Are you underpaying your employees?

As an employer, you might not realise when you are underpaying your employees, even if you are paying a higher hourly rate. Employers who deliberately underpay employees will now face jail time under the new Wage Theft Bill I discussed last week. We see big brands like coles, bunnings etc in the news for having underpaid their employees. It makes me wonder how big corporates like them can get it wrong having full time HR personnel on their books. So then what happens to small business owners who don’t have the same HR resources? They too are not immune to underpayments.

In Australia, there are more than 100 awards which explain minimal pays and entitlements. Getting the interpretation of these entitlements wrong is often the cause of an underpayment. Miscalculations in pay rates usually occur when:

  • Misinterpretation of the award terms
  • The employees roster changes
  • Incorrect salary payment from the start
  • Increases in the minimum wages were not applied
  • Incorrect or non-payment of the correct allowances
  • Incorrect or non-payment of weekend rates, overtime and public holidays

How do you know if you are underpaying your employees?

Many employers realise they are underpaying an employee only when the employee makes a claim for underpayment. Once an employer becomes aware of the issue, they should aim to rectify it immediately. An audit of the award or the enterprise agreement, the employment status, hours worked, roster and rate of pay will determine the extent of the issue.

Once the audit is complete an employer will need to calculate how much the employee has been underpaid. The accuracy of record-keeping as well as identifying how many employees are affected by the underpayment determines the accuracy of the audit. Affected employees need to be back paid. The employer pays the outstanding amount through an off-cycle payment or during the normal pay cycle. All underpayments and back payments are recorded in the employee files and PAYG taxes and superannuation entitlements are taken into account.

Get in touch

Most employers want to do the right thing by their people. Interpreting the award is the main challenge. The constant change in legislation makes it hard to keep up with compliance. So, getting the right advice from the get-go can help you mitigate these risks.

The information contained in this blog is general in nature. If you are unsure about how this applies to you, feel free to contact us at VeiraMal Consulting. Our HR consultants will be happy to conduct a pay audit to ensure your business is compliant.

VeiraMal Consulting offers a wide range of HR advisory services and packages to both employers and employees. You can view all our services and packages here.

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