The Fair Work Ombudsman (FWO) regularly receives inquiries from employees claiming underpayment of wages. These inquiries often form the basis of the FWO’s decision to audit certain industries, as well as investigate individual businesses and employers regarding an employee’s claim that they did not receive the correct remuneration. This could be as a result of any employee being paid under the wrong award, classified incorrectly or not taking into account relevant allowances.

Employers have a legal obligation to correctly pay their employees the relevant remuneration, including penalties and loadings, overtime and allowances.

Therefore, it is essential that employers ensure every employee is paid correctly.

It also important for employers paying employees annualised salaries ensure that they are incorporating any wage increases (as part of the Annual National Minimum Wage Review) into the annualised salary to ensure that such salaried employee’s are better off in comparison to the applicable award. Paying an employee an annualised salary does not automatically exclude them from an award. Therefore, employers should also be aware of any variations to awards that may affect wage rates.

Any underpayment of wages or entitlements is a breach of Federal workplace laws and may incur penalties, as well as the obligation to pay back any money owing.

What happens if I discover an employee has been underpaid?

If you have established or suspect that an employee in your business has been underpaid their entitlements or wage, then you should call the Telephone Advisory Service immediately. It is free for members and an experienced Business Advisor can provide you with initial help. However, depending on the level of help required, our Workplace Relations Consultants can assist you on a fee for service basis and manage the entire approach, including wage calculations.

If it is found that an employee has been underpaid, the business will be required to pay back any entitlements owing. In addition, an underpayment of wages breaches the Federal Fair Work Act 2009 and there may be penalties that will be incurred.

What are the consequences with the FWO?

The Fair Work Ombudsman (FWO) can pursue a number of different courses of action if an employer has breached workplace laws and failed to pay their employees correctly.

This can range from a contravention letter, an audit, compliance or infringement notice or enforceable undertaking through to prosecution in Federal Court.

There is detailed information about the different types of action the FWO can take in the ‘Wage and Record-Keeping Requirements’ article.

Want more information or need help?

If you are not sure of your requirements, Business SA has a range of services to help you.

The Telephone Advisory Service, a free service for members, has a team of experienced Business Advisers who can work with you on any issues or concerns you may have. They can help you with everything from record-keeping concerns and questions regarding wage rates to performance queries, legislative changes that may be affecting your business and difficulties with terminating employees.

Alternatively, you can book a Modern Award Advisory Service for more in-depth and tailored help. These one-on-one sessions help you to interpret and understand your relevant Modern Award to ensure correct payment of wages and accurate classification of employees, among numerous other benefits. Take advantage of this fixed-fee service at the low cost of $165 per hour. Follow this link for more details.

For more information, please call the Business Advisory Centre on 08 8300 0101.