Enforceable undertaking issued to self-reporting employer for underpayments

13 December 2020

With payment of wages being in the media recently, sparked by recent large-scale, multi-million-dollar underpayments claims, it is increasingly important to understand your business’ obligations.

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In November 2020, the Fair Work Ombudsman (“FWO”) announced it was necessary to issue an enforceable undertaking to another well-known Australian and international business.

The business, a manufacturer of cosmetics, has employees located throughout Australia in positions such as sales assistants, retail supervisors and productions assistants. In 2018, the business identified underpayment of minimum wage rates, weekend penalties, shift work penalties, overtime and allowances. The business approached the FWO to self-report the underpayment.

How was the underpayment identified?

Members of the business’ Support Team approached management regarding concerns about wages. The business commenced an initial review of contracts, policies, rosters and salaries. When errors and inconsistencies were identified the business engaged an external team to assist with a business wide analysis of payroll rules and payments. The review confirmed a significant underpayment of wages.

How did the underpayment arise?

The business, paying under the General Retail Industry Award 2020 and the Manufacturing and Associated Industries and Occupations Award 2020, had been using a manual payroll system which was unable to identify modern award intricacies such as minimum breaks between rostered shifts, or the entitlement to overtime penalties for employees working beyond the maximum number of hours in a day. The underpayment was compounded by a lack of specialised Human Resources knowledge and support to appropriately address and change the payroll systems and processes.

Fair Work Ombudsman intervention

Taking responsibility for the systemic error the business approached the FWO to self-report the underpayment. The FWO investigated and has now ordered the business to backpay staff, past and present, in excess of $4 million. The FWO has also required the business to make a $60,000 contrition payment to the Commonwealth’s Consolidated Revenue Fund and implement measures for future compliance including training staff in payroll and human resources, reviewing all contracts of employment and implementing a phone line to manage employee queries. In addition, the business must publicly display notices, including within the workplace, detailing the breaches to workplace laws.

What should employers do?

  • Employers should continue to seek advice from the Victorian Chamber to ensure compliance with applicable modern award/s.
  • Employers should conduct timely and regular reviews of wages paid against modern award or enterprise agreement minimums to ensure your payment obligations have been met.
  • Access our Workplace Relations Tools and Templates and Modern Award directory.
  • For further information relating to the changes or to subscribe to your applicable modern award contact the Workplace Relations Advice Line on (03) 8662 5222.

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