Wage Theft Is Major Concern For Fair Work Ombudsman This Year…

Posted on 9 August '22 by , under business.

This year has unveiled many concerns about employee underpayments from businesses across different industries by the Fair Work Ombudsman.

It is legally defined as the deliberate and dishonest withholding of wages from employees or the falsification or avoidance of keeping employer records to obtain an advantage.

Also known as wage theft, employee underpayments fail to comply with the required National Employment Standards. However, not all acts of wage theft are malicious.

Here are 7 mistakes that can lead to major employee underpayments:

Incorrect Calculations In Overtime Provisions 

When organisations do not ensure every ruling on overtime has been considered for employees, mistakes are made. Many employee awards have numerous sections on overtime – for instance, in the ‘overtime’, ‘breaks’ and ‘part-time work’ sections. One often overlooked ruling is overtime. Employees must receive a minimum of 10-hour breaks between shifts. If their break is fewer than 10 hours, under some awards – such as those governing hospitality, aged care and social service employees – they must be paid overtime rates thereafter until they receive their full 10-hour break.

Underpayment On Termination

The most common error here is payroll managers failing to refer to the Fair Work Act and the relevant employee award. The Act entitles employees over age 45 with at least two years of service with the company to receive one additional week of notice upon termination.

Failing To Pay Overtime Penalty Rates To Part-Time Employees

Many organisations mistake placing the same rules on overtime payments to part-time employees as to full-time employees. However, some common employee awards – such as the retail award and clerks award – require overtime penalty rates to be paid to part-timers when they work more than their contracted hours. This is where underpayment mistakes may be commonly made.

Superannuation Underpayments

Many employers fail to pay superannuation on employee payments on top of regular wages or salary. Super should be paid on any employee payment that is regarded as ordinary time earnings – this includes bonuses, leave loading, payment instead of notice of termination, and cashed-out annual leave.

Only Paying The Base Rate On Annual Leave Payments

The Australian Payroll Association has identified this error across multiple health support services and manufacturing organisations. The awards governing employees in these sectors require annual leave payments to include the full payments owed to the employee if they had worked. This includes penalties and allowances, not just the base rate of pay.

Excluding Commissions & Bonuses From Long Service Leave

Many employers do not include commissions, incentives and bonuses when calculating the value of long service leave. These payments should be included when long service leave is paid.

Lack Of Payroll Reviews And Outdated Systems

A major oversight contributing to all of the above errors is failing to review the accuracy of payroll systems alongside legislative changes – therefore, new regulations that benefit employees are not implemented.