Underpayment of wages – it’s more common than you think. We were recently contacted on the NBIA Members Hotline for assistance with resolving a matter with the Fair Work Ombudsman. The NBIA Member had employed an adult apprentice and paid a flat rate for all hours worked. They had also used a very costly service provider that promised they would be “Sure” to be correct in their employment documentation. They were wrong.
After receiving a “Compliance Notice” from the Fair Work Ombudsman, the Bakery was given 21 days to calculate and correct the underpayment. This resulted in back pay of $20,000 that had to be found in just a few days.
A huge amount for any small business, particularly one who was trying to do the right thing from the start. And this is just one case. We have received a number of calls from other members in a similar predicament over the last 12 months and who have been at their wits end.
The underpayment of wages problem has been in the spotlight for some time and in January 2025 the problem moves from being a breach of legislation which can result in a financial penalty at worst, to a crime which could result in jail time as well as a huge fine. Please follow these tips to make sure you stay on the right side of the law with your wages and avoid underpayment of wages:
- Read the Award/s which applies to your business. Become comfortable with them so you know the basics and can find a particular clause (i.e. shift work rates) if an employee asks a question. You don’t have to be an expert (that is our job) but you should be able to navigate the document comfortably;
- Do not “assume” your interpretation of a disputed clause is correct. Ask for advice (remember NBIA Members Hotline provides unlimited over the phone IR & HR advice and is free for NBIA Members), and keep a record of what was said;
- Do not pay a “flat rate” for all hours of work UNLESS your contracts of employment have been written specifically for this purpose AND you have calculated the rate to ensure they are better off than if you paid strictly in accordance with the Award terms;
- Keep accurate records of starting and finishing times for all shifts. Do not just let your staff sign off at the time they are due to finish if they leave at a different time. You can still use the “swings and roundabouts” to average their hours over a week, but make sure you have an accurate record of when they actually commence and cease work each day.
- Record meal break times – this is not negotiable and could cost you severely if not followed because some Awards insist on overtime rates being paid if meal breaks are not taken before 5.5 hours are worked each day;
- If the Fair Work Ombudsman contacts you, seek advice immediately. Be courteous and helpful to the inspector, but you don’t have to volunteer information. Answer their questions fully and truthfully, but contact the NBIA Members Hotline or a Solicitor for assistance.
The above will ensure that if you make any errors you won’t necessarily face prosecution and will certainly not face criminal proceedings. It won’t guarantee that an error cannot happen and you may still have to pay some backpay (because life is like that). But any inadvertent underpayment will be minor and easy to manage.
Being an employer is hard work and is getting tougher, but you are not alone and we will help you as much as possible with expert advice and timely responses. Please don’t think you have to deal with these issues without us alongside you.
NBIA Members receive free unlimited phone and email IR & HR support as part of their membership. If you need assistance with underpayment of wages, please contact the NBIA head office on 1300 557 022 or via email.