People Smartz

5 Steps to Take to Protect Your Business.....

Tony Perkins - Friday, September 23, 2011

Last financial year, the Fair Work Ombudsman commenced prosecutions against in excess of 50 companies for underpayment of wages and entitlements to their employees.

The simple fact is that this number is just the tip of the iceberg.  Many other employers have had to backpay employees as a result of underpayment.  Just check out the Ombudsman's media release page (Fair Work Ombudsman - Media Releases) and you will see the number of press releases on the subject.

Late last year, we worked with a business that had been underpaying their employees over a long period. By the end of the process, they had back paid their employees nearly $100,000 - quite a hit on a small business!

Now, this situation was one where they had innocently made an error in calculating a 40 hour week. The Ombudsman recognised this and no further action was taken.  However, there have been fines handed out to businesses and Directors where the Ombudsman found that taking further action was appropriate.

One example of a company based fine was where a franchisee from a major franchise group was fined $150,000 for underpaying staff.  Directors have also been targeted, with a recent prosecution fining individual directors a total of in excess of $130,000 for underpaying 47 staff.

Under the current system of Modern Awards and Transitional Arrangements, calculating how much you need to pay your employees can be confusing.  However, it is important to recognise that confusion, or not understanding your commitments is not an excuse for underpaying staff.  In the end, at best, you will be required to back pay them any entitlements they may have not received.

So what can you do to protect your business?  Well here are our recommended 5 Steps to Protect Your Business:

  • Understand and be compliant with the National Employment Standards.
  • Identify the modern awards and classifications that apply to your employees;
  • Make sure your employees receive compensation for actual hours worked, paying particular attention to ordinary hours of work, overtime and penalty rates, and shift allowances. 
  • Do you work a 40 hour week in your business?  Do you roll leave loading into a salary or hourly rate?  These type of arrangements (and others) come under the heading of "Award Flexibility" and you are required to ensure your employees are "Better Off Overall".   If you do not understand the requirements around Award Flexibility - seek advice. 
  • Make sure you keep the right records!  If you are investigated, you will need to demonstrate compliance.  To do that your record keeping will need to be accurate and in accordance with the requirements.  

If you need assistance in any of the above areas - then give us a call!  At People Smartz, we are more than happy to assist you!

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