Wage remediation - Prevention is better than a cure

In 2022, the Fair Work Ombudsman performed over 4,000 investigations in Australia. These reviews resulted in the recovery of approximately $532 million of unpaid wages and entitlements, of which $279 million related to 267,000 employees of large corporates. While recent media has focused on large retailers and hospitality, the issue of wage underpayment appears to impact businesses of all sizes and sectors of the economy.

Often underpayment issues emerge because of:

1. A misinterpretation of the appropriate Award or Enterprise Agreement (Wage Instrument) to apply.

2. A misinterpretation of the key clauses of the prevailing Wage Instrument.

3. An underinvestment in time and attendance and/or payroll technology; in that it does not capture the required data to appropriately characterise the shift hours and the associated allowances that may apply.

An underinvestment in the payroll team, by under resourcing and/or lack of experienced personnel, is a key indicator of high risk for non-compliance. As more wage underpayments are publicly brought to light, businesses should be assessing whether their payroll processes and procedures are sufficiently sophisticated to correctly interpret and implement relevant Wage Instruments. Businesses that don’t, not only face the prospect of having unknowingly underpaid their employees, but also a costly recalculation exercise to overcome shortcomings in their data to calculate backpay in a defensible and cogent manner.

As always, prevention is better than a cure. McGrathNicol’s payroll specialists assist in early detection of any potential issues within your payroll function and in streamlining payroll processes, making them appropriate and efficient for business requirements.

1. Performing an end-to-end review of your payroll function and identify any potential competency gaps, such as technology, staff competence or information.

2. Map how payroll information flows from function-to-function, including responsible employees, potential bottlenecks and/or where an absence of review exists.

3. Perform annual and periodic reviews of relevant Wage Instruments and examination of adherence to primary clauses.

4. Perform random sample checks of payroll outcomes, to confirm calculation basis and accuracy.

5. If required, perform a full payroll audit to address key risks or information gaps identified.