Since 2009, Fair Work data reveals over 40% of the businesses they audited were underpaying staff. That’s why the Federal Government is introducing stricter penalties.
But wage theft can accidentally happen within the most honest businesses and management teams. So here are the 4 most common mistakes we see honest employers make:
- Salary packaging creep
Many businesses opt to include things like allowances into their employees’ pay rate. This is perfectly legal and acceptable. It also has the benefit of simplifying payroll processing each pay period.
However, if the business doesn’t regularly check the impact of increases to the minimum wage or Super Guarantee (which has increased by 2% since 1 July 2021), it may be underpaying staff. That’s when the trouble starts.
How to prevent it? We have 2 suggestions:
- Provide a breakdown on all payslips that includes the hours worked, base hourly rate and any allowances. This will make it easy to identify how wages are calculated and if any adjustments are required. This is especially important if you have casual staff.
- We recommend you ask your accountant or End2end Business Solutions to conduct an annual check on the base hourly rate of each staff member to ensure all payments align with your legal obligations.
- Misreading overtime rates
In some industries, calculating overtime rates is complex. Depending on the hours work and the day of the week, staff may be entitled to overtime rates of 1.5%, 2% or even 2.5%. No wonder many businesses find they are making errors on overtime payments to staff.
How to prevent it?
Unfortunately, there isn’t an easy answer. Under the law, you are required to know and understand your obligations. If you have complicated overtime pay structures on a regular basis, we recommend you speak to your accountant or us about engaging a payroll specialist. Ultimately, it could be your wisest and most cost effective solution.
- Understanding when overtime should be paid
From time to time, you may need staff to put in extra hours. Conversely, staff may ask for some flexibility in the hours they work in a particular week. This type of give and take is essential in any workplace. But when there is an expectation of regular working hours extending beyond a 38 hour week, you can find yourself defending a wage theft claim. This type of accidental wage theft is often seen within management teams.
How to prevent it?
Pay attention to the hours all employees work – including your management team and leaders. If they appear to be regularly working additional hours just to keep up with their workload, you need to talk to them about their role, responsibilities and how best to support them. Remember, under the law, they may be entitled to overtime payments.
- Ensure you have correctly classified every employee
It’s common for businesses to have staff that come under different awards – even in small organisations. If you accidentally classify an employee into the wrong award, you may be at risk of underpaying them.
How to prevent it? We have 2 suggestions:
- Ask us to conduct an annual staff audit to ensure you have correctly allocated each staff member to the relevant award. This simple, proactive approach can potentially save you a lot of time and trouble if you are ever accused of breaching the Fair Work Act.
- Ask either your business’ accountant or End2end Business Solutions to conduct an annual payroll audit to confirm all staff were correctly paid throughout the year. This simple step, conducted annually, will give you long term, easy to access proof of accurate wage payments. If an error is found, it also gives you the opportunity to quickly correct the mistake and avoid dealing with the Fair Work Commission.
Mistakes happen. Let us help you avoid them.
At End2end Business Solutions, we understand HR compliance is difficult to understand and implement. But that’s where we can help. Whether it’s a one-off audit or something more advanced, we are here to help you with all your staff productivity and compliance requirements. To discuss how we can help you, call 02 8977 4002.