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Since the introduction of the modern award system in 2010 many employers have found it difficult to understand the complex requirements. In fact, the Fair Work Ombudsman (FWO) reported that for the 2013-2014 financial year it recovered more than $23 million for 15,483 workers.

However, it is not just small businesses who are finding understanding the modern award system difficult. In June 2015, the FWO found that 123 former sports bar and Hungry Jacks employees at Newcastle Airport were underpaid more than $472,000. The original complainant was short changed $15,596 over three years to November 2013. It was then found that the bulk of employees engaged between July 2010 and January 2014 had been underpaid.

The FWO does not always wait for complaints by employees before they check to ensure employers are paying employees correctly. The FWO also conducts random audits to keep employers on their toes! Currently the FWO’s focus is on metropolitan and regional councils across Australia to ensure that councils are not contributing to the underpayment of employees working for subcontractors. The investigation is expected to take one year to complete.

Under the Fair Work Act 2009 (Cth) (FW Act) employees have up to six years to make a complaint regarding underpayment of wages and/or entitlements to the Fair Work Ombudsman. This means that even ex-employees are able to come back and make a claim should it fall within the six year period.

While we appreciate that delving into a Modern Award has its challenges – we suggest starting with these steps:

1. Identify the modern award that applies to the employee’s work.

• This is an important step to get right - selecting the wrong modern award could mean that you are paying the incorrect amount (over or under) to the employee.

2. Work out the employee’s classification and the minimum rate of pay that applies.

3. All Modern Award have helpful descriptions of each classification in one of the Schedules at the back of the Award.

4. Check the modern award to see what penalty rates, loadings and allowances are specified and whether they apply to your employee’s working arrangements.

• Think about the hours the employee is working. Are they working outside the span of hours specified by the modern award, working weekends, shift work, more than 38 hours in a week or anything that may attract a penalty or overtime rate?

Think about the hours the employee is working. Are they working outside the span of hours specified by the modern award, working weekends, shift work, more than 38 hours in a week or anything that may attract a penalty or overtime rate?

If an employer finds that they have underpaid an employee it is important that it is rectified immediately. This of course can be difficult to manage within the workplace and should be approached with care.

Employers and individuals are reminded that not paying employees correctly is a breach of the FW Act. If there is found to be an underpayment companies are at risk of a $51,000 penalty per breach and individuals risk of a maximum $10,200 per breach.

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.