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Minimising the risk of underpayment claims

One of the key issues that has dominated discussion in the workplace relations area in recent years is the unlawful underpayment of employees (particularly of vulnerable workers) and the penalties that should be imposed on non-compliant employers.

One of the key issues that has dominated discussion in the workplace relations area in recent years is the unlawful underpayment of employees (particularly of vulnerable workers) and the penalties that should be imposed on non-compliant employers.

In our experience, one of the best ways that employers can protect themselves from underpayment issues is to ensure that they are aware of, and are fully transparent with employees about, the legal instruments that apply to an employee’s employment. In addition to the Fair Work Act 2009 (Cth) (the FW Act), this can also include modern awards and/or enterprise agreements.

These legal instruments set out the minimum terms and conditions that apply to employees such as minimum wage rates, penalties, allowances and working hours. So, when determining the terms and conditions that will govern a particular employment relationship, particularly an employee’s remuneration, regard must be had to these documents.

For modern awards, it is a legal requirement that an employee is notified of the award that covers their employment and also of their classification under the award. In some awards, an employee must also be notified of the specific components that make up their remuneration.

These requirements are in place to reflect the principle that an employee should have clarity as to what their rights and entitlements are in the employment relationship and what exactly they are being paid for. Without this clarity, an employee may not have the necessary information to determine if they are being paid in accordance with their minimum rights and entitlements at law.

This can then lead to confusion between an employer and an employee and can place the employer at greater risk of exposure to claims of underpayment (and breaches of the modern award more generally).

In light of the spotlight placed on underpayment issues in recent years and the greater penalties now being imposed on non-compliant employers, including the introduction of increased penalties for “serious contraventions” of the FW Act, as well as the criminalisation of “wage theft” in certain State or Territory jurisdictions, it is critical that employers are as transparent with employees about their minimum rights and entitlements as possible.  

Information provided in this blog is not legal advice and should not be relied upon as such. Workplace Law does not accept liability for any loss or damage arising from reliance on the content of this blog, or from links on this website to any external website. Where applicable, liability is limited by a scheme approved under Professional Standards Legislation.

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