How to avoid staff underpayments

When Woolworths announced it had underpaid 5700 supermarket workers more than $300m since 2010, it became the largest underpayment of employees on record.

A Senate inquiry has now been announced into the unlawful underpayment of employees’ remuneration with businesses expected to be more vigilant than ever.

Workplace Relations Director Ryan Martin on why staff underpayments are occurring.

 

The Fair Work Ombudsman was not alone in expressing shock that another large company had failed to ensure staff were receiving staff entitlements, with social media and union commentary running hot.

CCIWA’s Workplace Relations Director Ryan Martin said while the revelations were rightly not being tolerated, it does highlight that if large companies can’t get it right the laws are “certainly too complex for small and medium sized business”.

He points out that the Ombudsman has made it clear that it will not accept complexity as an excuse for years of failure, especially when businesses have the resources available including dedicated HR personnel, to address the system.

He said the Ombudsman has made it clear that even where a business self-reports, they will not be in the clear, stating that “admission is not absolution”.

Martin says ensuring payments are accurate gets more difficult when shift work and penalty rates are involved, even where businesses are using their own enterprise agreements.

“And in particular, if they’re trying to pay a flat rate or annualised salary, where they’ve done a calculation initially and over time, maybe a person’s role has changed, they might have shifted up in classifications through a change in qualifications or duties, or they might have started working additional shifts and the original calculation hasn’t been kept up to date,” he says.

“So over time, an individual’s circumstances change and if that gets overlooked without being audited regularly, it can create ongoing issues that once identified a business realises they’ve got to get back years to find out how big the problem actually is.”

Get advice

With hundreds of minimum wage rates under different awards and classification structures, Martin recommends businesses consult experts, such as CCIWA’s Workplace Relations team.

He says it is important to seek advice from someone who understands the industrial relations framework, which is not necessarily an accountant.

“You really need someone who understands those classifications and how awards work, particularly if they’re trying to pay flat rates. While it gives certainty and appears to simplify things because you are not needing to work out overtime and penalty rates each pay, you need to ensure the employee has been correctly classified under the correct award and is receiving an hourly rate or annualised salary that is high enough to satisfy any award entitlements that are being set-off.”

Audit annually

Martin recommends regular payroll audits.

“The minimum rates of pay go up on or after July 1 every year, so at least then it should be checked,” he says.

“Ideally more regularly and certainly the more employees you’ve got, the more important it is to do it more regularly so that small oversights don’t turn into big problems.

“A business should be making sure they are keeping accurate records and if conducting regular audits across their employees’ classifications, salaries and any flat rates of pay they will be able to rectify those quickly in the event they identify an accidental underpayment.”

Fix it fast

Martin says genuine errors happen and it is “very easy to get things wrong”, though it’s unlikely a business has deliberately gone out of its way to underpay employees.

“While it does happen, it’s quite rare,” he says.

“From my experience, it’s usually a genuine error. People don’t understand the framework and the best thing that they can do as soon as they realise is to contact a HR specialist or someone who understands the industrial relations framework to help them do a calculation, work out how big the problem is and back pay those employees as quickly as possible and go from there.”

Pay the penalty

The penalties for each contravention of the relevant award range from $12,600 for an individual per breach to up to $63,000 per breach for a company, with more significant penalties for knowingly breaching the laws, with a push by the Federal Government for the criminalisation of doing so.

“It is also important that businesses realise this is an issue that is not going to go away anytime soon,” Martin says.

“If they have not already, they need to put systems in place to ensure they are aware of the laws and are compliant with them or they will risk being caught up in the media as the next business underpaying their employees and being on the receiving end of significant penalties from the Fair Work Ombudsman”

►CCIWA’s employee relations team understand how and why underpayments occur. For advice, contact (08) 9365 7746 or visit cciwa.com.

Share This Post