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Economics References Committee
Superannuation guarantee non-payment

CULLETON, Mr Andrew, Executive General Manager, Group People Services, Commonwealth Bank of Australia

STEWART, Ms Janine, Executive General Manager, Human Resources, Commonwealth Bank


CHAIR: Welcome. Thank you for appearing before us 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.

Mr Culleton : I am the executive general manager for group people services at Commonwealth Bank and I am leading the remediation stream for the part-time super guarantee payment issue, and I also have responsibility for our HR systems. I am joined today here by my colleague Janine Stewart, who is the executive general manager of human resources for the retail bank and who also has accountability for our group industrial relations portfolio. Thank you for the invitation to appear before the committee today. Being respectful of the time we have, I will make my opening comments short.

Our written submission to the inquiry addresses issues raised by the Finance Sector Union in relation to payment of superannuation on additional hours worked by our part-time employees. In essence, we implemented an interpretation of the 2009 SG ruling that viewed additional hours at the single-time rate as not ordinary time earnings, and that therefore these were not superable. This is a complex area. However, when the FSU brought this to our attention in January we reviewed our interpretation. With the benefit of hindsight, we realised our approach was wrong and that superannuation should be paid on additional single-time hours by our part-time colleagues. Our employees count on us to get this right for them, and we know we have let some of them down. For this we are sorry. We are here today to take responsibility for fixing this issue and to discuss what we are doing to put things right.

Briefly, we have commenced a thorough review of all part-time employees and the hours they worked going back 1 July 2009. We will make changes to our system to ensure this problem is fixed into the future. We will improve the onscreen information available to our people when submitting additional hours. This will give transparency around what is superable and what is not. We will communicate broadly, using multiple channels, as we recognise that both current and former employees have been impacted by this. Our legal services team have also commissioned Deloitte to conduct a comprehensive review to identify any potential areas of noncompliance. Where we identify unpaid superannuation, we will reimburse this with interest and make other adjustments, for example, to leave entitlements as soon as we can.

The Commonwealth Bank is committed to taking the right approach for our people, and we again thank the FSU for bringing this matter to our attention. We are happy to answer any questions the committee may have.

CHAIR: Thank you, Mr Culleton. In your submission you talk about the fact that you received advice to assist you to implement the SGR 2009/2 ruling. Can you tell us where you received that advice from?

Mr Culleton : Certainly. That advice we sought from internal legal counsel.

CHAIR: Did you receive any advice from the ATO at all, in addition?

Mr Culleton : I do not believe so.

CHAIR: Have you got a view as to how much superannuation has been underpaid to current or former employees? Just a ballpark figure.

Mr Culleton : We are working through that now. We are reviewing over 200 fortnights of pay for every part-time employee from 1 July 2009. That is a significant piece of work. To give you an idea of context, that is 18 million payment elements we are going through. At this point in time we do not have a view. What we have got a view on, though, is when the FSU kindly gave us some examples in January around specific employees we did a deep analysis on those impacted employees and what we found was in the years that they did additional hours—obviously not everyone does additional hours every one of those eight years—it was about $180 per year.

CHAIR: Okay. You have said that you are not comfortable with the view that you took in 2009 about the interpretation of ordinary time earnings. Is that the same as saying that you now believe that your original decision was not in conformity with SGR 2009/2?

Mr Culleton : No. What we are saying is that, in 2009 with the new ruling coming into effect, we recognised that it was complex and we sought internal legal advice to provide clarity around the treatment—and I will be specific—of additional hours worked at single-time rate for part-time employees. That particular area I think everyone would agree is quite complex. It is open to interpretation. The approach we took in 2009 was that we did not view it as superable. Then obviously in the last eight years—context I think is important—we have had the FSU approach us three times, from what I have reviewed. The first time was in 2009, where a specific employee example came to us. We looked into that and we relied on the advice from 2009. The second time was in 2013. Again, a specific employee example was provided to us. We reviewed that and again relied on the initial advice. Then, I understand, in the 2013-14 EBA conversation both parties spoke about it but they agreed to disagree. The FSU brought this issue to us broadly earlier this year, in January. We immediately asked them for an example. They provided one example. We looked into that. Unfortunately for that employee, they had not done any additional hours in the previous year, so we actually went back and said, 'Can we have some more examples?' The FSU kindly provided five additional employees, of which we then did a review. Always with the benefit of hindsight, we looked at those specific examples. We looked at the work schedules. We looked at the hours they worked in addition. And we realised that we should have been paying superannuation on single-time earnings.

CHAIR: So you say that this issue has come up in one forum or another over the past four or so years. What has changed now to lead you to a different interpretation?

Mr Culleton : From what I have reviewed, it has come up three times in eight years.

CHAIR: Okay.

Mr Culleton : What has really changed is that when we—and Janine and I were both involved in this decision—looked at it with fresh eyes in January, and you look at the examples, it was certainly not the right outcome for our people. It was as simple as that. So we were absolutely committed to actually fixing this issue. Additional hours worked as single time should be paid superannuation, and we are doing a fairly significant piece of work to address it so it does not happen again, but also to fix the issue.

CHAIR: So, from what you have said then, if the FSU had not raised the issue with you, you would be continuing to apply the same approach?

Mr Culleton : As I said in the opening statement, we are very thankful that the FSU raised this with us in January.

CHAIR: This issue highlights the fact that there may be some difficulties around interpretation of the concept of ordinary time earnings. You have said it is very complex. Would you agree with that, or do you have any recommendations as to how we might reform the definition to make it more easy to comply with?

Mr Culleton : We would certainly support a general move to simplicity here. I think what we recognised in 2009 was that this is a complex area. I would argue it is complex now. I would argue it is open to interpretation. We, with the benefit of hindsight, made the wrong call in 2009. Our decision today is different. So I would certainly welcome simplicity in relation to the definition of additional hours worked as they relate to ordinary time earnings.

CHAIR: One way to make it more simple is to extend ordinary time earnings to all salaries and wages. Do you have a view about that?

Mr Culleton : I do not have a particular view on that. I am happy to take that on notice.

CHAIR: I would appreciate that, if you could. I understand that there are some people—I am trying to understand who was affected by this decision. You have said in your submission that there are 7,000 part-timers. Were all those 7,000 part-timers directly impacted by this interpretation? Perhaps I should ask: how many of those 7,000 are covered by the individual flexibility agreement provisions?

Mr Culleton : I will answer your question in two parts and I might ask Janine to answer the second part. In relation to your first question: no, not all of those 7,000 employees, part-time colleagues, will be impacted by this. What I can tell you is that—and again we are working through the analysis right now—any given payroll fortnight, for example we have 5.6 per cent of our part-time employees doing additional hours worked in any given fortnight. When we broaden that out to all part-timers, that percentage is 7.9 per cent per fortnight. Again, that would not lead you to conclude that every one of our part-timers is doing additional hours. The average additional hours effort each week is about 45 minutes. But I might ask Janine to comment on the second part of your question.

CHAIR: Before you do, I think the FSU made a comment that there were some extreme cases where people might work an additional third of their hours. I am not sure how common that was. Do you have a view as to what was the upper range of the number of hours people were working in addition to their contracted hours?

Ms Stewart : I am happy to take that, Chair. On average, our part-time workers work about 23 hours per week. There is, on average, another 45 minutes for those people who work additional hours, which, as Andrew said, is about 5.6 per cent of the part-time branch employees who work additional hours. We compensate for all additional hours for our part-time employees. There are three ways that we do that. One is through single-time hours, which attracts super, which is the issue that we are here to talk about today. Secondly, there is overtime. Thirdly, it is time off in lieu.

CHAIR: Okay. So, if an employee receives time off in lieu for working additional hours, does that attract superannuation?

Ms Stewart : Yes, it does.

CHAIR: But in the case of overtime that would not attract—

Ms Stewart : That is correct. It does not attract.

CHAIR: From what the FSU said, the IFA—which does come into play to some extent on the issue of overtime and that does impact on the SG aspect—indicated that people work such hours as are 'reasonably necessary'. In practice, that means that certainly some employees are working an additional two hours as a matter of course, up to 40 hours in a week. Would that be the same with the part-timers?

Mr Culleton : I might ask Janine to answer your question shortly, but I would make one broad comment, which is: this particular issue around superannuation additional hours worked is not an IA and EA issue. It is actually a superannuation on additional hours worked. So there is no differentiation between the two. That would be a broad comment I would make. Janine, did you want to—

CHAIR: As I mentioned, the IFA does define what is overtime and what is not overtime. Overtime is not covered by the superannuation provisions.

Mr Culleton : That is right.

Ms Stewart : That is correct. The reality is that we treat our IFAs and EA employees the same in relation to overtime. So that applies for a part-time employee for more than 10 hours in a day or more than the rostered hours in a day or outside the span of ordinary hours. What I would like to—

CHAIR: Sorry, can I just ask—

Ms Stewart : Yes.

CHAIR: So long as somebody is working within the span of ordinary working hours during the course of a week, that could see people working more than 40 hours in a week without the payment of overtime?

Ms Stewart : No. That would be a full-time employee not a part-time employee. Our part-time employees—we do not roster anyone above 38 hours for our part-time employees.

CHAIR: Okay. I think you were going to answer the second part of my question.

Ms Stewart : You would like to talk about IFAs?


Ms Stewart : So, broadly, as you are aware, the Fair Work Act requires an IFA mechanism to be available in all EAs.

Since 2010, we have negotiated five EAs with the FSU, and that has included this IFA provision. IFAs give flexibility to our employees and to their managers about terms and conditions. Employees have a choice about IFAs. They have a very strong preference for them and have voted overwhelmingly in favour of them. Our IFAs have been approved by the independent umpire, the Fair Work Commission, as recently as September 2016, with a 97 per cent positive vote by our employees. As Andrew said, the current superannuation issue is not an IFA or an EA issue; it is an issue that impacts our part-time employees equally.

CHAIR: How far have you progressed in reviewing the underpayments of your employees since 2 March? Where are you up to with that?

Mr Culleton : We are in the middle of the analysis. We are doing a full diagnostic, as I mentioned before, of all part-time employees and all additional hours worked for 200 payroll fortnights. We are at the beginning of that exercise, so we are expecting that to be done within about six weeks. Following that, we will then obviously start the remediation. As you can appreciate, this is a complex issue in that it actually affects other items as well—annual leave, long service leave, carer's leave and pay allowances. It affects a number of things. We are actually going through and making sure we remediate everything. And, of course, one of the things that we are really focused on is how to avoid these issues in the future. We are doing a full system-wide review where we are looking at all the configuration elements in our systems. It is important to point out that, in 2009, this was an interpretation that led us to configure our systems accordingly. We configured all our controls accordingly. In relation to any given fortnight, we have over 70 controls that we run on our payroll, but, obviously, based off the interpretation we took, the controls and the systems were operating effectively. What we are doing now is a full system-wide review to make sure that we pick up and address any of these things that, with the benefit of hindsight, you would want to change.

CHAIR: You have thanked the FSU for bringing the matter to your attention. Will you continue to work with them to assist with the review of current and former employees?

Mr Culleton : We have a fantastic relationship with the FSU. We would absolutely welcome their partnership, and we will make sure we provide updates and work with them on the outcomes of what we find.

CHAIR: So, if any employees appoint the FSU to act on their behalf to assist them with the review, you will not have any difficulties with that?

Ms Stewart : None whatsoever.

Senator HUME: Does the issue of remediation and reimbursement with interest include former employees?

Mr Culleton : It does.

Senator HUME: It does?

Mr Culleton : Absolutely.

Senator HUME: Excellent. You said that the IFAs are negotiated in conjunction with the FSU. So the FSU knew that the IFAs existed in their current form for part-time employees as well as for full-time employees?

Ms Stewart : That is correct, yes.

Senator HUME: They knew the terms of those contracts?

Ms Stewart : Yes, that is correct.

Senator HUME: It is really just the unhappy by-product of those contracts that is the issue now? It was an unintentional by-product of those IFAs—is that correct?

Ms Stewart : Actually, our employees are very positive about them.

Senator HUME: Generally.

Ms Stewart : Yes, generally. A large majority of our employees elect an IFA by choice. It buys out a number of conditions, but, in return, of course, it provides a higher salary.

Senator HUME: You said that the decision today is very different and that the conversation about superannuation has moved on an awful lot since 2009. I think that is fair and reasonable. But do you have a sense of how widespread similar contractual arrangements are both within the industry—within the banking industry or the financial services industry broadly—and beyond that?

Mr Culleton : I can only comment on what I have seen from our review so far—and, again, we are in the middle of it now. We have not yet identified any similar issues that we think are along these lines. I could not comment on the industry, but, certainly, from our review, albeit we are in the middle of it, we have not identified anything else. But that is kind of what we are looking for.

CHAIR: Given that this is a disappointing chapter in the history of the Commonwealth Bank, are you prepared to give the committee and the FSU an update on how you progress with your review?

Mr Culleton : Absolutely. We are happy to work with the committee and the FSU.

CHAIR: Which would involve total payments made to current and former employees once the review is complete—is that something you would be prepared to provide?

Mr Culleton : Can I take that request on notice.

CHAIR: Yes. I wondered if you were here when there was a discussion, and an example provided by the FSU, about the gender pay differential. They provided two examples of a male employee and a female employee with different outcomes. There was probably about a $10,000 difference in the employment arrangements made at the same time. Do you have a comment about that? It would be helpful if you could look at that for us, to see whether there are any other extenuating circumstances.

Mr Culleton : Janine and I are members of the HR leadership team, so our job is to safeguard the entitlements and interests of our employees. It is always very disappointing to hear examples like we heard. We will absolutely take away those specific examples and look into them. From our perspective, though, we have achieved gender based pay parity on a like-for-like basis, so I would be really interested in making sure we come back and address those specific examples, if they are raised with us. We are absolutely committed to doing that.

CHAIR: What are the metrics that you are using to make the conclusion that you have reached parity?

Mr Culleton : Simply, it is on a like-for-like role. There is no difference in base remuneration for a male or a female employee.

CHAIR: We have heard an example of where that is not the case.

Mr Culleton : We are happy to look into that and to take it away.

CHAIR: Are there any safeguards in your systems to ensure that this commitment to removing the gender pay gap is met, particularly in relation to the individual arrangements that you have? How do you ensure that you meet that commitment?

Mr Culleton : Our systems capture the individual arrangements for every single employee, which allows us to do the analysis and to determine the fact that we are on gender based pay parity. We do have the information in our systems to do that work.

CHAIR: I cannot recall the exact classification that the FSU used. It was something like a customer—whatever that base classification in customer something—

Ms Stewart : Yes—

CHAIR: Whatever that is. That was a fairly clear example of two comparable employees on a similar classification getting a starting offer of a different base rate.

Ms Stewart : We are happy to take any case examples and look further into them, because, as Andrew said, we are very proud of our approach to workplace gender equity. We are very proud of many of the aspects that we do for our women. We are very disappointed this has happened to eight of our part-time employees who are women that are impacted by this.

We do lots of things that are very positive around gender. We do paid superannuation up to 40 weeks of unpaid parental leave for six months after our employees return to work. There are lots of things that we do to really help support our female employees. That has been recognised by CBA being the Workplace Gender Equality Agency's employer of the year for the third year running. We are very happy to take all those case studies on board. I think there are some complexities when we do market mapping. That case study was not necessarily straightforward. As it appeared, there are some complexities around different tiers of our branches, but once again we are very open to looking at every case.

CHAIR: I think you are proud of the fact that you offer market rates—

Ms Stewart : Yes.

CHAIR: I think you acknowledged that you do not stick to minimum rates. You try to be competitive—

Ms Stewart : That is correct.

CHAIR: so that adds an extra sort of danger that there could be gender discrepancies arising.

Ms Stewart : We are committed to making sure that we have parity for like-for-like roles. Once again, we are happy to look at it in the future if necessary.

CHAIR: Thank you for taking some of those questions on notice. I foreshadow I might have a couple more to put on notice, if you do not mind, so we will provide those to you in due course.

Ms Stewart : Thank you.