Flight Centre accused of underpayment and toxic culture - HRM Online

Former and current employees have accused Flight Centre of having a corrupt, booze-filled culture and troubling pay practices. HRM talks to legal experts Trent Hancock and Athena Koelmeyer about the matter.

Travel company Flight Centre has been accused of encouraging staff to charge questionable mark-ups, and engaging in troubling pay practices. The workplace culture has also been labelled “alcohol-fuelled” and “cult-like”.

This information comes from ABC news who spoke to “dozens” of Flight Centre employees, both former and current. In their report, the company confirmed that it is currently under investigation by the Fair Work Ombudsman (FWO).

Low base pay and commissions

The report states that the current base wage for travel consultants is $33,500, around $4,000 below the minimum wage. This base is then supplemented by commissions made on the sale of flights, accommodation, and travel insurance and packages. Such a system seems designed to encourage employees to engage in whatever sales practices are available to them to make a living wage.

Former staff allege that in order to meet targets, they were told to apply mark-ups in a process the article calls “remarkably uncomplicated and ad-hoc”. Of the practice, former employee Renee Oloffson, says: “It definitely wasn’t hinted at. It was, ‘this is how we operate. This is how you make money. This is part of your job’.”

“You aim for a 10 per cent margin [on top of the cost of the flight]. I know consultants who aim for a 20 per cent margin,” said another, who chose not to be named.

On the practice of paying staff under the minimum wage and expecting commissions to make up the difference, principal lawyer at McDonald Murholme Trent Hancock says, “Unfortunately it is not uncommon in sales-based roles in particular industries. However, if the commissions are not guaranteed, and an employee ends up receiving less than the minimum wage as a result, these types of arrangements are usually unlawful.”

In the industries that do have commission-based arrangement, Hancock says there should be provisions in place to prevent underpayment. “In certain industries – such as real estate – ‘commission only’ arrangements, or those involving a repayable retainer, are regulated by a modern award. However, strict conditions are attached to these types of arrangements to ensure that employees are not at risk of receiving an unsustainable wage when sales are not made.”

Hancock says it’s also a risk to pay employees below the minimum wage, whatever the circumstance. “Employers should always ensure that their employees are receiving at least the minimum wage regardless of commission.”

Athena Koelmeyer, managing director at Workplace Law agrees that meeting the minimum wage is a must. “All employees in Australia are entitled to minimum wages, no matter what.”

“If you are working in an industry that doesn’t have commission provisions clearly set out in a modern Award or Enterprise Agreement, your expectation should be to receive at least the minimum hourly rate set out in the award for your classification for every hour you work. Plus superannuation on that amount where applicable.”

Of the allegations of underpayment, a Flight Centre spokesperson told the ABC: “Commissions motivate our front-line staff to give the customer the best experience possible to ensure they become loyal, repeat customers.”

Topping-up

According to the report about 30 per cent of Flight Centre employees failed to meet the minimum wage on a month-to-month basis. The company is said to have “topped-up” their pay so as to stay compliant. Depending on its exact nature, this practice is not legally sustainable.

“An employer cannot seek to systematically and retrospectively ‘top-up’ an employee’s wage,” says Hancock. “An employee has the right to be paid the minimum wage for the performance of their work in full and least monthly. Employers that have to ‘top-up’ wages after the fact are merely remedying a breach of the legislation that has already occurred.”

Flight Centre is said to have “clawed back” these top-up payments in subsequent commissions, though it says it abandoned this practice two years ago.

Perhaps aware of the risks it has been taking, Flight Centre is currently in the process of negotiating a new enterprise agreement with its employees where they are offering a new base wage for travel consultants that will exceed the minimum wage. The report says the company is attempting to offset that cost with a lower percentage on commissions.

Toxic, booze-fuelled culture

A party culture was said to have developed at Flight Centre, with an expectation to participate in “sexually charged” drinking session in bars and restaurants. “You are required to go to these staff nights, but I dreaded them,” says former employee Olivia Little.

Hancock says these hard partying, numbers-based businesses are bound to encounter problems. “A workplace culture that forces its employees to be too revenue focussed will always given rise to problems. Not only can it result in a drop in customer service, it can also put employee health and safety at risk.”

Koelmeyer similarly forecasts further legal woes: “The cheating of customers will be something I am sure the Australian Competition and Consumer Commission or the Australian Securities and Investments Commission will be interested in,” she says.

“Certainly the FWO is already looking at the underpayment question for the staff, including the unpaid overtime and their somewhat bizarre practice of ‘clawbacks’ where employees were required to pay back money to the employer.”

“We all know how cashback schemes are viewed by the FWO – you just have to look at the 7-11 example.”

Reference: ‘Flight Centre accused of underpayment and toxic culture’, HRM OnlineMonday 22nd August 2018.