Avoid getting caught in the underpayment trap

Avoid getting caught in the underpayment trap


7 October 2020

Last month, Fair Work Ombudsman Sandra Parker announced the number of large corporations under investigation for underpayment was putting a significant strain on the Ombudsman’s resources. This follows many high profile corporate underpayment cases over the last few years. You are probably familiar with some of these; household names such as ABC and Woolworths who have made significant mistakes when paying their employees. At last count, Woolworths reported underpaying staff approximately $390 million!

These large organisations with sophisticated and significant resources making payroll mistakes shows just how difficult it can be for employers of all sizes to navigate complex modern awards and enterprise agreements. The scale of these underpayments also shows how one small error can often have big consequences.

Here are some steps you can take to reduce the risk of accidental underpayments in your organisation.

1. Apply the correct industrial instrument 

The first step is to work out which modern award or enterprise agreement applies. It’s important to get this right as the award or enterprise agreement will set out the pay and conditions that apply to each employee.

2. Map employees to the correct classification

After identifying the correct instrument, you will need to map the employee to the correct classification.  This helps identify the minimum rate of pay an employee is entitled to, including any allowances, penalties or overtime.

3. Pay people for time worked

Make sure you capture all time worked by employees and when it was worked. Unless you have this information, you may not be able to determine if an employee is being paid for all time worked and if the correct penalty, allowance or overtime rate is being applied.

4. Use payroll systems correctly

It’s important to make sure the system is set up correctly to reflect employees’ entitlements. To do this it’s necessary to have a clear understanding of the circumstances that give rise to payment of a penalty, overtime or allowance. Don’t forget to review the system regularly to make sure it’s up to date. With modern awards and enterprise agreements being updated regularly it can be easy to get caught out.

Remember to watch out for annualised salaries and set-off clauses in employment contracts. They’re easy to set and forget. CCER Employment Relations Specialist Brooke Scarfe has outlined the do’s and don’ts when it comes to set-off clauses.  You can read Brooke’s guide here.

CCER is hosting a webinar on Managing Underpayments on 20 October. During the one hour session, we’ll dive a little deeper into the steps above to provide you with a clear strategy to reduce the risk of underpayments and explore what to do if a mistake occurs. You can register using the following link.  We look forward to seeing you there.

For any members who would like further information or have any questions, please contact us on 9390 5255 or ccerenquiry@ccer.catholic.org.au.

CCER does not give legal advice and this should not be taken as such. 

Back to articles