With many wage-related changes over the last few months, businesses are now at risk more than ever for underpayment claims.

Referred to an “influx” of significant underpayments by large employers, Fair Work Ombudsman (FWO) Sandra Parker recently advised that the focus of the FWO has shifted from dispute resolution to compliance and enforcement. The Commonwealth Government is also considering introducing a national anti-wage-theft regime.

The spotlight is on wage underpayments – whether deliberate or inadvertent. Deliberate underpayments may not be as common as those made in error but the risks and penalties are still high. Given all this, it is timely for businesses to check their payroll functions to ensure everything is compliant.

Here are some tips to assist your business in avoiding underpayments:

1. Invest in a reputable payroll system

Award interpretation can be complex and is often the main cause of an underpayment error. There are more than 100 modern awards outlining minimum pay rates and employment conditions for employees based on their industry or occupation.

Calculating salaries based on awards is challenging, with different rates for overtime and weekends and various allowances depending on the industry and role. Good payroll systems interpret this for you and can make applying these diverse entitlements much easier.

2. Regular auditing

Auditing salaries can be challenging. An external auditor may be required for an independent health check of your systems, practices and payments.

In the first instance, an expert that can objectively assess and interpret awards and compare them to your salaries across the business can determine if you require an external auditor.

Should you end up in court, the business may be less vulnerable if you can demonstrate that your actions were not deliberate and an expert was engaged to determine the salaries, penalties and allowances to make to employees.

3. Properly calibrated payroll

A payroll system that is not properly calibrated can result in costly errors. It is important to ensure that your payroll system is set up in a way that is specific to your business.

4. Record keeping

It is a legal requirement under the Fair Work Act 2009 for employers to keep time and wages records for seven years. These must be readily accessible to a Fair Work inspector.

Records that are well documented and clear to understand make it easier for all parties involved and help identify any payroll mistakes that can result in avoiding fines.

While the basic requirements of record keeping, such as legibility and accessibility (e.g written in English) are usually adhered to, employers may not be aware of less common requirements. For example, individual flexibility arrangements under an Award, wage averaging arrangements and termination documents must be kept on record in writing.

These documents are used as evidence in court matters and will be critical for your business to demonstrate it has done the right thing.

5. Support the payroll function

The FWO notes that “systems are only as good as the information entered into them”, meaning the payroll team must be appropriately skilled, trained and adequately resourced to ensure the risk of wage underpayments remains low.

The cost of getting it right from the start is low compared to the consequence of being caught out. Seeking advice from experts is the first step in ensuring salaries are correct in the first place.

Victorian Chamber General Manager, Workplace Relations and Wellbeing Amy Bell said: “Maintaining a vigilant commitment to compliance is paramount for businesses to ensure fair wage practices and uphold the well-being of their employees. Staying informed and aligned with regulations is not only a legal obligation but a moral imperative.

“The Victorian Chamber stands ready to provide guidance and support, fostering an environment where workplaces flourish, and every individual’s contribution is duly valued.”

How the Victorian Chamber can help

For assistance on any aspect of your employment obligations, please call the Victorian Chamber Workplace Relations Advice Line on 8662 5222.

Our experienced team can offer advice about human resources or workplace relations issues. We have award interpretation experts who can help your business navigate these complexities and conduct wage/payroll audits so you can identify any gaps and address them proactively.

Our team can also help you deal with underpayments claims made to bodies such as the FWO.