Introduction

1. The current national workplace relations system began to take effect for employers and employees with the commencement of the Fair Work Act 2009 (the Act) on 1 July 2009.¹ Key changes introduced at that time included a revised collective bargaining framework for enterprise agreements and strengthening of protection for employees against unfair dismissal. Subsequently, on 1 January 2010, a safety net for employees was established. This included the National Employment Standards and modern awards for industries and occupations. At this time certain states referred industrial relations powers to the Australian Government, resulting in the large majority of Australian employers and employees becoming subject to the Fair Work legislation.

2. Under the Act, a revised institutional framework for the administration of the workplace relations system was introduced, including two new agencies which commenced operations on 1 July 2009: the Office of the Fair Work Ombudsman (FWO) and Fair Work Australia (FWA).² The Fair Work Ombudsman is an independent statutory office created by the Act to promote harmonious, productive and cooperative workplace relations and ensure compliance with workplace laws. FWO consists of the Fair Work Ombudsman, his staff, and Fair Work Inspectors appointed under the Act by the Fair Work Ombudsman to exercise compliance powers. The broad coverage of the Act and the extentof change it introduced for the community highlight the importance of FWO’s workplace relations services, both in terms of the initial 1 The Act replaced the Workplace Relations Act 1996 which was amended in 2005 to introduce the former Government’s ‘WorkChoices’ workplace relations system. 2 FWA is the national workplace relations tribunal that makes decisions about the national minimum wage and can create and change modern awards. It deals with a range of workplace matters including unfair dismissal, right of entry and enterprise bargaining. FWA is also responsible for administering the provisions of the Fair Work (Registered Organisations) Act 2009 which deal with registration and accountability of unions and employer associations registered under that Act. 3 implementation and ongoing operation of the reformed workplace relations system. FWO is the focus of this audit.

Office of the Fair Work Ombudsman

3. The main functions of FWO under the Act are to: provide information and advice about the workplace relations system; educate people about their workplace rights and obligations; investigate suspected contraventions of workplace laws, awards and agreements; and litigate to enforce workplace laws and to deter people from not complying with their workplace responsibilities. The mechanisms FWO uses to perform these functions include:

• the Fair Work Ombudsman website, which provides self‐service tools and other resources;
• the Fair Work Infoline (FWO’s call centre);
• national and regional campaigns, which involve education and audit activity in selected industries and/or locations; and
• processes for resolving workplace complaints, including assisted voluntary resolution and investigations.

4. As part of its service delivery model, FWO also has contractual arrangements with relevant agencies in the New South Wales, Queensland and South Australian governments (state partner agencies). These agencies are contracted to complete an agreed number of education visits, audits and investigations into complaints in their state.³ To enable the delivery of these services, the Fair Work Ombudsman appoints certain state partner agency staff as Fair Work Inspectors, with the same powers as Fair Work Inspectors who are on the staff of the Fair Work Ombudsman.⁴ The current contractual arrangements with the three state partner agencies commenced on 1 January 2010 and are due to expire on 31 December 2012. In December 2012, FWO advised that two of the state partner agencies have agreed to extend their contracts through to June 2013.⁵

5. As at 30 June 2012, FWO had 827 employees, including 360 Fair Work Inspectors and 181 Fair Work Infoline staff (these figures are based on head‐count). There were an additional 183 state partner agency Fair Work Inspectors. Between 2010–11 and 2012–13, FWO’s departmental expenses are forecast to decline by 9 per cent to $137 million, and its average staffing level is forecast to decline by 13 per cent to 753 staff. FWO advised that its funding levels were determined based on an assumption that incidents of non‐compliance following the introduction of the Act would reduce as employers and employees gained a better understanding of their rights, responsibilities and obligations.⁶

6. Based on information in FWO’s annual reports, in the three years to end June 2012, the Fair Work Ombudsman website received nearly 14.1 million visits and over 2.4 million telephone calls to the Fair Work Infoline were answered. In addition, FWO reported finalising over 72 000 workplace complaints and approximately 16 700 audits of employers, recovering more than $91 million in unpaid wages and entitlements for approximately 51 000 employees.

Audit objective, criteria and scope

7. The audit objective was to assess the effectiveness of FWO’s administration of education and compliance services in relation to the 5 Fair Work Act 2009. The three high‐level audit criteria used to assess FWO performance against the objective were:

• education and compliance services are well‐designed and appropriately targeted;
• education and compliance services are effectively delivered; and
• the effectiveness of education and compliance services is monitored, evaluated and reported to stakeholders.

8. The scope of the audit included FWO’s administration of the Fair Work Ombudsman website, the Fair Work Infoline and national and regional campaigns, and its handling of workplace complaints received from employees. The audit considered FWO’s investigations manual, processes and data; but did not examine FWO’s use of coercive powers or the appropriateness of the outcomes of its investigations into workplace complaints.

Overall conclusion

9. To support the introduction of workplace relations reforms in 2009, the Office of the Fair Work Ombudsman (FWO) was established to educate employers, employees and contractors about the reformed workplace relations system, and to ensure compliance with new workplace laws. The changes in workplace relations were far-reaching, including additional protections for employees, new employment standards and awards, affecting the large majority of Australian employers and employees. Within this context, FWO seeks to optimise voluntary compliance with workplace legislation by providing information and education services, while taking enforcement actions to address identified non compliance where this is necessary.

10. The demand for FWO’s services has remained high⁷ following the introduction of the Fair Work Act 2009 (the Act)—for 2011–12, FWO reported nearly 6.6 million visits to the Fair Work Ombudsman website, over one million calls to the Fair Work Infoline and more than 26 000 workplace complaints.⁸ In the main, available feedback on FWO’s workplace relations services has been positive.⁹ A substantial increase in the use of the website, and the low level of requests for a review of the handling or outcome of a workplace complaint, provide other positive indications of service quality.¹⁰ Nonetheless, some key workplace relations services have not been consistently accessible or timely. For 2011–12, FWO reported that 24 per cent of calls to the Fair Work Infoline were abandoned, reflecting lengthy call wait times; and approximately 68 per cent¹¹ of workplace complaints were finalised within 90 days compared to a target of 80 per cent.¹²

11. FWO’s administration of education and compliance services in relation to the Act has generally been sound, with scope for the agency to improve its use of information and analysis to further inform service delivery strategies. FWO has delivered a good range of well developed services to support compliance with workplace laws. Appropriate training and guidance material underpin FWO’s program delivery, and the agency has established monitoring and reporting mechanisms.

12. Similar to some other Australian Government agencies, FWO has experienced reductions in its departmental budget since 2009–10, with a further reduction forecast for 2013–14. A strategic approach to the design and delivery of its program is crucial for FWO to effectively manage the ongoing demand for its services and best support compliance with workplace laws. Along these lines, FWO has strengthened the design and content of the Fair Work Ombudsman website to assist in meeting the information needs of clients without intervention. It also recently formalised mediation as another mechanism to resolve workplace complaints in a timely manner and developed and commenced implementing a diverse range of agency change projects.

13. However, FWO could improve its overall program planning and monitoring approaches by integrating risk management into these activities, and through systematic measurement of the effectiveness and efficiency of its work place relations services. Currently, FWO does not apply a structured risk management approach as part of its identification and response to key workplace relations issues for employers and employees, nor does it apply such an approach to its development and application of internal capabilities to meet the demand for its services. A strengthened approach to measuring effectiveness and efficiency would provide a stronger basis for FWO to assess the working of the reformed workplace relations system over time, and to make adjustments in service delivery strategies to improve their cost-effectiveness.

14. The ANAO made two recommendations which aim to assist FWO to strengthen its overall approach to service delivery in support of the reformed workplace relations system.

Key findings by chapter

Program governance arrangements (Chapter 2)

15. FWO’s Executive Committee provides the Fair Work Ombudsman with a collaborative forum to assist him to exercise his responsibilities, including oversight of the strategic direction of FWO’s program and monitoring program performance. The key matters considered by the committee in 2011–12 included reductions to FWO’s budget and staff numbers in the context of the continuing high level of demand for services. The Executive Committee also instigated 28 strategic projects aimed at assisting FWO to change its program support, design and delivery arrangements, and to achieve the Government’s vision of fair Australian workplaces.

16. FWO identified its strategic program delivery risks for the period 2009–2012. The identified risks included shortcomings in internal capabilities and inability to enforce the reformed workplace system. However, FWO’s risk mitigation strategies to identify and respond to any issues arising in the implementation of the major changes in the workplace relations system were underdeveloped. FWO also did not allocate risk management responsibilities, or update its risk register to take into account emerging risks as its budget situation changed. There would be benefit in FWO applying a structured approach to risk management as part of its strategy, planning and decision-making, including through regular assessment of difficulties being experienced by employers and employees in the application of workplace relations requirements. This would assist FWO to maintain and improve its capabilities to be able to effectively respond to the demand for its services. FWO faces challenges in improving the accessibility, timeliness and/or targeting of its Fair Work Infoline, audit and complaints handling services, and decisions that impact on these services should take into account an assessment of the associated risks.

17. As mentioned in paragraph 4, FWO has contractual arrangements with relevant government agencies in New South Wales, Queensland and South Australia. Fair Work Inspectors in these state partner agencies conduct education visits, audits and investigations into complaints. FWO has several mechanisms in place to oversee and support the delivery of these services. These include a Partnership Management Committee, mandatory training of the state partner agencies’ Fair Work Inspectors and quality assurance reviews. Despite these mechanisms, there have been some issues with the quality and timeliness of services delivered by the state partner agencies during the term of the contracts. In developing any future contracts with state partner agencies, FWO could seek to strengthen performance incentives.

Information and advice (Chapter 3)

18. The provision of accessible and useful information and advice is necessary for FWO to optimise voluntary compliance and meet client needs. In this respect, the Fair Work Ombudsman website is structured around key workplace relations topics, designed to provide easy navigation for a large number of clients. Further, FWO reported that out of over one million calls made to the Fair Work Infoline in 2011–12, approximately 67 per cent of the calls were answered by advisers and 9 per cent of callers chose to use the available self-service option. However, the remaining 24 per cent of calls were abandoned. The high abandonment rate of calls reflected lengthy wait times, which averaged nearly 10 minutes. FWO has planned a further reduction in the number of Fair Work Infoline advisers in 2012–13, and will need to maintain visibility over the impact of the reduction on call wait times and abandonment using informative performance measures.¹³

19. FWO’s website contains extensive and tailored content for employers and employees. The website includes several widely used self service tools, which provide detailed information on pay and conditions for different industries and types of employment. ANAO tested the accuracy of the most used pay calculator for 50 employment scenarios and found that in 43 cases the calculator provided the same hourly rate of pay, including any allowances, as the applicable award. In the remaining seven cases, the webpage recommended the user call the Fair Work Infoline due to the complexity of the calculations. The tailored information provided through the website also assists in responding to many enquiries made through the Fair Work Infoline.

Outreach initiatives (Chapter 4)

20. FWO’s national and regional campaigns involve education and audit activity in selected industries or locations. In 2011–12, FWO completed 26 campaigns, compared to a target of 20 campaigns. The selection of national campaigns has been well informed by analysis of complaints data and consultation involving relevant FWO staff and representatives of the state partner agencies. However, the basis for selecting regional campaigns was more variable, and in some cases the choice of industry was not supported by data analysis. For completed campaigns, FWO’s planning, monitoring and reporting has generally been sound.

21. The number of employer audits undertaken by FWO as part of campaigns has increased substantially in the past three financial years, and significantly exceeded FWO’s internal target for 2011–12.¹⁴ However, there has been variability in the number and type of audits undertaken at a state level relative to the size of the state and the number of workplace complaints received. For example, in 2011–12, 860 monetary audits¹⁵ were completed in Victoria, and in New South Wales, 71 monetary audits and 137 non-monetary audits were completed. A more coherent approach to targeting state level audits would base the number and type of audits undertaken on identified risks of non-compliance. Changes in the coverage of state level audits could also be considered as part of contract renegotiations with relevant state agencies.

Workplace complaints handling (Chapter 5)

22. FWO recently amended its arrangements for employees to lodge a workplace complaint, removing the option to lodge a complaint by email. This is likely to result in FWO receiving fewer complaints that are not within its remit. However, it also makes FWO’s complaints handling service less accessible for employees. As a consequence, it is important that FWO review the impact of the change in lodgement arrangements in the short term, and make any necessary adjustments to support accessibility. FWO receives around 100 workplace complaints per working day, which are allocated for resolution using a suitable range of methods based on the nature and complexity of the complaint. In particular, the use of assisted voluntary resolution, and more recently, formal mediation, for inquiring into and resolving less complex complaints has assisted FWO to deal with a large number of the more straightforward complaints in a timely manner. FWO has also pursued a range of other strategies to improve the timeliness of its complaints handling, which include an agency change project directed towards developing an early treatment model for workplace complaints. While in 2010–11 and 2011–12 FWO finalised action on less than 70 per cent of complaints in 90 days compared to a target rate of 80 per cent, the agency reported that timeliness improved in the first two months of 2012–13.

Performance monitoring and reporting (Chapter 6)

23. The objective of FWO’s single program is ‘to educate employers, employees, organisations and contractors about the workplace relations system and to ensure compliance with workplace laws’.¹⁶ The FWO KPIs in the Education, Employment and Workplace Relations Portfolio Budget Statements focus on activity in relation to its program deliverables, including aspects of timeliness and accessibility of services. However, the KPIs do not directly measure the effectiveness of FWO’s program in achieving its objective and contributing to FWO’s outcome. Although developing measures of effectiveness can be challenging, it is important that they are established for internal management and external accountability purposes, including gauging the impact of changes in delivery approaches over time. Along these lines, FWO should develop effectiveness measures and targets for underlying levels of non compliance with workplace laws¹⁷, and for stakeholder satisfaction with the quality of its information, advice and education (as identified through an annual client survey). Effectiveness measures would also contribute to the quality of external reporting to Parliament and stakeholders, and understanding about the ongoing operation of the reformed workplace relations system.

24. FWO’s executive and divisions use several key management reports to monitor the delivery of services. However, these reports generally do not include measures which reflect the relationship between number, type and cost of resource inputs, and workplace relations services delivered. The inclusion of efficiency measures in the reports would inform senior management about the impact of changes in the level of resources applied to particular service delivery activities.

Summary of agency response

25. The Office of the Fair Work Ombudsman provided the following summary response:

The Office of the Fair Work Ombudsman notes the ANAO’s comments concerning the sound administration of education and compliance services in relation to the Fair Work Act 2009 delivered by the Fair Work Ombudsman.

The report makes reference to a number of new and changed initiatives implemented by the Fair Work Ombudsman that have led to an ongoing improvement in the timeliness and quality of our service delivery. These initiatives are all aligned to improving governance of the Fair Work Ombudsman and delivery of outcomes for citizens in line with the recommendations made by the ANAO report.

The report makes two recommendations with which we substantially agree.

Footnotes

[1] The Act replaced the Workplace Relations Act 1996 which was amended in 2005 to introduce the former Government’s ‘WorkChoices’ workplace relations system.

[2] FWA is the national workplace relations tribunal that makes decisions about the national minimum wage and can create and change modern awards. It deals with a range of workplace matters including unfair dismissal, right of entry and enterprise bargaining. FWA is also responsible for administering the provisions of the Fair Work (Registered Organisations) Act 2009 which deal with registration and accountability of unions and employer associations registered under that Act.

[3] FWO has 26 offices across Australia, located in all capital cities and in 18 regional centres, with the state partner agencies offering the benefits of providing services through an additional 26 offices.

[4] FWO’s Fair Work Inspectors also undertake audit and investigation work in these states.

[5] The Queensland Government decided not to enter into another contract.

[6] FWO received approximately $20 million per annum in appropriations from 1 January 2010 to meet its extra obligations arising from the referral of industrial relations powers from New South Wales, Queensland, South Australia and Tasmania. This funding ceases on 30 June 2013. The 2012‑13 Education, Employment and Workplace Relations Portfolio Budget Statements indicates a further reduction of $19 million in FWO’s departmental expenses in 2013–14 related to the non-continuation of this funding. FWO advised in October 2012 that it is seeking additional ongoing funding of approximately $20 million per annum in order to maintain its current levels of service.

[7] One of the factors that has influenced the demand for FWO’s services is the transitional arrangements in place for modern awards. More than 4000 pre-modern awards are being transitioned into 122 modern awards. The transition to modern awards finishes at end June 2014.

[8] Statistics are sourced from FWO’s 2011–12 Annual Report. ANAO analysis of data in FWO’s investigations case management system calculated the same number of workplace complaints received.

[9] For example, out of 600 respondents to a client survey in late 2010 on the Fair Work Infoline and workplace complaints services, more than 70 per cent of the respondents were either ‘very satisfied’ or ‘satisfied’ with the level of service they received from the Fair Work Ombudsman.

[10] In 2011–12, the reported number of requests for a review of the handling or outcome of a workplace complaint was less than one per cent of the total number of complaints.

[11] ANAO analysis of data in FWO’s investigations case management system calculated the percentage of complaints finalised by FWO in 90 days to within one per cent of the number reported in FWO’s 2011–12 Annual Report.

[12] In the second half of 2011–12, FWO prioritised the resolution of ‘old’ complaints. Reducing the backlog of old complaints has assisted with the timeliness of complaints resolution in the early part of 2012–13. In July and August 2012, 78 per cent and 82 per cent respectively of complaints were finalised within 90 days.

[13] Changes to the monthly dashboard report presented to FWO’s Executive Committee during 2012 reduced the quality of information reported to the Committee about the performance of the Fair Work Infoline.

[14] Levels of non-compliance identified as part of the audits have remained relatively stable. For 6547 audits of employers in 2011–12, non-compliance with workplace legislation was identified for 35 per cent of the employers.

[15] Monetary audits consider the appropriateness of wages and penalty rates paid by employers, whereas non-monetary audits focus solely on recordkeeping requirements.

[16] Portfolio Budget Statements 2012–13, Budget Related Paper No.1.6, Education, Employment and Workplace Relations Portfolio, p. 256.

[17] This measure would require the use of a consistent measurement technique. For example, a random sample of audits each year, or a stratified random sample at an industry level.