Australia: Employee Entitlements: Are you paying your employees the right amount?

Earlier this year, the Australian government introduced the Fair Work Amendment (Protecting Vulnerable Workers) Bill, which sets out to increase the penalties for serious contraventions and broaden the scope of compliance responsibility.

Earlier this year, the Australian government introduced the Fair Work Amendment (Protecting Vulnerable Workers) Bill, which sets out to increase the penalties for serious contraventions and broaden the scope of compliance responsibility. Under the new bill, the compliance responsibility is extended to include franchisors and holding companies who can now be held responsible if their franchisees or subsidiaries do not comply with workplace laws1.

As a result, it is now more important than ever for Australian businesses to ensure that they comply with these requirements, as not doing so could lead to financial impairment or worse, significant reputational damage. As seen in a recent Federal Circuit Court judgment, Kjoo Pty Ltd, a sushi outlet in Shellharbour, and its accountant were ordered to pay penalties totalling almost $200,000 for underpaying three foreign workers a total of $51,025 between September 2014 and July 20152, not to mention all the negative press they got!

So what can businesses do to reduce their exposure to this risk?

  1. Proper record keeping. It is essential that businesses maintain up-to-date business activity records, including payroll records, as without these there is no way to tell if you have underpaid (or even overpaid) your employees.
  2. Good communication. Employees need access to communication channels where they can express their concerns about potential underpayment or general employee entitlements. In many instances, the matter could be resolved simply and without costly compliance actions.
  3. Education of management. It is critical that managers and supervisors (not only payroll staff and senior management) understand the business' obligations in relation to payroll. Managers and supervisors are the eyes and ears of the business and should facilitate continuous or frequent monitoring.

In ensuring the above, businesses can increase compliance, identify non-compliance earlier and in turn deal with requests from authorities such as the Fair Work Ombudsman easily.

What are some of the difficulties in ensuring employees are paid appropriately?

While conceptually, it is simple to understand the notion of an underpayment (being the difference between what was paid and what should have been paid), calculating the amount can be challenging and subject to: numerous wage rates (including casual and permanent), employee agreements (including amendments) and industry awards to mention a few.

Note: When dealing with Employee Agreements it is vital that organisations ensure they satisfy the 'better-off' test, i.e. that on the whole employees are better off under the employee agreement than that of the industry award. Otherwise statutory penalties may be applicable.

The above may all seem manageable for small and medium sized businesses with a limited number of employees, but depending on the circumstances and the period in review, the data volume can easily grow exponentially. This is where the power of data analytics, if properly applied, comes to the fore.

For larger businesses, it's both the data volume and the complexity of entitlement calculations that poses the challenge, quickly requiring well planned data analytic expertise.

Where to next?

Depending on the business' in-house capabilities, next steps may require engagement of data expertise to assist with the data collation and quantification process. Depending on the findings, obtaining legal advice may be a necessary next step in considering on how to move forward with any adverse findings.

Closing remarks

Employing data analytical expertise to extract relevant data can potentially save time and money in a forensic review. By combining this analysis with management's understanding of the accounting and payroll records, and the efficiency of data analytical procedures, an analysis or report can be produced to evaluate whether underpayment has occurred and quantify this for each employee, entity, period or business unit. This analysis will support compliance requests or provide assurance correct payments are being made. A by-product of this procedure could also potentially be to highlight any indications of payroll fraud.

The key takeaway from the above is that the landscape is changing and the responsibility of management to ensure compliance in their businesses is growing. Considering employing data analytics may be a solution.

KordaMentha experience

KordaMentha has experience in assisting businesses of all size and type in complying with legislative requirements for employee entitlements. If you would like to learn more about how the KordaMentha data analytics team can assist you, we'd happily come to present on this topic and provide our insights.



The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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