02. Risk

The unresolved epidemic of underpayments

While 2020 saw the Fair Work Ombudsman (FWO) signal some reprieve for COVID-hit businesses, the FWO continues to enter into Enforceable Undertakings. In the 12 months to June 2020, $123 million of back pay was returned to Australian workers. So, what are some businesses doing wrong?

The causes of non-compliance range from compensating employee overtime through gift vouchers, failure to provide a 12-hour break between shifts, and paying salaried employees below the award equivalent. Regulator activity will continue in 2021 as businesses return to work and JobKeeper winds up. Employers will need to consider the following to manage underpayment risk:

Classifications: Businesses should ensure all employees are appropriately classified under the correct industrial instrument, by employment type and grade. Some industrial instruments allow for an automatic promotion after a set period of employment.

Salaried employees: Processes which accurately record time and attendance should be periodically cross-checked against the equivalent remuneration employees would have received under the relevant award.

Casuals: A casual employee’s employment pattern may be considered indefinite, stable, regular and predictable which is a matter that needs to be properly investigated. To this extent, they may not legally be considered ‘casual’ and employers may be required to pay leave and public holiday entitlements, without the right to set off this liability against casual loadings already paid.

Penalty rates: Businesses should ensure that high value penalty rates (overtime, shift loadings, casual loadings) per industrial instruments are correctly captured in time and attendance and payroll systems.

Training: All employees should be made aware of the importance of receiving the pay they are entitled to and that your culture and systems support this. It is essential that employees have an avenue such as payroll, a hotline or email address through which they can internally escalate any payment-related queries.