Insurance Australia Group signs Enforceable Undertaking, as FWO urges boards to focus on corporate culture

5 April 2024

Insurance Australia Group Limited (IAG) entities have back-paid workers more than $21 million owed under federal workplace laws and signed an Enforceable Undertaking (EU) with the Fair Work Ombudsman.

IAG, Australia’s largest general insurer under brands including NRMA Insurance, RACV, CGU, SGIO, Swann Insurance, WFI and ROLLiN, self-reported non-compliance issues to the regulator in December 2020.

IAG identified the underpayments when it conducted an internal review.

The companies that have entered into the EU with the Fair Work Ombudsman are Insurance Australia Group Services Pty Limited and Insurance Manufacturers of Australia Pty Limited, which are both subsidiaries of IAG and employ more than 90 per cent of IAG’s workforce.

The underpayments were caused by basic shortcomings in the IAG entities’ processes, including not having time and attendance systems in place, resulting in them not paying employees for their actual hours of work.

The IAG entities also failed to perform reconciliations and top up payments necessary to ensure that the entitlements they were paying employees under their enterprise agreements were no less beneficial than employees’ minimum entitlements under the applicable Awards.

This resulted in employees’ basic lawful minimum entitlements being undercut and employees being left worse off for many years. Employees were underpaid overtime, weekend, public holiday and shift-work entitlements, as well as minimum wages, leave entitlements and other allowances and entitlements.

Underpaid workers were located in every state and territory in Australia and were engaged in a range of positions. IT professionals, IT support workers, frontline claims staff and call centre staff were among the most frequently underpaid workers.

Underpaid workers also included administration, customer service and sales staff, as well as various consultants, assessors, underwriters, analysts, sales and mid-level managers.

IAG entities have back-paid more than 19,000 current and former employees more than $21 million in wages and entitlements that was owed under federal workplace laws between 2013 and 2023, plus several million dollars in interest and superannuation.

Overall, the average back-payment is just over $1,000, though 14 workers have been back-paid more than $200,000.

In addition, the IAG entities have back-paid workers a total of $16.2 million in long service leave entitlements that was owed under state and territory laws between 2013 and 2022. State and territory based long service leave entitlements are not part of the Fair Work Ombudsman’s jurisdiction but the payment formed part of IAG’s remediation program.

Fair Work Ombudsman Anna Booth said an EU was appropriate as IAG had commenced a major overhaul of its compliance and governance systems that would protect its workers, and executed a widespread remediation program that included rectifying significant underpayments going back to years beyond the six-year statute of limitations.

“IAG had substantial, long-running compliance breaches underpinned by flawed processes. Once identified however, IAG responded strongly and invested heavily to fix those problems, including through new measures to ensure all its workers are paid correctly in future,” Ms Booth said.

“IAG also cooperated fully with the Fair Work Ombudsman’s investigation, providing full disclosure of information about their approach to help us efficiently assess that their remediation and approach to compliance in future are robust.

“Their new measures include commissioning, at their own cost, an independent audit of the new time-and-attendance and payroll systems to check that they are fully complying with all aspects of workplace laws.

“I commend IAG for committing to amending its governance processes to ensure IAG’s Board of Directors has significantly better awareness of potential non-compliance issues.

“IAG have made the most significant commitment for Board oversight we’ve seen in any EU entered into with the FWO to date.”

Ms Booth said it was disappointing that large, well-resourced corporate employers were continuing to fail in their fundamental duty to meet the legal entitlements of their workers, and Boards must set the culture for compliance.

“Corporate compliance culture starts with the Board, including how it sets its risk appetite, performance measures and reporting. Many Boards need to do better, particularly with increased penalties and criminal offence provisions that commence in January 2025,” Ms Booth said.

“Every Director needs to ensure that the company they are responsible for has systems in place that prioritise compliance. By doing this they also reduce risks and costs for the business associated with non-compliance.

“Large corporate employers need to place a much higher priority on having systems and governance in place that ensure employees’ full lawful entitlements are paid, year-in, year-out.”

The EU requires the IAG entities to commission workplace relations training for managers, and the IAG businesses to publish notices about the EU and their contraventions on their intranets and websites.

IAG must also make a $650,000 contrition payment to the Commonwealth’s Consolidated Revenue Fund.

Employers and employees can visit or call the Fair Work Infoline on 13 13 94 for free advice and assistance. An interpreter service is available on 13 14 50.

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