Imagine paying your employee $100K thinking that you are paying at least $40K over the amount they would have received under the award (keeping in mind that most awards only have hourly and weekly rates). There is just no way that you could be underpaying the employee given you have a ‘set off’ provision in the contract and you are a generous employer – I mean, there is $40K to make up any shortfall, right?

Well, think again…

Inadvertent Error or Corporate Crime?

One of the key complaints made by employers is that many of the underpayment errors are inadvertent mistakes – it’s just too hard to get across the 122 awards and of course, the amendments to those awards. And wait, you didn’t know about the decisions affecting annualised wage in awards that will take effect on 1 March 2020?

Well those inadvertent mistakes are bringing some employers to their knees. We have seen the Fair Work Ombudsman crack down on certain industries in relation to underpayments, which has caused significant reputational damage to otherwise strong brands in the marketplace.

The Federal government is also going to reform the industrial landscape, taking steps to introduce strong criminal sanctions to address wage theft by employers. Possible changes include increases to the already significant civil penalties under the Fair Work Act 2009 (Cth) and implementing criminal sanctions including up to 10 years’ imprisonment.

Is it still all too hard? Steps you can take:

The Australian industrial landscape is complex – there are no ways around this – but there are ways in which you can ensure that you do not get caught up in a wage theft scandal, including:

  1. reviewing existing employment arrangements, including the classification of employees under modern awards and annualised ‘set off’ contractual arrangements to ensure compliance with applicable awards;
  2. ensuring that you know what the applicable award entitlements are for each employee and that they are being remunerated for each pay period for such entitlements; and
  3. rectifying any identified wage or salary deficiencies.

While this does sound burdensome (doesn’t everyone love a wage audit?!) taking the appropriate steps to address these issues will not only assist employers in ensuring they are paying employees correctly, but it will mitigate the risks of orders of backpay, penalties and for some, going into administration.