Underpayment of Employee Wages and Entitlements – Is Your Business at Risk?

How to Identify Issues of Underpayment of Employee Wages

Underpayment Of Employee Wages Graphic (1) $100 notes

Australia’s employment legislation is extensive, broad and can be incredibly complex. And, if you don’t have a thorough understanding of your obligations to your employees, then the likely answer to our title question is YES…you are at risk of underpayment of employee wages!

The underpayment of employee wages, or what the media has cleverly coined ‘Wage Theft’ can occur in any business. Recent media publications have shone a light on this issue, highlighting that every business, no matter the industry or business size, is at risk if wage obligations are not met.

Sample Case:

George Calombaris is a very familiar name on this topic. It could even be argued that the popular MasterChef judge and celebrity is now just as renowned for his Wage Theft faux pas as he is for his culinary skills! The saga with his hospitality empire, MaDe Establishment, commenced after a former employee contacted the Fair Work Ombudsman (FWO) back in 2015. What followed was an extensive audit, a self-disclosure of underpayment by George, further FWO investigations and even more underpayments revealed, before the true extent of the theft was publicly revealed in July of this year…The underpayment of 515 staff a total of $7.8 million over a six-year period!

The repercussions of this theft were extremely damaging for George. He was (and still is) battling against a significant amount of negative publicity, he was ordered to make back-payments and had to pay huge penalties.

So where exactly did George go wrong?

In this case, the FWO found that the majority of the wages’ underpayment was caused by:

  1. the failure to correctly apply annualised salary arrangements to employees covered by a modern award; and
  2. further failure to conduct annual audits to ensure workers under annualised salary arrangements were being appropriately compensated for the overtime and penalty rate hours worked.

There were also cases of workers not being paid according to their correct award classifications and corresponding pay grade.

Could this apply to you?

In reading this case, you may be thinking a few things, like…what is a modern award? Do I have employees who may be covered under a modern award and am I paying them in accordance with these conditions? What is an award classification? Or, what on earth is an annualised salary arrangement?

We are the first ones to admit that Australia’s industrial relations system can be difficult to navigate, especially without the help of HR professionals. So, recently our Allan Hall HR team facilitated a seminar to assist our clients in identifying whether they are meeting minimum wage obligations, or if they are at risk of underpayment of wages and subsequent penalties.

The biggest takeaway from the seminar was for employers to understand the key instruments their employees may be covered by.

Key instruments such as; National Employment Standards, the National Minimum Wage Order, Enterprise Bargaining and Collective Agreements, Modern Awards, Individual Flexibility Agreements or Employment Contracts (to name a few!) can have the ability to dictate what, when and how much an employee is paid.

Businesses who do not understand what industrial instrument covers their employees, or businesses without proper processes and systems in place, can often be unintentionally underpaying their staff, as rates of pay can vary greatly and are dependent on a number of factors.

What you can do to mitigate risk

If reading this blog has provoked any questions for you in respect to how you are paying employees within your own business, then we recommend you take steps to ensure that you are paying your employees correctly and reduce the risk of any potential mistakes.

We encourage you to complete our HR Health Check questionnaire. Our 1-minute HR Health Check is designed to identify your compliance and business risk in relation to a number of key HR legislative compliance activities. To complete the questionnaire, please click the button below, and following submission we will provide you with a confidential report.

Complete our 1-minute HR Health Check Questionnaire

If you have any immediate questions regarding payment of your employees or any other HR matter, or are seeking support with a partial or full wage audit for your team, please feel free to get in touch with our experienced HR Consultants today on (02) 8978 3752 or [email protected]

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