Wage underpayments in Australia
Wage underpayments are a systematically widespread issue in Australia. It includes ‘unlawful underpayment or non-payment of employee wages and entitlements.’1 More recently, there have been a higher rate of wage underpayments in particular industries (hospitality, horticulture, retail), highlighting the widespread push for regulation and solutions in this area.
Wage underpayments in Churches
Although churches and charities have not been categorized within those industries that are more susceptible to underpaying their staff, in our practice we see numerous cases where churches and schools have failed to properly pay staff. It is important to note that underpayment not only includes your general underpayment of the hourly rate or yearly salary, it can also include, for example, failure to pay overtime, failure to pay the right superannuation, failure to pay the appropriate amount of annual leave loading, failure to pay travel time etc.
What impact has technology had on payroll?
The introduction of technology in the workplace has evidently made it easier and more efficient for companies to issue pay and invoices to their employees, however, employers need to be careful they are not over-relying on these systems and are still complying with their obligations under their applicable Awards and Instruments.
Employers Record Keeping Obligations
Under sections 535 and 536 under the Fair Work Act 2009 (Cth) and regulations 3.31 and 3.46 of the Fair Work Regulations 2009 (Cth) employer have obligations when it comes to keeping an employees records.
Employers are obligated to keep accurate and complete records for all their employees.
For example, as noted on the Fair Work Ombudsman website employment records must include the following:
- the employer’s name
- the employer’s Australian Business Number (ABN) (if any)
- the employee’s name
- the employee’s commencement date
- the basis of the employee’s employment (full or part-time and permanent, temporary or casual).2
Employers additionally need to keep the following records:
- Hours of work, leave
- Superannuation contributions
- Individual flexibility arrangement
- Annualised wage arrangements
- Guarantee of annual earnings
- Transfer of business.3
What are the consequences of wage underpayments?
Financial Penalty – If an employer breaches their obligations in record keeping under the Fair Work Act they may be subject to a financial penalty.
Criminal Penalty – Wage theft was classified as a criminal offence in 2020 in Queensland. This was done due to the widespread occurrence of wage theft.
Employers who underpaid employees due to an honest mistake or delay won’t be liable for prosecution.
However, employers who have engaged in intentional and deliberate behaviour resulting in underpayment of wages can be charged a maximum of 10 years imprisonment.
Understanding award instruments – getting scope and application right
Underpayments can also commonly arise by an employer’s failure to accurately interpret an industrial agreement or Award or correctly identify which Award applies to them. At Corney and Lind Lawyers we often receive enquiries from employers seeking assistance in interpreting a particular clause of an Award or Industrial Agreement as there is often ambiguity in these clauses and are not always straightforward.
What if I discover I have underpaid an employee?
If you have identified any historical underpayments for your employees, you will have an obligation to rectify those underpayments.
For example, if you have failed to correctly pay superannuation or an employees hourly rate for 5 years, you will have to retrospectively make up any underpayments for those past five years to your employee.
It is also necessary to consider the various implications for underpayment including:
- Income tax and super implications if there has been historical underpayments;
- Ensuring you have correctly paid payroll taxes associated with historical underpayments; and
- Ensuring you have correctly paid Employees long service leave arising from an underpayment.
It is important Employers attend to these as soon as possible as they each have separate liability attached for the Employer.
The respondent took unlawful adverse action when it stopped giving shifts to a casual bartender who complained of being underpaid. By way of background unlawful adverse action is action taken by an employer towards an employee that threatens to dismiss an employee, injure them throughout their employment, alter their position because of prejudice or discriminate against the employee.
The respondent was ordered to pay the applicant $8,120.08 for unpaid wages and superannuation; $2,500 for distress, hurt, and humiliation; and $685.07 interest.
Understand your Employees Relevant Award/Enterprise Agreement- Have an understanding of the relevant Award or Enterprise Agreement as it pertains to meal breaks, overtime, base rates of Pay, allowances including travel, casual minimum hours provisions, shift penalties, breaks between shifts, RDOs and annual leaving loading. By having an overall understanding of these provisions, an Employer will understand how much and when an employee will be paid in accordance with the Award.
Seek Legal Advice – is important as an Employer if you have issues in interpreting an Award or Industrial Instrument to seek expert legal advice early. A lawyer can help you identify your legal position in relation to employee entitlements and provide advice on which employees will be effected and how they will be effected. This can circumvent and potential liability an Employer may have in incorrectly interpreting an Award or Industrial Agreement.
Obtain Financial Advice– There will be various financial implications for wage underpayments. It is necessary to obtain expert financial advice to ensure repayments are correct and take into account the
If you have discovered an issue of underpayment, again it is best to seek legal advice on how to best handle the situation and identify the correct interpretation of the Award. A lawyer can direct you to the next steps. Ian Humphries suggest that it is important to not make any assumptions or disclosures of the Employer’s position until there is satisfactory evidence to support the nature of the underpayment.
Please contact our client engagement team or call us on (07) 3252 0011 to book an appointment with one of our Employment Lawyers today.