary hours of up to 38 hours per week and only those hours above 38 can be characterised as overtime, if I can put it that way, and those overtime hours do not attract any additional remuneration, as we pointed out. CBA does pay the single-time hourly rate for any hours above those specified in the annexure to the IFA, but does not pay the super guarantee on them, even though these hours are not overtime and they did not attract a loading or penalty payment. As I mentioned, our members often report that working additional ordinary hours above those initially specified is a frequent and common occurrence.

CHAIR: Based on what you said earlier, though, your experience is that two hours per week additional is deemed reasonable, and I presume part-timers are in the same boat—that they can work up to 40 hours without the payment of overtime. Is that your understanding?

Ms Clancy : The provision of a flexibility arrangement, because it removes the requirement of the enterprise agreement's hours-of-work clause, it does not give rise to any employee having access to overtime.

CHAIR: At all?

Ms Clancy : At all. If people do work on a Saturday, they may receive a notional loading, and that is just a lump sum. Those payments can be paid as policy and not an entitlement, so it is at the discretion of the business. They can pay some extra money to entice work on a weekend, but the provision of overtime as it is outlined in the enterprise agreement is removed by the signing of the individual arrangement.

CHAIR: What happens if somebody works six days a week on a regular basis? That would not attract overtime?

Ms Clancy : Not in the current arrangement.

CHAIR: That does not sound to me like it passes the pub test of what would be a reasonable approach. What about other banks—are they doing the same sort of thing?

Ms Angrisano : In terms of how they pay their part-time staff?

CHAIR: Yes, with the use of individual flexibility agreements?

Ms Angrisano : The Commonwealth Bank, in terms of the big four banks, is the biggest user of IFAs in that respect and, whilst the other banks may use them, they use them, I believe, in the way that was intended and that is to offer genuine flexibility. There is no other experience that we have where an employee uses them in the way that the Commonwealth Bank does, and that is in a template approach where they are all consistent, they are all the same. It is largely the annexure that changes hours and base pay.

CHAIR: It is your understanding that the Commonwealth Bank offers these individual flexibility arrangements at the point of engagement of the employee?

Ms Clancy : That is something that we have heard from members in the past. Our experience in the last six months or so is that there seems to be a change from the Commonwealth Bank in relation to how they approach that initial discussion with employees. It looks like people are provided an individual flexible arrangement, but are advised that they can choose the enterprise agreement as part of that process. I am happy to provide the committee with a bit more detail on that. Unfortunately I do not have it at hand. But, yes, definitely. The opening letter of offer provided to staff in their first engagement says, 'Thank you for asking. We would like to provide you with an individual flexibility arrangement.'

CHAIR: You have talked about the overall impacts of these arrangements on the workforce. Are you able to give us some specifics as to how it impacts on individuals amongst the part-timers concerned?

Ms Angrisano : Certainly. I think that the impact is varied. It really depends on each individual worker. I have some very brief case studies from the members that we have been speaking with over the last couple of months with regard to this issue. One member who currently works 21 hours a fortnight and receives $24 an hour has worked—she has advised us—so many additional hours over the last eight years without the superannuation that the lost super, in her calculations, is equivalent to a full year's worth of superannuation that is owed to her—this is over that eight-year period. We have spoken to another member who worked in a job-share arrangement where she worked two days a week and her partner picked up the additional three days. Her job-share partner was seconded to another branch and as a result our member picked up the additional three days and worked in a full-time capacity for a period of eight months. When she asked about the superannuation for the additional hours, she was advised that it was not paid and so those additional three days a week did not attract the superannuation payment. We know of another member who specifically put off her retirement because she was unable to afford it, despite having worked for the Commonwealth Bank for a period of over 15 years. She believes that the underpayment of superannuation was making a difference to her decision-making process about when she was going to retire. I have a few other extracts if it is helpful.

CHAIR: How would you quantify the levels of underpayment that we are talking about? Are we talking about hundreds of dollars or thousands of dollars for the individuals concerned?

Ms Clancy : I am going to answer that in little bit of detail. It differs. The idea is that depending on the individual's personal arrangement, they may have once done one shift and not been paid super. At the end of the day, you are paid $24 then you work an extra shift and that is four hours, so nine per cent of that might be about $10 in unpaid superannuation. On the flip side of that you might see people who work up to an extra third of their hours—an extra 169 hours in a year—who do not receive the superannuation contributions. It is a range from people who may have worked those additional hours once or twice to people who are chronically asked to work additional hours week in, week out to provide cover in retail branch environments . The flexibility of being able to dial people up and dial people down on those hours of work provides for that capacity. With the number of people involved, it is hard to even guess, to be perfectly honest, how big and deep this could be. Hopefully that answers your question.

CHAIR: You made comments in your opening statement, Ms Angrisano, about the fact that the Commonwealth Bank has said in their submission that they believe in the concept of 'like pay for like work' and that they are committed to removing the gender gap. How would you say their actions square up with those comments?

Ms Angrisano : I did note that in my opening statement because it was something that certainly pricked the attention of the union when we read that submission. It is something that we are very mindful of as the finance sector has the highest the gender pay gap at 30 per cent and, while there are many contributing factors that cause that, we believe that a significant factor is the individualised nature of the employment arrangements that are used across the industry where we have the discretionary component of pay.

I think in the case of CBA and their use of IFA's—our members tell us—it really is a secret individual system. Workers are warned against discussing their pay with their colleagues and their peers. So whilst the Commonwealth Bank has made that statement, we disagree with the notion of like pay for like work. We have examples of where that is not occurring. To assist the committee, I can share one with you that I was looking through for today. It was brought to my attention recently that we had a female member, a CBA worker, who was engaged as a Customer Banking Specialist in the branch network. She had 18 years' service and she was offered an IFA with a base remuneration of $55,000 and a short-term incentive potential of $5,500. Now, if we add that to her super then her potential remuneration is $65,725. She is working at a tier 2 branch, which is the second largest size across the Commonwealth Bank. They have three tiers; she is in the middle layer and that offer was made to her in late November 2016.

A male worker engaged in the very same region, where that offer was made to the female worker, was offered the same role but he had less experience—he had nine years' experience—and he was offered an IFA four days earlier—the timing was very close. The base remuneration he was offered was $61,000 and his short-term incentive potential was almost double at $9,150. When you add those to his super, his total base potential was $75,945. He in fact worked at a tier 3 branch.

That is a very stark comparison. We have a man and a woman doing the same work: she works in a high-level branch but she is offered $6000 less in her base salary and $3650 less in her bonus potential. When you add that up, the overall difference in pay between these two workers is just over $10,000. That does not seem like 'like pay for like work' to the union. When we have such disparity, these scenarios do not help the gender-pay gap get any smaller. This example demonstrates a significant concern for the union around economic insecurity in retirement. It is widely acknowledged that women in particular have substantially lower superannuation balances than their male counterparts and therefore are more likely to have insufficient funds to sustain a comfortable lifestyle in retirement. These sorts of individual arrangements and contracts do very little to close the gender-pay gap; in fact our view is that they make it worse.

CHAIR: Have you received any explanation or justification from the CBA as to that disparity in the rates of pay for the two employees who have mentioned?

Ms Angrisano : No, I have not raised that particular concern with the Commonwealth Bank. I only drew it out in the last couple of days to pick up on that point. I would be happy to do that and report back to the committee if their response is of assistance to the committee.

Senator HUME: How did the underpayment of these employees come to your attention?

Ms Angrisano : Our members advised us that they were noticing on their pay slips over a period of time that the additional hours worked were not attracting the superannuation component.

Senator HUME: To be clear: they are attracting salary but there are not attracting superannuation. Is that correct?

Ms Angrisano : That is correct.

Senator HUME: This particular IFA has been in place for eight years. Is that what you said?

Ms Clancy : The IFA system is the use of individual arrangements that the Commonwealth Bank used in the Fair Work era, post AWAs. The IFAs are a vehicle of the underpayment but not actually the problem of that underpayment. The underpayment comes to light in the 2009 tax ruling which talks about the difference between ordinary-time earnings and additional hours. The Commonwealth Bank chose a path at that time that said: 'We pay salary on these additional hours but these hours do not need to attract super because we record it differently on a pay slip.' If a Commonwealth Bank employee works additional hours their pay slip will say X worked 21 hours at $24 and got this salary; X worked an extra four hours additional and got this salary. But week on week their superannuation contribution stayed the same. The idea is that the additional hours were coded differently and therefore did not mean ordinary-time earnings and therefore did not attract superannuation. That is the justification we have received from the Commonwealth Bank as to their thinking behind it.

Senator HUME: Was that decision made in 2009?

Ms Clancy : Yes, the Tax Office ruling was in 2009.

Senator HUME: You have said that you are not entirely sure how many people this particular issue affects. Do you have any indication of how many people have signed up to these IFAs? Let's assume I started a new job tomorrow at the CBA part-time as a teller—they do not call them tellers anymore but you know what I mean—and signed an IFA, how many of those have there been since the situation arose?

There is an element of when you sign a contract, you read it and you understand what it is that you are signing up to, but I am interested to know how many of those people you think there might be.

Ms Clancy : If we say that 90 per cent of the CBA workforce have signed up to an individual arrangement, I would say that that would probably flow down to these tellers at about the same rate.

Senator HUME: You have suggested that, while other banks may be engaging in similar behaviour or similar contractual arrangements, CBA are the worst offenders. Is that what you have suggested?

Ms Angrisano : When it comes to the use of IFAs, the other big four banks certainly do not use them at the same rate and in the same way. We are aware of IFAs existing across the rest of the industry—for example, when a worker puts their hand up and says, 'I require a different arrangement because it gives me the flexibility that I am looking for.' Some of those do exist, but not in the way they are applied in the Commonwealth Bank.

Senator HUME: This raises a couple of issues, and some of those have been dealt with by other inquiries—for example, the Senate Standing Committee on Economics inquiry into the economic security of women in retirement that took place in 2015; and, very recently, an education and employment committee inquiry into the disclosure of employment arrangements, which was part of a private senator's bill. Those particular issues probably are not necessarily entirely within the terms of reference of this inquiry. If the terms of reference of this inquiry are about the non-payment of superannuation guarantee, other than through negotiation between a union and an employer, how do you think that this issue is addressed—the non-payment of appropriate superannuation guarantee? Is it entirely focused on the definition of ordinary time earnings?

Ms Clancy : I believe so. No employer should have been able to receive any advice that ordinary time earnings could be delivered in a way that was not superannuable. I think that is the key here. If there was advice that said that if it is coded a certain way you do not need to pay super on it, and that was advice in line with an interpretation of ordinary time earnings, the key problem here is in the definition of ordinary time earnings and whether or not that should be simpler so as to make sure that this does not occur again.

Senator HUME: You said that the CBA have since responded to the union's issues. Do you feel that the CBA's response is appropriate and adequate?

Ms Angrisano : We are pleased that the Commonwealth Bank provided that response to us on 2 March, and we believe that it does address the issue of underpayment of superannuation for part-time workers who engage in additional hours. We are also pleased that there is an acknowledgement that there is also an interest component that is to be paid. We want to keep working with the Commonwealth Bank to make sure that the process is open and transparent and that our members and their workers have an understanding of how those calculations will be made and the timing of those. There is more work to be done with the Commonwealth Bank but, as to the core issue, we are pleased with the acknowledgement by the Commonwealth Bank to rectify this problem.

Senator HUME: Stepping outside the terms of reference, it is interesting that you suggest that the Commonwealth Bank have made commitments to reducing the gender pay gap and yet this practice has persisted for some period of time. I know that there are other banks that have gone above and beyond to address issues of the gender pay gap. I am thinking of the ANZ as probably the best example there. From memory, they allocate additional superannuation to their female employees. Does that sound right?

Ms Angrisano : Yes; they did make a $500 additional payment for female employees, I think in 2014-15. I am not sure of the exact date. The gender pay gap is such a complex issue. As I mentioned, there is a whole raft of things that contribute to it. We certainly believe that, with individual contracts where you have a lot of discretion in the way in which people are paid and the bonus arrangement, it is a significant factor that we think needs to be addressed in really taking this issue seriously. We do not have the data that the Commonwealth Bank is relying upon when they say it is like pay for like work. We just have what our members tell us and to us there is still a huge gap between what a male and a female can earn for doing the same job.

Senator HUME: I have to say that it would have set off some alarm bells in my head if it had been me and I had read those lines in the contract which said what you are paid and that you are required to work additional hours. Perhaps it would not have immediately set off the alarm bells, but it would have when I realised that I was working at least an additional two hours per week, particularly if I were a part-time employee. Why do you think this has only come to light now?

Ms Clancy : It is definitely not an issue that has come to light now. We have continued to talk to the Commonwealth Bank over a number of years about the practice and how this actually works. It is a conversation that we wish to have with the Commonwealth Bank to work through the problems our members face. One of the big problems is that an employee can sign an individual flexibility arrangement on two occasions: one, when they first start employment and they are not particularly thinking about how many additional hours it might be and what it actually means and, two, when they are on an enterprise agreement and they move to an individual flexibility arrangement. On the enterprise agreement they would be unlikely to have worked a lot of additional hours because there is an overtime clause that is applicable to them. So they do not work the overtime; the people who do not get paid the overtime work the overtime. So they say: 'I'm not getting paid it anyway. I don't do it, so I may as well sign onto a contract with a bit more money to it.' That is kind of how people get led into an individual arrangement scenario as was explained to us by our members.

One problem is once they are in it is very hard to get out. The Commonwealth Bank, like a number of other banks, do not pay at their published minimum rates. They pay at a market level generally higher than the minimum rates. The enterprise agreement says that, if you get off one of these individual arrangements, you do not go back to a market rate base; you go back to the minimum rate in the enterprise agreement. For some workers that can be a $20,000 or $25,000 pay cut to not work these additional hours. So for some of our members they are damned if they do and damned if they don't unfortunately. Therefore, that is the complexity of the arrangement system for us.

Senator HUME: So the additional hours themselves are not necessarily the problem. The problem is the additional hours do not attract the superannuation guarantee; is that correct? From what you have just said the additional hours are in fact compensated; is that correct?

Ms Clancy : Yes, so the additional hours are salaried and for part-time employees they attract a salary. They are taxed. It is a salary payment. They just do not attract the superannuation guarantee component.

Senator HUME: Does the fact that the CBA have admitted liability now suggest that the problem is done and dusted, or do you think it is an ongoing issue?

Ms Clancy : In relation to the payment of superannuation for part-time workers who work additional hours, we are hopeful that, once the retrospective review is done to the satisfaction of members and a plan is put in place to move forward, that will be complete.

CHAIR: You said 'to the satisfaction of members'. How are you going to be involved in monitoring this exercise of reviewing the past payments of the part-time workers?

Ms Angrisano : Our members have specifically requested our assistance in representing them on that particular point and that will be something we want to raise with the Commonwealth Bank. As part of our ongoing commitment to wanting to resolve this in a very quick and efficient way for our members we believe there is a role for the union to represent those workers who believe that the calculation is inaccurate or they have other information that the Commonwealth Bank might not be aware of. There are a whole range of factors, as Alicia mentioned, that will come into play here as each individual's underpayment of super will need to be calculated. We certainly want a seat at that table so we can assist and represent our members who have been impacted by this issue.

CHAIR: Just for my clarification, in the absence of the individual flexibility agreement and, I presume, going back to the enterprise agreement, would the additional hours of work beyond the originally contracted hours be overtime?

Ms Clancy : No.

CHAIR: So it is not necessarily the IFA itself that is giving rise to this single-time payment phenomenon.

Ms Clancy : No. The IFA does not give rise to it; the IFA provides the context in which the hours of work are regulated for a majority of these people. I suppose that is the best way to clarify it. To Senator Hume's point, where IFAs come into play here is that, other than talking about an award or EBA, we need to talk about an IFA arrangement as the majority basis of the entitlement of people's hours of work and where overtime et cetera come in. The role of the superannuation payment applies to both EBA and IFA employees in the same way.

CHAIR: Thank you very much, Ms Angrisano and Ms Clancy, for appearing before us.