Underpayment Issues Hit Another National Company.

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HHG Legal Group’s Murray Thornhill from the Dispute Resolution team discusses the consequences of underpaying employees.

What are the risks and consequences of underpaying employees in Australia?

This article explains how employers can unintentionally underpay staff by failing to correctly apply Awards, enterprise agreements, and other workplace instruments. It highlights the importance of properly classifying employees, maintaining accurate payroll records, and ensuring all entitlements are paid correctly. Businesses that get it wrong may face significant penalties, back-pay obligations, superannuation liabilities, and infringement notices for record-keeping breaches.

Another large company has hit the news today for issues related to underpayment of staff and this time it is in relation to managerial staff, who are commonly misunderstood to not fall into Awards or enterprise agreements. Woolworths has self-reported underpayments amounting to approximately $300million to certain of its salaried managerial staff, who are covered by the General Retail Industry Award.

HHG Legal Group’s Employment Law team is seeing more and more cases of businesses, small or large, getting caught out by the interaction between the Fair Work Act, relevant Awards and the enterprise agreements. 

So what can you do to avoid falling into this trap?

Remember that the Fair Work Act and the minimum wages that apply to all employees are likely not the “minimum wage” entitlement for each of your employees.

Make sure you consider each employee or category of employee carefully and determine whether they are covered by an Award, an enterprise agreement, an individual flexibility arrangement, and/or an employment agreement (verbal or written). This can be a complex assessment, so consider getting legal advice at an early stage.

Once you have assessed the appropriate industrial instrument, carefully review the relevant pay rates and other entitlements, such as overtime and weekend pay, casual loading, and allowances.

Keep good records of all payments made to all employees and ensure payslips are provided to employees immediately after each payment is made. In addition, from March 2020, many Awards will include the requirement that all hours worked are recorded and employees are provided with a reconciliation of hours worked and payments made.

Consequences of not getting it right.

The maximum penalties for breaches of the Award or the Fair Work Act related to underpayment of employees are $63,000 for companies and $12,600 for individuals. You will likely also be ordered to repay any underpaid amounts, including superannuation contributions. You can also be issued with infringements notices for failing to provide payslips or other record-keeping breaches. These are on-the-spot fines issued by FWO inspectors and can be a maximum of $1,260 per contravention for an individual or $6,300 per contravention for a company.

So what are your first steps as an employer?

Once you’re sure you’ve correctly classified your employees, and have set up appropriate employment contracts and payroll processes, it is also important to ensure that you maintain ongoing records of payments made and that employees are provided with payslips reflecting those amounts.

How HHG Legal Group can assist.

For more detailed information on this issue, we wrote an article a few months ago outlining the changes from 1 July this year which may shed further light on this ever-increasing trend across Australia. However, if you require any advice or assistance regarding your obligations and rights please contact Murray Thornhill on 1800 609 945.

 

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* The information provided in this website serves as a general guide and does not constitute legal advice. It is based on our research and experience at the time of publication. Please consult our knowledgeable legal team for any specific inquiries or advice relevant to your circumstances, as the content may not have been updated subsequently.