Employers - Be Careful!

There has been a number of high-profile businesses in the media recently for the wrong reason. They have been accused of underpaying their staff, including television celebrity chef George Calombaris’ restaurant group who back-paid workers $7.8 million in wages. More recently, supermarket giant Woolworths has admitted underpaying about 5,700 of their salaried staff an amount in the range of between $200 million to $300 million. The underpayment dates back as far as 2010.

These large employers join a long list of major corporates who have been found to have underpaid their staff. The list includes Wesfarmers, 7 Eleven, Qantas, the Australian Broadcasting Corporation (ABC), the Commonwealth Bank, Super Retail Group and Michael Hill Jewellers. 

But how can this happen?

Payroll in this country is complex with more than a hundred awards to interpret. Within each award there are various pay rates including ordinary time earnings, overtime, penalty rates, public holiday rates, weekend rates, shift allowances and travel allowances. When setting up an employee in a computerised payroll system you need to understand these rates and various allowances. Groups like the Council of Small Business Organisations Australia (COSBOA) and the Australian Retailers Association (ARA) have argued workplace laws are too complex and need to be streamlined but don’t hold your breath on any changes.

For a small business owner with a single employee there’s no excuses. They must follow a number of steps when onboarding an employee including ticking the right boxes in their payroll software. There are check boxes for things like an existing HECS debt, various leave entitlements and superannuation calculations. When things go wrong employers tend to blame the software, but the program is only processing the data that is entered into the system. Tick the wrong box and you could innocently trigger a series of underpayments until you or the employee detects the issue. This could be weeks, months or even years later like the Woolworths case.

So, what is the message for small business owners?

We run the payroll for some of our clients and we have checklists in place. We review employment agreements for new staff members and also review timesheets and run reconciliation reports to cross check the data. It’s certainly not just a simple ‘tick and click’ process.

The Woolworths case highlights the fact that most employees don’t even know they are underpaid because they trust their employer will get it right. Ultimately the onus is on the employer to get it right and a series of raids initiated by the Fair Work Ombudsman (FWO) detected a high level of ‘wage theft’ in regional Victoria and NSW. The FWO has revealed some disturbing results from this series of inspections conducted in the Albury/Wodonga, Ballarat and Wollongong regions:

• Just under half (47%) of the 489 businesses that received surprise visits (including retail outlets, takeaway shops, cafes and bars) were in breach of Workplace Laws.
• Over a third (35%) of audited businesses were found to be underpaying workers their minimum hourly rates, while 12% weren’t paying correct penalty rates.
• More than half (63%) of employers audited were “unaware” of all applicable workplace relations obligations, 15% had “misinterpreted” award requirements and 9% stole wages because of a “business decision” such as paying a flat rate.
• Wage theft was the most common breach identified by FWO inspectors followed by record-keeping failures.

The Fair Work Ombudsman Sandra Parker said, a “lack of awareness” was behind the majority of non-compliant cases with employers paying fines totalling more than $30,000.  Parker went on to say, “Australia’s minimum pay rates are not negotiable, and employers in the fast food, restaurant and café sector need to actively check that they are paying their staff correctly”.

The moral of the story is you have clear responsibilities as an employer and the right software is absolutely critical. Have a clear onboarding process for your staff and if you have any queries about your payroll or software please don’t hesitate to contact us.

This article forms part of our Business Accelerator Magazine. Download the latest edition HERE or browse other articles from this edition below:

• Festive, Restive or Pensive? Your Business at Christmas Time
• The Five Phases of Buying a Business
• Why Do Business Start-Ups Fail?
• Proposed Superannuation Guarantee Amnesty Extension 
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