Top 3 tips – Employers can avoid a $1.34 Million underpayment claim

A recent Federal Circuit Court decision has seen 48 employees of Macquarie Bank being awarded in total $1.34 Million in underpayment of wages.  Ranging from non payment of:

  • Annual leave loading
  • Periods of annual leave
  • Personal/carers leave (sick leave)
  • Compassionate leave
  • Public holiday leave

This was even though in the context of the Modern Award the employees were paid well above any wage obligations under the Modern Award due to substantial revenue sharing benefits.  However, the Court found that Macquarie Bank could not satisfy their statutory obligations leading to penalties ranging from $2,540 to $44,580 and in total more than $1.34 Million.

How can this be avoided here are 3 tips:

Tip 1 – The contract must have an off-set clause

An off-set clause or an all inclusive clause must be carefully drafted and considered in the context of award and statutory obligations as well as non legal obligations such as revenue sharing arrangements, bonus payments, reimbursements and allowances.

A contract without an off-set clause (or a poorly drafted one) will leave an employer open to penalties under the Fair Work Act 2009 even if the employee is remunerated well above any industrial instrument applicable.  This Macquarie Bank case is a prime example.

Tip 2 – Have in place a payroll system which reflects rules of awards

Payroll systems may not necessarily fully reflect the rules within awards which creates risks of unintended underpayments. This is often caused by inaccurate rules or an employer’s misunderstanding of the terms of an award being programmed into the payroll system.

In order to ensure a payroll system reflects the rules prescribed by an award, we recommend employers undertake a manual audit of their employees’ pay. Of course, we recommend speaking to our office first about the possibility of allowing us to undertake an audit given the findings of the audit may be legally privileged (and therefore exempt from disclosure in legal proceedings).

Tip 3 – The bigger you get the worst it gets

Macquarie Bank had in place revenue sharing benefits schemes developed prior to the Fair Work Act 2009 – however it was not reviewed in the context of the modern award changes.  If it had been then a $1.34 Million sum would not have been awarded against Macquarie Bank. 

Relying upon – “this is how we always do it” is dangerous.  Here are some circumstances where we have seen problems occurring:

  • Buying a business and inheriting the formal (and informal) wage arrangements
  • Lack of or poor due diligence around personnel management and documentation
  • Rigid or inflexible internal HR systems
  • Reliance upon old advice and non-legal advice
  • Misinterpretation of award obligations due to changes in the Fair Work Act 2009

If you are an employer and this issue strikes a chord we offer an obligation free consultation – please call +61 (07) 3876 5111 to arrange an obligation free consultation to discuss your inquiries and we will do our best to provide a practical solution.

Written By

Jonathan Mamaril 
NB Lawyers – Lawyers for Employers 
[email protected]  
+61 (07) 3876 5111