2 minute read
Mitigating underpayments and the risks that follow
NATIONAL
The main causes of underpayments in the retail industry can be attributed to the following:
» Annual salaries;
» Misclassification of employee
levels; and
» Inaccurate time and record
keeping.
In 2019, a grocery store in Australia was investigated by the Fair Work Ombudsman (“FWO”) and was alleged to have owed at least $713,395 in unpaid staff wages. This particular case was in relation to salaried staff members.
Annual salaries
Whilst employers often choose to pay their staff members an annual salary as opposed to the relevant hourly rates of pay under the applicable award; they often forget to revisit the employee’s salary on a yearly basis or consolidate the salary with any overtime worked by the employee.
Businesses must ensure that an employee’s salary is at least equal to their minimum entitlements under the General Retail Industry Award (“GRIA”) (or any other applicable award), meaning an employee cannot be ‘worse off’ receiving an annual salary than they would have, had they been paid an hourly rate pursuant to the applicable award. Often employers believe an annual salary leaves an employee better off. However, employees often work overtime and public holidays, which entitles them to higher rates of pay, which is often not factored into the employee’s annual salary and can inadvertently result in an underpayment.
Misclassification of employees
Another common factor that results in businesses inadvertently underpaying staff members is that they have not classified their employees’ levels correctly. Under the GRIA, there are 8 employee levels. Level 1 to 3 involves general sales assistant duties, forklift operations etc., whilst levels 4 to 8 are generally reserved for those in a managerial position.
Each classification level has a particular base ordinary rate of pay rate, which means that if an employer has classified an individual as a level 1 employee when they are, in fact, a level 3 employee under the award, there will be an inadvertent underpayment.
Employers should regularly assess the day to day duties a staff member is performing in consideration of the employee levels as defined in the GRIA.
Time and record-keeping
Retailers are constantly working in a busy environment, and staff members are often required to stay back to assist with stock or customer assistance. This can result in the entitlement to penalty rates and additional or overtime payments. It is therefore vital for a business to ensure that they are complying with all their record-keeping obligations in the Fair Work Act in keeping a record of the hours that their employee’s work and also ensuring any additional payments or overtime are paid.
The Fair Work Act requires employees to keep records of including but not limited to:
• Overtime;
• Hours of work;
• Pay records;
• Superannuation contributions;
• Annual wage arrangements;
• Leave; and
• Averaging hours.
In light of wage theft recently becoming criminalised in Victoria and Queensland, it is crucial for businesses to seek legal advice and rectify any underpayments that have been identified.
