IAG has back-paid staff more than $37 million following past underpayments and has published an apology on its website as part of an enforceable undertaking with the Fair Work Ombudsman.

The undertaking involves IAG’s two main employing entities, Insurance Australia Group Services and Insurance Manufacturers of Australia.

“As a result of the enforceable undertaking, the IAG entities commit to undertake a number of activities to ensure their ongoing compliance, such as conducting an independent audit,” the website notice says. 

“IAG expresses its sincerest regrets and apologises for these contraventions of Commonwealth workplace laws and the underpayment of current and former employee entitlements.”

The total paid to staff includes more than $21 million in wages and entitlements owed between 2013 and last year under federal laws, plus interest and superannuation, and $16.2 million in long service leave entitlements under state and territory rules for the period between 2013 and 2022. 

IAG will also make a $650,000 “contrition payment” to the Commonwealth Consolidated Revenue Fund. 

State and territory long service leave entitlements are not under the Fair Work Ombudsman’s jurisdiction, but the payment forms part of IAG’s remediation program. 

Fair Work Ombudsman Anna Booth says an enforceable undertaking is appropriate because IAG has started a major overhaul of systems and undertaken remediation that includes rectifying underpayments pre-dating the six-year statute of limitations.

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

The average back-payment under the federal laws is just over $1000, although 14 workers have been paid more than $200,000, the ombudsman says. 

IAG self-reported non-compliance issues to the regulator in December 2020 after conducting an internal review of payroll processes. It announced a provision in its 2021 financial results. 

The company says it found 6094 current employees and 14,117 former workers had been underpaid one or more entitlements, including certain overtime allowances and superannuation contributions. 

“A key cause of these issues was IAG’s payroll system, which required employees to submit their claims for entitlements manually, rather than having them automatically calculated by IAG’s payroll system,” it said. 

The insurer has introduced new controls and payroll processes and invested in a time and attendance system that will automatically calculate entitlements. The new system is due to be implemented by September. 

Ms Booth says IAG has made the most significant commitment on board oversight seen in any enforceable undertaking with the ombudsman. 

“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,” she said.