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The FWO Inquiry into Charity Collections and What It Means for You

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Background

On the 6th October last year, after a series of media reports on the Fundraising sector, the Fair Work Ombudsman (FWO) published a media release announcing that an Inquiry into charity collections was underway. Specifically, it was announced that the FWO would be scrutinising major Australian charity organisations and the specialist sales and marketing companies that these charities were outsourcing their fundraising to.

On behalf of our clients and the direct sales industry, immediately after learning of the announcement, Certica® reached out to the Fair Work Ombudsman, the Australian Chamber of Commerce and Industry (ACCI) and Senator Michaelia Cash’s office to understand the implications and practical operations of this Inquiry.

Of concern at the time was:

  • the inclusion of the National Union of Workers (NUW) in the media release; and
  • that no terms of reference had been announced to provide critical details about the Inquiry.

Following on from our repeated calls for a copy of the terms of reference and more information, ACCI were able to secure a stakeholders meeting with the relevant FWO Directors on behalf of their members. Certica® attended this stakeholder teleconference, alongside other industry groups.

The stakeholder meeting highlighted that there was not, nor will there be, a set terms of reference for the Inquiry. It appeared that the scope of the Inquiry had also shifted. Rather than the original seven (7) major charities that were to be scrutinised, the list had been reduced to just three (3). Furthermore, it seemed that the focus would be more on the sales and marketing companies involved in the supply chain, rather than the charities themselves.

The FWO confirmed that the Inquiry focus this calendar year would be on audits and information gathering. The FWO will be implementing a top-down, bottom-up approach, meaning that not only will they interview the charity and sales companies, but also the individual contractors and employees engaged in the industry.

The audits will focus on:

  • Supply chain: Who is involved and what money is flowing down?
  • Fair rates: Is there enough money flowing down to ensure fair rates are being received by the individuals? If there isn’t, where is the money being absorbed?
  • Bullying and harassment: What policies are in place and what practical steps are being implemented to ensure workplace harmony?
  • Award compliance: Are employees being paid correctly, including penalty rates, overtime and leave provisions?
  • Record keeping: Are companies keeping accurate and comprehensive employee records, including timesheets, break notices, leave notices, payslips, etc.?

To contract, or not to contract?

When assessing whether a worker is a contractor or an employee, the reality is that work relationships sit on a continuum. At one end is the employee defined by notions of dependence and subordination and at the other end is the truly entrepreneurial, autonomous independent contractor.

This, and not ideological bias, is the real difference between contractors and employees. Contractors are in business and take risks in order to make a profit (but sometimes incur a loss), while employees take no risk and receive steady, predictable remuneration.

Contractors choose to work under these arrangements because they want to run their own business and make money. Principals choose to engage them because it is the most cost effective way of achieving the business outcomes (and NOT for avoidance purposes).

The Charity Collections Industry

Face-to-face fundraising activities play a significant role within the fundraising sector. These activities provide the dual benefits of raising awareness and immediate cost effective donor acquisition.

The commercial reality is that donor acquisition is a sales activity. Individuals and marketing companies must be incentivised to grow a charity’s donor base. This means paying a fee for a result, rather than for the time spent on acquisition.

Experience shows that employing a salaried or casualised workforce of fundraisers is not a viable proposition for charities or marketing companies, as the workers are paid for their time regardless of the donor support they generate. The cost of donor acquisition increases beyond the level of viability.

For this reason, most charity collectors are offered work as independent contractors and are offered results based contracts. The objective is to incentivise individuals to acquire greater numbers of donors and increase their earnings potential.

All well in theory; however, we are aware of the reputation damage that can be done to a charity organisation should they, or their channel, engage in non-compliant contracting practices. Contractor engagement and compliance is a specialised field and Certica® is the recognised industry expert.

Contracting is legal, but it must be done compliantly. Doing so protects all parties from commercial and regulatory (Fair Work, ATO) risk.

This reality is not limited to contracting arrangements. All workplace relations models (contracting or employment) are subject to laws around fairness and responsibility. The question is which model is most appropriate for your business and your industry? For the fundraising sector, that has traditionally been the risk and reward model, afforded by contracting.

Whilst much conversation centres around sham contracting (whether valid or not), it would be remiss of any business to transition to an employment relationship without fully understanding the onus of responsibility placed on employers.

For example, in 2016, Mondial Fundraising Communications entered into an enforceable Undertaking with the Fair Work Ombudsman in relation to underpayment of employees. Not only did Mondial agree to repay almost $700K in underpaid wages (despite the underpayment being inadvertent), but also:

  • engage with employee union representatives;
  • calculate penalty rates outside of ordinary hours and weekends;
  • make repayments to workers, whether a deed of release was in place, or not;
  • donate $10,000 to a Legal Centre for the purposes of providing free legal advice to workers; and
  • to place a public notice in the Saturday edition of The Australian within 28 days of, but not prior to, the FWO publishing a Media Release on its website in respect of the Undertaking.

The enforceable actions taken above are significant and expose you to both reputational and financial risk. Regardless of engagement method – fairness and compliance are paramount.

What does this mean for you?

As a Certica® client, it means that your investment in compliance and your ongoing commitment to responsible contracting, holds you in good stead for the Inquiry process. You can have confidence that we are actively lobbying to protect the commercial viability of the industry and contracting in general.

In the stakeholder meeting, the FWO announced that it would look at what “reasonable steps” the sales and marketing companies had taken to ensure compliance and that would be taken into consideration during the audit process. It is clear that ignorance is not an excuse and belligerence would not be tolerated.

To that end, we will continue to offer our Certainty Star reports which analyse 4 key areas of your workplace:

  • Fair Rates: Are your contractor rates offering a fair opportunity to individuals?
  • Operational Integrity: Are you advertising, operating and communicating with integrity?
  • Statutory Compliance: Are you and your workforce meeting strict statutory compliance requirements?
  • Indicia of Contracting: Are you treating your contractors, as contractors?

If you haven’t undertaken a Certainty Star report in the last 3 months, please contact your Relationship Manager immediately to arrange a meeting.

Your partnership with Certica® ensures that you are, at all times, Contractor Ready™. This means that as legislation or case law shifts, we adapt our models and approach to ensure that you meet the new standards.

However, we only deal in fact. The fact is that contracting as form of workforce engagement is legal and no less legitimate than employment. Neither we, nor you, should ever feel pressured to kowtow to a shift in opinion, unless it is based in law or fact.

Certica® is a staunch opponent of sham contracting or the use of contracting to avoid Statutory obligations. Certica® will stand firm behind any decision met by the FWO, ATO or any other regulators, where they prosecute businesses engaged in illegitimate contracting or contraventions of the Fair Work Act in regard to employment.

In recent months, we have seen some charities who have insisted their supply chain engage only in employment relationships. Whilst the reasons for this are varied, overall it’s critical to remember that contracting arrangements provide great benefit to both parties and importantly are legal, where they are implemented responsibly.

So, what should you do?

  • Be proactive, not reactive to compliance;
  • Set up for success, know your obligations and meet them;
  • Partner with experts and make sure you’re receiving up-to-date advice;
  • Practice fairness, assess your supply chain and ensure enough is being offered to the individuals providing their services; and
  • If contacted by the FWO, contact Certica® as soon as possible.

Certica® will continue to provide you with updates on our interactions with regulators with regard to the Charity Collections Inquiry.

If you have any questions, please contact Stephanie Lewis via M: +61412 002 052 or E: stephanie@certica.com.au.

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